Question 1

Devin wants to purchase DEF stock for a specified price of $40.00 or less, and he understands this request will be executed after all previously received orders have been fulfilled. He should use a

Accepted Answer

A)   Current sale order.
B)   Limit order.
C)   Market order.
D)   Stop order.
E)   Stop-loss order.F) None of the above
G) B) and D)

Question 2

Using the information given here, what are the earnings per share for GHI Company? 
• Earnings = $375,000
• Number of shares outstanding = 150,000
• Price per share = $60
• Book value per share = $20

Accepted Answer

A)   $0.33
B)   $1.33
C)   $2.50
D)   $3.00
E)   $7.50F) A) and B)
G) A) and E)

Question 3

The earnings per share equals

Accepted Answer

A)   Total number of shares of preferred stock divided by earnings.
B)   Total number of shares of common stock divided by earnings.
C)   Total earnings divided by number of shares of preferred stock.
D)   Total earnings divided by number of shares of common and preferred stock.
E)   None of these.F) B) and D)
G) A) and D)

Question 4

Earnings per share equals the corporation's earnings divided by the number of outstanding shares of a firm's common stock.

Accepted Answer

A) True 
 B)False

Question 5

If you buy or sell with this technique, you may be required to pledge additional collateral or cash for a loan.

Accepted Answer

A)   A call option
B)   Direct investing
C)   Buying on margin
D)   A put option
E)   Selling shortF) C) and D)
G) D) and E)

Question 6

Many financial experts believe that a corporation's ability or inability to generate dividends in the future may be one of the most significant factors that account for an increase or decrease in the value of a stock.

Accepted Answer

A) True 
 B)False

Question 7

Amanda wants to be part of the most basic form of ownership for a corporation. She should invest in

Accepted Answer

A)   Bonds.
B)   Common stock.
C)   Dividends.
D)   A savings account.
E)   A proxy.F) A) and D)
G) B) and D)

Question 8

Which of the following usually offers some free information and charges for the more detailed online information you may need to evaluate a stock investment?

Accepted Answer

A)   Financial websites such as www.finance.yahoo.com
B)   Personal finance websites such as www.smartmoney.com
C)   Professional advisory services such as Standard & Poor's Financial Services
D)   Search engines such as Yahoo!
E)   Securities and Exchange Commission websiteF) A) and D)
G) A) and C)

Question 9

Mary Sue owns 1,000 shares of QRS Moving Company. QRS pays a yearly dividend of $1.00 per share. What is the total annual dividend that Mary Sue will receive?

Accepted Answer

A)   $.50.
B)   $2.00.
C)   $250.00.
D)   $500.00.
E)   $1,000.00.F) A) and D)
G) B) and C)

Question 10

Which of the following statements about stock splits is correct?

Accepted Answer

A)   If a company has a 2-for-1 split, the price will be doubled.
B)   If a company has a 3-for-1 split, the price will increase by a factor of 3.
C)   If a company has a 4-for-1 split, the new number of shares will be four times as many as before the split.
D)   If a company has a 5-for-1 split, the new number of shares will be equal to the old number of shares divided by 5.
E)   None of these is correct.F) A) and E)
G) A) and C)

Question 11

Since 1926, the average annual return for stocks has been almost

Accepted Answer

A)   8%.
B)   10%.
C)   12%.
D)   14%.
E)   16%.F) A) and D)
G) B) and C)

Question 12

Kenny wants to sell his stock at a specified price or higher without a guarantee that his order will be executed. He should use a stop order.

Accepted Answer

A) True 
 B)False

Question 13

Brenda purchases stock and plans to hold on to it for a number of years. She could be considered to be using a

Accepted Answer

A)   Buy-and-hold technique.
B)   Direct investment plan.
C)   Direct reinvestment plan.
D)   Dollar cost averaging technique.
E)   Margin technique.F) A) and B)
G) B) and C)

Question 14

Value Line, Standard & Poor's reports, and Mergent are three widely used advisory services that provide detailed research for stock investors.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following is correct?

