Money Matters: 5th 6wks Test Review (Ch. 16-20) - Even
Multiple Choice
Identify the
choice that best completes the statement or answers the question.
|
|
|
Ch 18. Investing In Bonds
|
|
|
1.
|
One main distinction between stocks and bonds is that
a. | bonds represent equity, not debt. | b. | corporations are required to pay dividends on
stocks but not bonds. | c. | unlike stock dividends, a bond’s interest
does not go up and down. | d. | bonds are shares of ownership in a corporation,
not loans. |
|
|
|
2.
|
An investment-grade bond
a. | is considered the highest-quality, lowest-risk bond. | b. | has no rating at
all. | c. | is highly speculative | d. | offers the highest possible
yield |
|
|
|
3.
|
A revenue bond is a type of municipal bond that
a. | is backed by specific assets that serve as security to assure repayment of the
debt. | b. | is backed by the power of the issuing government to levy taxes to pay back the
debt. | c. | is repaid with the government’s general revenue and
borrowings. | d. | finances public-works projects such as airports and
hospitals. |
|
|
|
4.
|
When a bond issuer cannot meet the interest and/or principal payments, what has
occurred?
a. | bond default | c. | short selling | b. | hedging | d. | bond redemption |
|
|
|
5.
|
Which of the following types of bonds cannot be purchased through
TreasuryDirect?
a. | Treasury securities | c. | Series EE savings bonds | b. | corporate
bonds | d. | Series I savings
bonds |
|
|
|
6.
|
Bond prices
a. | tend to react in the same direction of stock prices. | b. | are by law always
lower than stock prices. | c. | can never change once you’ve purchased a
bond. | d. | tend to remain steadier than stock prices |
|
|
|
7.
|
Corporations usually agree not to call bonds for the first ___ years after
issuance.
|
|
|
8.
|
When bonds sell for more than their face value, they are selling at a
a. | cut rate. | c. | discount | b. | capital gain | d. | premium |
|
|
|
9.
|
The amount a bondholder will be paid at maturity is called
a. | dividend. | c. | face value | b. | market value. | d. | yield. |
|
|
|
10.
|
A type of corporate bond based on the general creditworthiness of the company is
called a(n)
a. | secured bond | c. | annuity | b. | debenture | d. | mortgage bond. |
|
|
|
Ch 19 - Mutual Funds, Real Estate, and Other
Choices
|
|
|
11.
|
A building with two separate living quarters is called a
a. | duplex | c. | quad | b. | triplex | d. | condo |
|
|
|
12.
|
An investment in a pool of mortgages that have been purchased by a government
agency is a
a. | real estate syndicate | c. | certificate of participation | b. | real estate
investment trust | d. | derivative
mortgage |
|
|
|
13.
|
Which of the following is a sales charge paid when you sell an
investment?
a. | back-end load | c. | front-end load | b. | dividend | d. | capital gain |
|
|
|
14.
|
Which of the following is the most risky investment?
a. | growth and income fund | c. | money market fund | b. | income fund | d. | growth fund |
|
|
|
15.
|
Which of the following tells you the market price for a share of a mutual
fund?
a. | market value | c. | net asset value | b. | face value | d. | par value |
|
|
|
16.
|
Advantages of investing in mutual funds include all of the following
except
a. | liquidity | c. | diversification | b. | professional management | d. | a guaranteed rate of
return |
|
|
|
17.
|
What is the goal of an income fund?
a. | to produce current income in the form of interest or dividends | b. | to produce current
income from interest alone | c. | to earn returns from capital gains
alone | d. | to earn returns from both dividends and capital gains |
|
|
|
18.
|
Farm products (such as wheat, corn, and cattle) and metals (such as gold and
silver) are called
a. | collectibles | c. | futures | b. | options | d. | commodities |
|
|
|
19.
|
To reduce risk, you should choose a mutual fund company with all of the
following characteristics except
a. | it is a large company that manages investments for millions of
investors | b. | it provides customers with easy-to-read statements | c. | it has been in
business for a minimum of five years | d. | it exists both in brick-and-mortar and in
cyberspace |
|
|
|
20.
|
A professionally managed group of investments bought using a pool of money from
many investors is called a
a. | savings bond | c. | mutual fund | b. | passbook account | d. | Ponzi scheme |
|
|
|
Ch 16 - Investing for the
Future
|
|
|
21.
|
The use of long-term savings to earn a financial reward is called
a. | diversifying | c. | investing | b. | gambling | d. | speculating |
|
|
|
22.
|
A daily newspaper that provides detailed coverage of the business and financial
world is
a. | Kiplinger’s Personal Finance. | c. | Barron’s | b. | The Economist | d. | The Wall Street
Journal |
|
|
|
23.
|
Maximization of return in the next five to ten years is the goal of which
investment strategy?
a. | initial investing | c. | systematic investing | b. | speculation | d. | strategic
investing |
|
|
|
24.
|
Which of the following is typically the first stage of investing?
a. | a put-and-take account | c. | speculation | b. | systematic investing | d. | strategic
investing |
|
|
|
25.
|
Which of the following would be considered the lowest risk
investment?
a. | a corporate bond | c. | a stock | b. | real estate | d. | an annuity |
|
|
|
26.
