True/False
Indicate whether the
statement is true or false.
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Ch. 17 - Investing in Stocks
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1.
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Stockholders can lose all of their investment if the company fails or goes out
of business.
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2.
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A capital gain becomes profit only when you sell the stock.
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3.
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Dividends on preferred stock may be higher than dividends earned on common stock
if the company thrives over time
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4.
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Growth stocks typically pay the most certain and predictable dividends.
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5.
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Common stock can be issued without a par value.
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6.
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When interest rates are low, people tend to buy fewer stocks.
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7.
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Bull markets are usually short and savage, and stock prices may fall as much as
20 percent.
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8.
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The Dow Jones Industrial Average is an average of the price movements of 30
major stocks listed on the New York Stock Exchange.
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9.
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A company must meet a minimum number of public shares and dollar market-value
requirements to be listed on the New York Stock Exchange.
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10.
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Someone who buys and sells stock within a short period of time is called a
speculator.
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11.
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By using direct investment, you may be able to buy shares at prices lower than
on open exchanges.
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12.
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With a margin purchase, you are betting a stock will decrease in value.
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13.
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A stock split lowers the selling price of a stock, making the shares more
affordable and encouraging investors to buy more.
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14.
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The percentage of the current stock price the dividends represent is called
percent yield.
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15.
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The net change column of a stock listing shows the cash dividend per share for
the year, listed in dollars and cents.
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Multiple Choice
Identify the
choice that best completes the statement or answers the question.
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Ch. 17 - Investing in Stocks
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16.
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Which of the following would be considered an odd lot of stocks?
a. | 50 shares | c. | 200 shares | b. | 100 shares | d. | 1,000 shares |
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17.
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An increase in the value of a stock over time is called a(n)
a. | investment | c. | dividend | b. | capital gain | d. | yield |
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18.
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A common stock
a. | is less risky than preferred stock | b. | has no voting rights. | c. | pays a fixed
dividend. | d. | allows stockholders to influence corporate policy. |
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19.
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Stocks in young, often small corporations that have higher overall risk than
stocks of successful, long-established companies are called
a. | growth stocks | c. | blue chip stocks | b. | defensive stocks | d. | emerging stocks |
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20.
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The price for which a stock is bought and sold in the marketplace is called
the
a. | par value | c. | market value | b. | yield | d. | dividend |
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21.
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Current Profit on Stock ÷ Purchase Price + Commission =
a. | Earnings per Share | c. | Net Yield | b. | Return on Investment | d. | Interest Rate |
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22.
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Which of the following is not a securities exchange?
a. | OTCBB | b. | NYSE | c. | NASDAQ | d. | all of the above are securities
exchanges |
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23.
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Which of the following investment techniques would more likely be used by a day
trader?
a. | buying and holding | c. | buying on margin | b. | dollar-cost averaging | d. | reinvesting
dividends |
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24.
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Using dividends previously earned on a stock to buy more shares is called
a. | dividend reinvestment | c. | short selling | b. | direct investment | d. | preferred
reinvestment |
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25.
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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 |
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Matching
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Chapter 17 - Investing in Stocks a. | index | f. | over-the-counter | b. | Dividends | g. | Short | c. | bull | h. | split | d. | preferred | i. | proxy | e. | par | j. | Growth |
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26.
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__________ are money paid to stockholders from the corporation’s
earnings.
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27.
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A type of stock that pays a fixed dividend but has no voting rights is
__________ stock.
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28.
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A(n) __________ is a stockholder’s written authorization to transfer his
or her voting rights to someone else.
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29.
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__________ stocks are stocks in corporations that reinvest their profits into
the business so it can grow.
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30.
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The __________ value of a stock is an assigned dollar value given to each share
of stock.
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31.
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A stock __________ is a benchmark that investors use to judge the performance
of their investments.
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32.
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When securities are bought and sold through brokers but not through a stock
exchange, the transaction is __________.
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33.
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A(n) __________ market is a prolonged period of rising stock prices and a
general feeling of investor optimism.
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34.
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__________ selling is selling stock borrowed from a broker that must be
replaced at a later time.
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35.
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A stock __________ is an increase in the number of outstanding shares of a
company’s stock
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