Accepted Answer

A)   The broker pays you interest on money borrowed to purchase stock on margin.
B)   Selling short is selling stock borrowed from a brokerage firm.
C)   A put option is the right, but not the obligation, to purchase a stock at a specified price by a given date.
D)   A brokerage firm receives double its commission when stock is bought and sold when the investor is selling short.
E)   If the stock price increases and you purchased stock on margin, you may receive a margin call.F) A) and D)
G) A) and E)

Question 16

Ethan wants to purchase some stock for the first time. Which of the following is correct?

Accepted Answer

A)   His account executive should be encouraged to churn Ethan's account to maximize his return.
B)   He should use an online broker to get professional help about purchasing stock.
C)   His purchase price will exactly equal the number of shares he purchases times the average price per share and is known in advance.
D)   If he uses a commission order, he can lock in the price at which he wants to buy the stock.
E)   His commission should be lower at an online broker than at a full-service broker.F) C) and D)
G) A) and D)

Question 17

Stephen wanted to become one of the owners of GHI Corp. when it initially became available to the general public. He participated in the

Accepted Answer

A)   Initial public offering.
B)   Investment bank.
C)   Primary market.
D)   Secondary market.
E)   Securities exchange.F) B) and E)
G) A) and D)

Question 18

A.J. wants to buy a stock at its current market price. He should use a market order.

Accepted Answer

A) True 
 B)False

Question 19

When beginning an investment program, many investors do not know where to get the information they need to evaluate potential investments.

Accepted Answer

A) True 
 B)False

Question 20

An investor may receive a margin call when selling stock short.

Accepted Answer

A) True 
 B)False

Exam 12: Investing in Stocks

Stephen wanted to become one of the owners of GHI Corp. when it initially became available to the general public. He participated in the

Correct AnswerverifiedShow Answer

Which of the following usually offers some free information and charges for the more detailed online information you may need to evaluate a stock investment?

Correct AnswerverifiedShow Answer

An investor may receive a margin call when selling stock short.

Correct AnswerverifiedShow Answer

The earnings per share equals

Correct AnswerverifiedShow Answer

Amanda wants to be part of the most basic form of ownership for a corporation. She should invest in

Correct AnswerverifiedShow Answer

Brenda purchases stock and plans to hold on to it for a number of years. She could be considered to be using a

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

Ethan wants to purchase some stock for the first time. Which of the following is correct?

Correct AnswerverifiedShow Answer

A.J. wants to buy a stock at its current market price. He should use a market order.

Correct AnswerverifiedShow Answer

Using the information given here, what are the earnings per share for GHI Company? • Earnings = $375,000 • Number of shares outstanding = 150,000 • Price per share = $60 • Book value per share = $20

Correct AnswerverifiedShow Answer

Kenny wants to sell his stock at a specified price or higher without a guarantee that his order will be executed. He should use a stop order.

Correct AnswerverifiedShow Answer

Since 1926, the average annual return for stocks has been almost

Correct AnswerverifiedShow Answer

Value Line, Standard & Poor's reports, and Mergent are three widely used advisory services that provide detailed research for stock investors.

Correct AnswerverifiedShow Answer

If you buy or sell with this technique, you may be required to pledge additional collateral or cash for a loan.

Correct AnswerverifiedShow Answer

When beginning an investment program, many investors do not know where to get the information they need to evaluate potential investments.

Correct AnswerverifiedShow Answer

Many financial experts believe that a corporation's ability or inability to generate dividends in the future may be one of the most significant factors that account for an increase or decrease in the value of a stock.

Correct AnswerverifiedShow Answer

Earnings per share equals the corporation's earnings divided by the number of outstanding shares of a firm's common stock.

Correct AnswerverifiedShow Answer

Which of the following statements about stock splits is correct?

Correct AnswerverifiedShow Answer

Mary Sue owns 1,000 shares of QRS Moving Company. QRS pays a yearly dividend of $1.00 per share. What is the total annual dividend that Mary Sue will receive?

Correct AnswerverifiedShow Answer

Devin wants to purchase DEF stock for a specified price of $40.00 or less, and he understands this request will be executed after all previously received orders have been fulfilled. He should use a

Correct AnswerverifiedShow Answer

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