QUESTION The yield of a particular security is determined by dividing the dividend or income by the security’s market price. Indicate whether the statement is true or false. ANSWER Answer: TRUE Explanation: Yield is income from securities, calculated by dividing income or dividend by the market price. An investing-for-income strategy focuses on obtaining the […]
QUESTION Which of the following gives an investor a portion of ownership in the issuer of a security? A) U.S. Treasury bond B) bank certificate of deposit C) stock D) secured corporate bond E) municipal bond ANSWER Answer: C Explanation: C) Stocks represent shares of ownership in a company.
QUESTION Blue-chip stocks usually pay investors regular dividends. Indicate whether the statement is true or false. ANSWER Answer: TRUE Explanation: Blue-chip stocks are issued by big, reputable companies and usually pay regular dividends. They can be common stock or preferred stock.
QUESTION A town issues $15 million in bonds to pay for construction of a new high school. The bonds will mature over 20 years, but the town will begin paying off a portion of the bonds annually after 15 years. What type of bonds are being used to help finance the school construction? A) callable […]
QUESTION An investment bank buys the first issue of stock from XYZ Company at $35 per share. As XYZ’s shares are sold on the secondary securities market, the price falls to $28 a share. Which of the following describes the outcome of this dynamic? A) The investment bank sells the shares back to XYZ Company […]
QUESTION Which of the following is considered an institutional investor on the securities market? A) Goldman Sachs B) Charles Schwab C) E-Trade D) Liberty Mutual Insurance E) U.S. Treasury ANSWER Answer: D Explanation: D) Institutional investors are large and powerful organizations, such as pension funds and insurance companies, that invest their own or others’ […]
QUESTION The market for stocks progresses through a series of steps. Which step comes last in the process? A) Investment banks buy stocks. B) Corporations issue stocks. C) Investment banks form a syndicate. D) Investors sell stocks on an exchange. E) Investment banks sell stocks. ANSWER Answer: D Explanation: D) After investment banks sell […]
QUESTION Marco bought 100 shares of Xtreem Energy Drink stock at $75 per share. One year later the stock price is $87, and Marco is content to watch his investment grow. Which of the following statements is true? A) Marco has earned a capital gain of $1,200. B) Marco has earned a capital gain of […]
QUESTION Which of the following is sold to investors at weekly auctions? A) initial public offering stock issues B) long-term U.S. Treasury securities C) secondary securities D) short-term U.S. Treasury securities E) institutional investor stocks ANSWER Answer: D Explanation: D) Most securities sold through open auction are U.S. Treasury securities. Short-term securities are auctioned […]
QUESTION Which of the following is NOT true of money market instruments? A) They are easily converted into cash. B) They are long-term investments. C) They are considered a very low-risk investment. D) They offer investors very low returns. E) They are conservative investments. ANSWER Answer: B Explanation: B) Money market instruments are debt […]