|
All of the following are wise investment practices except
a. | seek good investment advice | b. | define your financial goals | c. | keep good financial
records | d. | make your decisions quickly to take advantage of the
market |
|
|
|
27.
|
According to the Rule of 72, if an investment of $5,000 is yielding an average
of 6 percent, it will take ___ years for that investment to be worth $10,000.
|
|
|
28.
|
This type of risk is caused by the business cycle.
a. | political risk | c. | industry risk | b. | interest-rate risk | d. | market risk |
|
|
|
29.
|
The right, but not the obligation, to buy or sell a commodity or stock for a
specified price within a specified time period is called a(n)
a. | option | c. | future | b. | annuity | d. | discount bond |
|
|
|
30.
|
Professional investment planners who are trained to give investment advice based
on your goals, age, lifestyle, and other factors are called
a. | day traders | c. | discount brokers | b. | certified financial
planners | d. | certified public
accountants |
|
|
|
Ch. 17 - Investing in Stocks
|
|
|
31.
|
A common stock
a. | has no voting rights. | b. | pays a fixed dividend. | c. | allows stockholders
to influence corporate policy. | d. | is less risky than preferred
stock |
|
|
|
32.
|
Which of the following investment techniques would more likely be used by a day
trader?
a. | buying and holding | c. | buying on margin | b. | reinvesting dividends | d. | dollar-cost
averaging |
|
|
|
33.
|
Current Profit on Stock ÷ Purchase Price + Commission =
a. | Net Yield | c. | Earnings per Share | b. | Interest Rate | d. | Return on
Investment |
|
|
|
34.
|
The price for which a stock is bought and sold in the marketplace is called
the
a. | yield | c. | par value | b. | market value | d. | dividend |
|
|
|
35.
|
The price of a share of stock divided by the corporation’s earnings over
the past 12 months is the
a. | percent yield | c. | ROI | b. | earnings per share | d. | P/E ratio |
|
|
|
36.
|
Using dividends previously earned on a stock to buy more shares is called
a. | short selling | c. | direct investment | b. | dividend reinvestment | d. | preferred
reinvestment |
|
|
|
37.
|
An increase in the value of a stock over time is called a(n)
a. | dividend | c. | capital gain | b. | yield | d. | investment |
|
|
|
38.
|
Which of the following is not a securities exchange?
a. | OTCBB | b. | NASDAQ | c. | NYSE | d. | all of the above are securities
exchanges |
|
|
|
39.
|
Stocks in young, often small corporations that have higher overall risk than
stocks of successful, long-established companies are called
a. | emerging stocks | c. | blue chip stocks | b. | growth stocks | d. | defensive
stocks |
|
|
|
40.
|
Which of the following would be considered an odd lot of stocks?
a. | 100 shares | c. | 1,000 shares | b. | 200 shares | d. | 50 shares |
|
|
|
Ch. 20 Retirement and Estate
Planning
|
|
|
41.
|
Many financial advisers suggest that you will need between __________ percent of
your preretirement income to live comfortably
a. | 75 and 85 | c. | 60 and 75 | b. | 95 and 100 | d. | 50 and 60 |
|
|
|
42.
|
The amount for which you could sell your home now is its
a. | current market value | c. | true value | b. | assessed value | d. | appraised value |
|
|
|
43.
|
A will written in a person’s own handwriting is called a
a. | holographic will | c. | codicil | b. | simple will. | d. | trust will. |
|
|
|
44.
|
In addition to safeguarding retirement plans from employer mismanagement, the
Employee Retirement Income Security Act does all of the following except
a. | require employers to provide participants with information about the plan's
features and funding | b. | penalize employers who do not provide
retirement plans for their employees | c. | guarantee payment of certain benefits if a
defined-benefit plan is terminated | d. | require that all participants be treated
equally under the plan |
|
|
|
45.
|
A Roth IRA differs from a traditional IRA in that
a. | contributions are not tax-deductible. | b. | earnings as well as contributions are taxed
when you withdraw the money at retirement. | c. | there is no penalty for early
withdrawal. | d. | contributions are taxed but earnings are not. |
|
|
|
46.
|
In 2014, Deborah gave Richard a gift of $12,000. What are the tax
implications?
a. | Richard would have to pay a gift tax. | b. | Richard would have to pay an inheritance
tax. | c. | Deborah would have to pay a gift tax. | d. | No one would have to pay tax because the amount
of the gift is too small to be taxable. |
|
|
|
47.
|
Because of inflation,
a. | retired individuals sometimes find it difficult to maintain their standard of
living. | b. | the cost of living goes down over time for seniors. | c. | all retired
individuals need to work at part-time jobs. | d. | price increases boost buying
power. |
|
|
|
48.
|
A tax-deferred retirement plan available to small businesses is a
a. | Simplified Employee Pension (SEP) plan | b. | defined-benefit plan | c. | money market
plan | d. | Keogh plan |
|
|
|
49.
|
A legal document authorizing someone to act on your behalf is called a
a. | power of attorney | c. | codicil. | b. | joint tenancy agreement | d. | inter vivos |
|
|
|
50.
|
Social Security replaces about ____ percent of an average wage earner's
income after retiring.
|