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 […]
QUESTION Martha recently won $10,000 on a scratch lottery ticket. She is 67 years old and wants to invest her windfall but avoid any risk of losing her money. Which of the following should Martha avoid? A) bank certificates of deposit B) U.S. Treasury notes C) investor-grade bonds D) corporate secured bonds E) speculative-grade bonds […]
QUESTION Which of the following would NOT be appropriate for the portfolio of someone practicing an investing-for-income strategy? A) preferred stocks B) municipal bonds C) corporate secured bonds D) bank certificates of deposit E) junk bonds ANSWER Answer: E Explanation: E) Junk bonds are considered highly speculative. The issuer could default and the investor […]
QUESTION Which of the following indicates the amount of debt a city takes on by issuing a particular bond? A) interest rate B) dividend C) yield D) denomination E) rating ANSWER Answer: D Explanation: D) Bonds are issued in denominations, in multiples of $1,000. A city that issues one $10,000 bond has taken on […]
QUESTION A conservative investor would buy bonds that receive which of the following Standard & Poor’s rating? A) AA B) BBB C) B D) CCC E) C ANSWER Answer: A Explanation: A) Bond ratings measure the quality and safety of a bond. The AA rating is Standard & Poor’s second highest rating: high quality. […]
QUESTION What do the Standard & Poor’s and Moody’s bond ratings provide an assessment of? A) book value B) risk C) dividends D) convertibility E) SEC compliance ANSWER Answer: B Explanation: B) Standard & Poor’s and Moody’s, the two principal rating services, issue bond ratings that reflect the issuer’s potential to default. A high […]
QUESTION All bonds have a maturity date at which the issuer must pay them off. What type of bond has two pay-off dates? A) sinking-fund bond B) serial bond C) prerefunded bond D) callable bond E) convertible bond ANSWER Answer: D Explanation: D) Issuers of callable bonds may specify a date before the full […]
