Question 1

Explain the purpose of a brokerage account and the 3 types of brokers.

Accepted Answer

A brokerage account represents the money...

Question 2

Unsystematic risk cannot be eliminated through diversification.

Accepted Answer

A) True 
 B)False

Question 3

You recently purchased 100 shares of stock at $15 per share.The stock is now worth $20 per share,and it paid a $2 dividend during the time you held it.Your rate of return on this stock is closest to which of the following?

Accepted Answer

A)   -20%
B)   33%
C)   35%
D)   47%E) A) and B)
F) A) and C)

Question 4

Investing in assets such as collectable Barbie Dolls or Beanie Babies are both example of speculating.

Accepted Answer

A) True 
 B)False

Question 5

Because Nancy is extremely risk averse she is less likely to receive a solid rate of return on her investment portfolio than Babby who is more accepting of a risky portfolio.

Accepted Answer

A) True 
 B)False

Question 6

An investor with a low propensity for risk would avoid investments with high risk premiums.

Accepted Answer

A) True 
 B)False

Question 7

If the total rate of return is multiplied by 1/N,where N is the number of years for which the investment was held,the result is the

Accepted Answer

A)   serialized rate of return.
B)   annualized rate of return.
C)   tax-free rate of return.
D)   capitalized rate of return.E) None of the above
F) A) and D)

Question 8

The two major organized stock exchanges in the Unites States are the ________ and the ________.

Accepted Answer

A)   AMEX; Chicago
B)   NYSE; AMEX
C)   NYSE; Chicago
D)   NYSE; Pacific
E)   AMEX; PacificF) A) and B)
G) B) and D)

Question 9

A company that doesn't make a dividend payment is insolvent and may be forced into bankruptcy by the stockholders.

Accepted Answer

A) True 
 B)False

Question 10

Which statement is true regarding overconfidence?

Accepted Answer

A)   Overconfidence leads to trading too often.
B)   Overconfidence afflicts women more often than men, and it also leads women to trade too often.
C)   Overconfident investors think they can beat the market.
D)   Both A and CE) All of the above
F) B) and C)

Question 11

Historically,U.S.government securities have been considered the safest,lowest-risk investment available.

Accepted Answer

A) True 
 B)False

Question 12

A(n) ________ is a legal document that describes a securities issue and is made available to potential investors.

Accepted Answer

A)   disclosure statement
B)   offering contract
C)   prospectus
D)   tombstone
E)   none of the aboveF) C) and E)
G) C) and D)

Question 13

With short selling you are hoping for the stock price to fall.

Accepted Answer

A) True 
 B)False

Question 14

The real rate of return is the rate of return earned on an investment without any adjustment for inflation.

Accepted Answer

A) True 
 B)False

Question 15

Suppose that you purchased a machine several years ago for your company.You recently sold the machine for more than you paid.This is an example of a

Accepted Answer

A)   capital carry-forward.
B)   non-taxable gain.
C)   capital gain.
D)   windfall.
E)   none of the above.F) A) and B)
G) A) and C)

Question 16

Why should investors with a short investment horizon invest less money in common stocks?

Accepted Answer

A)   Because the stock market is very volatile and a catastrophic market event can happen at any time.
B)   Because the investors won't have enough time available to effectively recover from a loss of their investment principle.
C)   Because the transaction costs will negatively affect their returns in the short-term.
D)   All of the above are correct.
E)   Only A and B are correct.F) A) and C)
G) C) and E)

Question 17

A lending type investment,such as a corporate bond,represents a legal obligation for the issuer to pay its creditors back.

Accepted Answer

A) True 
 B)False

Question 18

The Securities Act of 1934 created the SEC to enforce trading laws.

Accepted Answer

A) True 
 B)False

Question 19

Greg spent the weekend in Las Vegas.He started out with $10,000 and won an additional $5000.Greg was very risky with how he gambled with the $5000 he had won.Greg was exhibiting the ________ effect.

Accepted Answer

A)   disposition
B)   house money
C)   loss then risk aversion
D)   Las Vegas
E)   none of the aboveF) None of the above
G) A) and E)

Question 20

That portion of a stock's risk or variability that can be eliminated through investor diversification is called ________ risk.

Accepted Answer

A)   unsystematic
B)   systematic
C)   volatility
D)   inflation
E)   portfolioF) A) and E)
G) D) and E)

Exam 11: Investment Basics

That portion of a stock's risk or variability that can be eliminated through investor diversification is called ________ risk.

Correct AnswerverifiedShow Answer

Investing in assets such as collectable Barbie Dolls or Beanie Babies are both example of speculating.

Correct AnswerverifiedShow Answer

You recently purchased 100 shares of stock at $15 per share.The stock is now worth $20 per share,and it paid a $2 dividend during the time you held it.Your rate of return on this stock is closest to which of the following?

Correct AnswerverifiedShow Answer

Explain the purpose of a brokerage account and the 3 types of brokers.

Correct AnswerverifiedA brokerage account represents the money...View AnswerShow Answer

The Securities Act of 1934 created the SEC to enforce trading laws.

Correct AnswerverifiedShow Answer

Suppose that you purchased a machine several years ago for your company.You recently sold the machine for more than you paid.This is an example of a

Correct AnswerverifiedShow Answer

Which statement is true regarding overconfidence?

Correct AnswerverifiedShow Answer

With short selling you are hoping for the stock price to fall.

Correct AnswerverifiedShow Answer

Greg spent the weekend in Las Vegas.He started out with $10,000 and won an additional $5000.Greg was very risky with how he gambled with the $5000 he had won.Greg was exhibiting the ________ effect.

Correct AnswerverifiedShow Answer

Why should investors with a short investment horizon invest less money in common stocks?

Correct AnswerverifiedShow Answer

Unsystematic risk cannot be eliminated through diversification.

Correct AnswerverifiedShow Answer

A company that doesn't make a dividend payment is insolvent and may be forced into bankruptcy by the stockholders.

Correct AnswerverifiedShow Answer

An investor with a low propensity for risk would avoid investments with high risk premiums.

Correct AnswerverifiedShow Answer

If the total rate of return is multiplied by 1/N,where N is the number of years for which the investment was held,the result is the

Correct AnswerverifiedShow Answer

A lending type investment,such as a corporate bond,represents a legal obligation for the issuer to pay its creditors back.

Correct AnswerverifiedShow Answer

Because Nancy is extremely risk averse she is less likely to receive a solid rate of return on her investment portfolio than Babby who is more accepting of a risky portfolio.

Correct AnswerverifiedShow Answer

The real rate of return is the rate of return earned on an investment without any adjustment for inflation.

Correct AnswerverifiedShow Answer

The two major organized stock exchanges in the Unites States are the ________ and the ________.

Correct AnswerverifiedShow Answer

A(n) ________ is a legal document that describes a securities issue and is made available to potential investors.

Correct AnswerverifiedShow Answer

Historically,U.S.government securities have been considered the safest,lowest-risk investment available.

Correct AnswerverifiedShow Answer

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A brokerage account represents the money...
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The two major organized stock exchanges in the Unites States are the and the .

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