QUESTION When placing an order regarding a particular security, what three points of information must be specified? What will be an ideal response? ANSWER Answer: 1. whether you want to buy or sell the security 2. how many shares to buy or sell 3. the conditions for the order Explanation: When placing an order […]
QUESTION Ron has entered the high-stakes world of commodities trading. On April 1, he signed a futures contract to buy 200 metric tons of soybeans on October 1 at $526 per metric ton. The current price is $485 per metric ton. What will the price be on October 1 for Ron to join the rarefied […]
QUESTION What is diversification from an investment perspective? What will be an ideal response? ANSWER Answer: Diversification is owning a variety of different securities types in an investment portfolio. Following this approach means that a serious decline in the value of a particular security will not have a dramatic impact on the entire portfolio. […]
QUESTION Which of the following lists investment strategies in order from lowest risk to highest risk? A) investing for growth < buying and holding < market timing < investing for income < value investing B) buying and holding < investing for income < investing for growth < value investing < market timing C) value investing […]
QUESTION Which of the following guides a broker’s decision on executing a limit order for a stock? A) par value B) dividends C) book value D) market value E) interest rate ANSWER Answer: D Explanation: D) Limit orders direct a broker to buy or sell a security when the market price, or market value, […]
QUESTION Why do investors believe that the S&P 500 offers a more accurate index of stock prices than the Dow? A) It lists more companies. B) It is a composite of U.S. and foreign stocks. C) It changes the stocks listed to represent economic trends. D) It lists stocks of all other U.S. stock market […]
QUESTION Which industry sector is NOT represented in the Standard & Poor’s 500 index? A) financial B) industrial C) leisure and entertainment D) public utility E) transportation ANSWER Answer: C Explanation: C) The S&P 500 index tracks 400 industrial, 40 financial, 40 public utility, and 20 transportation stocks.
QUESTION Sayed inherited a large sum of money and wants to spread his investment risk. He wants to focus on healthcare companies because it’s a high growth industry. He also prefers to have management fees deducted from his account rather than pay commissions on every purchase. What does Sayed invest in? A) an income load […]
QUESTION What type of securities make up a hybrid mutual fund? A) common stock and preferred stock B) secured bonds and debenture bonds C) stocks and bonds D) alternative energy company and utility stocks E) convertible bonds ANSWER Answer: C Explanation: C) Hybrid funds include both stocks and bonds to help balance risk.
QUESTION In recent years, the Dow Jones Industrial Average has replaced manufacturing companies listed in the index with pharmaceutical and technology companies. Why? A) to open the Dow to foreign companies B) to reflect change in the U.S. economy C) to add more companies selling preferred stock D) to enhance computation of the index E) […]