Question 1

What is the purpose of a margin account and using margin to purchase stocks?

Accepted Answer

A)  A margin account allows you to purchase stocks without using any of your own money.
B)  A margin account allows you to purchase more shares than you could afford to purchase using only your own money.
C)  Using margin to purchase more shares gives you the potential to earn a higher return on your investment.
D)  All of the above are correct.
E)  Only B and C are correct.F) A) and E)
G) C) and E)

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

Jeffery is an underwriter and sells shares on the ________ market for his job.However,in his personal investment life,he will purchase his stocks through the ________ market.

Accepted Answer

A)  primary;secondary
B)  secondary;primary
C)  primary;bond
D)  open;closed
E)  none of the aboveF) A) and B)
G) B) and C)

Question 4

Amy and Bob have decided to borrow a portion of the purchase price of stocks from their broker.They will then have a ________ account.

Accepted Answer

A)  cash
B)  round lot
C)  margin
D)  debtor
E)  combinationF) A) and E)
G) A) and D)

Question 5

Day trading is considered to be a safe,conservative investment practice.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following investors will potentially receive dividends on their investments?

Accepted Answer

A)  Bondholders
B)  Stockholders
C)  Debt holders
D)  Derivative holders
E)  Both B and D are correct.F) None of the above
G) B) and E)

Question 7

Investing in bonds is generally less risky than investing in stocks.

Accepted Answer

A) True 
 B)False

Question 8

Risk capacity refers to the strength of your financial safety net.

Accepted Answer

A) True 
 B)False

Question 9

Which organization would handle frequently traded OTC stock,bonds,and foreign stock?

Accepted Answer

The over the counter market handles freq...

Question 10

The real rate of return can never be a negative number.

Accepted Answer

A) True 
 B)False

Question 11

When placing a market order to purchase shares of stock,you will be required to make the order good-till-canceled.

Accepted Answer

A) True 
 B)False

Question 12

________ risk is simply the variability in the returns of an investment that is due to events that are unrelated to the overall market.

Accepted Answer

A)  Systematic
B)  Unsystematic
C)  Non-diversifiable
D)  PortfolioE) A) and C)
F) None of the above

Question 13

Provide an explanation for the concept of asset allocation in investing and differentiate between the 3 stages.

Accepted Answer

Asset allocation attempts to ensure that...

Question 14

Clarify the difference between systematic and unsystematic risk.

Accepted Answer

Systematic risk is that portion of a sec...

Question 15

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 16

Principle #4,taxes affect personal finance decisions,tells us that several points hold true regardless of what we invest in.Jason found a point that was included on the list in error.Which of the following is it?

Accepted Answer

A)  The marginal tax rate is the rate you pay on the next dollar of earnings.
B)  Tax-free investments should be compared on a before-tax basis.
C)  You should consider tax-deferred investments.
D)  Capital gains are better than ordinary income when it comes to taxes.
E)  The higher your marginal tax bracket,the more attractive tax-free investments become.F) B) and E)
G) None of the above

Question 17

Assume you have a margin account with a 50% initial margin.You purchase 100 shares of Microsoft at $150 per share.The price increases to $175 per share.What is the net value of your investment (margin) now?

Accepted Answer

A)  $17,500
B)  $15,000
C)  $ 7,500
D)  $ 3,750
E)  None of the aboveF) D) and E)
G) A) and C)

Question 18

Louis purchased $5,000 worth of stock three years ago and sold it today for $7,000.He received no dividends from this investment.Inflation averaged 4% during the three years he owned the stock.What was his annualized real rate of return on this investment?

Accepted Answer

A)  4%
B)  9.33%
C)  13.33%
D)  36%
E)  40%F) A) and B)
G) A) and C)

Question 19

Market risk is the risk of fluctuations in security prices due to changes in the market interest rate.

Accepted Answer

A) True 
 B)False

Question 20

One of the most important types of risk associated with real estate is the liquidity risk.

Accepted Answer

A) True 
 B)False

Exam 11: Investment Basics

Day trading is considered to be a safe,conservative investment practice.

Correct AnswerverifiedShow Answer

Market risk is the risk of fluctuations in security prices due to changes in the market interest rate.

Correct AnswerverifiedShow Answer

When placing a market order to purchase shares of stock,you will be required to make the order good-till-canceled.

Correct AnswerverifiedShow Answer

The real rate of return can never be a negative number.

Correct AnswerverifiedShow Answer

Which organization would handle frequently traded OTC stock,bonds,and foreign stock?

Correct AnswerverifiedThe over the counter market handles freq...View AnswerShow Answer

________ risk is simply the variability in the returns of an investment that is due to events that are unrelated to the overall market.

Correct AnswerverifiedShow Answer

Clarify the difference between systematic and unsystematic risk.

Correct AnswerverifiedSystematic risk is that portion of a sec...View AnswerShow 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

Amy and Bob have decided to borrow a portion of the purchase price of stocks from their broker.They will then have a ________ account.

Correct AnswerverifiedShow Answer

Risk capacity refers to the strength of your financial safety net.

Correct AnswerverifiedShow Answer

Jeffery is an underwriter and sells shares on the ________ market for his job.However,in his personal investment life,he will purchase his stocks through the ________ market.

Correct AnswerverifiedShow Answer

Assume you have a margin account with a 50% initial margin.You purchase 100 shares of Microsoft at $150 per share.The price increases to $175 per share.What is the net value of your investment (margin) now?

Correct AnswerverifiedShow Answer

Provide an explanation for the concept of asset allocation in investing and differentiate between the 3 stages.

Correct AnswerverifiedAsset allocation attempts to ensure that...View AnswerShow Answer

One of the most important types of risk associated with real estate is the liquidity risk.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Investing in bonds is generally less risky than investing in stocks.

Correct AnswerverifiedShow Answer

Louis purchased $5,000 worth of stock three years ago and sold it today for $7,000.He received no dividends from this investment.Inflation averaged 4% during the three years he owned the stock.What was his annualized real rate of return on this investment?

Correct AnswerverifiedShow Answer

Which of the following investors will potentially receive dividends on their investments?

Correct AnswerverifiedShow Answer

Principle #4,taxes affect personal finance decisions,tells us that several points hold true regardless of what we invest in.Jason found a point that was included on the list in error.Which of the following is it?

Correct AnswerverifiedShow Answer

What is the purpose of a margin account and using margin to purchase stocks?

Correct AnswerverifiedShow Answer

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The over the counter market handles freq...
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Systematic risk is that portion of a sec...
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Correct Answer
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Jeffery is an underwriter and sells shares on the market for his job.However,in his personal investment life,he will purchase his stocks through the market.

Correct Answer
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Correct Answer
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Correct Answer
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Asset allocation attempts to ensure that...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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