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Exam 11: Investment Planning

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Question 21

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INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement. -[Investing | Speculating] is viewed as a short-term activity that involves the buying and selling of securities in which future value and expected return are highly uncertain.

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Question 22

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Two prerequisites to investing are above average risk and clear understanding of market direction.

A) True
B) False

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Question 23

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An essential ingredient of an effective investment strategy is

Assume that the price of ABC common stock fell from in a short period of time from $105 to $84.Which of the following investors probably made the most money,if all of these transactions occurred prior to the drop in price?

Instructing your broker to buy or sell a stock at a particular price is a

The Securities Investor Protection Corporation insurance guarantees the dollar value of your securities will not dip below a certain level.

Which of the following terms best describes a day trader

Prices are rising in bear markets,indicating economic optimism.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement. -A corporation that had demonstrated earning power of $2 million [could | could not] be listed on the NYSE.

Preferred stock combines the fixed income features of bonds with the same price appreciation potential as common stocks.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement. -The issuer of the security would get no money from a trade in the [primary | secondary] market.

You have inherited $250,000.You have decided that since you don't need the money currently,you should invest for the long-term.After seeking advice,you decide on an asset allocation plan that puts 10% in short-term securities,75% in equities,and 15% in bond funds.How much money would you put in each category? (Show all work. )

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement. -Investments with high current income typically have [high | low] potential capital appreciation.

An annual stockholder report will contain audited financial statements of the company.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement. -Fifty shares of stock would constitute [an odd lot | a round lot].

In investment terminology,selling stock that you have borrowed is known as a

A retired couple can probably bear more risk in their portfolio than a young investor with a secure job.

Stockbrokers are also known as

The federal government regulates securities markets through the Securities and Exchange Commission.

A prospectus describes the firm and the issue of a new security.