Person decides to buy a house that has 3 rental apts. The profits from this investment may be lower than expected if the

one of the apartments is not rented.

When is there high risk for a stock to become worthless?

the business that issued the stock is about to declare bankruptcy

Using a brokerage firm, a qualified investor buys 1000 shares of common stock at $50 a share on 50% margin. This means

brokerage firm is lendingthe investor 50% of the money.

George received a dividend from the company in which he is a stockholder. A dividend is

Distribution of part of the company’s profit

The interest earned on United States Series EE Savings Bonds is

exempt from state and local taxes.

Issued by local governments to raise money for roads, bridges, etc.

What is the chief reason corporations issue stock?

To raise money for the corportation

Publicly held corporations

Have shares of stock that are held by public (outside) investors

Which of the following is your right as a shareholder of common stock?

The right to receive dividends if paid

Which of the following best describes diversification?

Reducing risk by investing in different types of securities

Jennie owns Disney shares and cannot attend the annual stockholder meeting. She can:

Vote by mail or online through a proxy

An investment that holds wide range of different investment instruments

Before the Kiss Corporation can issue stocks or bonds, it must register the issue with:

The Securities and Exchange Commission (SEC)

Investors select “blue chip” stocks because they:

Have a reputation for quality management and sometimes pay dividends

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WBH EPF on Investing

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Questions 28

Answers

1
You own a stock that pays a $2.00 a share dividend. If you reinvest that dividend, the $2.00 will go toward buying
bonds in the corporation.
more of the same stock.
preferred stock in the corporation
stocks that are similar to those already owned.
2
A pharmacy is to drugs as the American Stock Exchange is to:
Interest
Securities
Stock advisor
Mutual Fund
3
Person decides to buy a house that has 3 rental apts. The profits from this investment may be lower than expected if the
one of the apartments is not rented.
tenant in an apartment decides to paint the hallways.
taxes on the house are lowered.
mortgage on the house is paid off.
4
When is there high risk for a stock to become worthless?
market stock prices are increasing
the interest rates are decreasing
the business that issued the stock is about to declare bankruptcy
the financial markets are fluctuating
5
Using a brokerage firm, a qualified investor buys 1000 shares of common stock at $50 a share on 50% margin. This means
investor will pay only $5000 for the shares.
investor is buying 2000 shares.
brokerage firm will own 50% of the 1000 shares of stock
brokerage firm is lendingthe investor 50% of the money.
6
George received a dividend from the company in which he is a stockholder. A dividend is
Required by the SEC to be given to shareholders
Interest on his shares of preferred stock
Distribution of part of the company’s profit
a.Profit from the sales of some of his shares of stock
7
The interest earned on United States Series EE Savings Bonds is
paid in alump sum at the time the face value on the bond is reached.
deducted at the time of the bond’s purchase.
equal to the money paid to purchase it.
exempt from state and local taxes.
8
Municipal bonds are:
Issued by local governments to raise money for roads, bridges, etc.
A tax to raise to raise money for city operations
Issued by investment firms
Guarantee high dividends to bondholders
9
If a business wants to raise capital but not create debt, it can:
Borrow money from thegovernment
Borrow money from a commercial bank
Issue common stock
Float a bond issue
10
The price of a security may be affected by:
Destinations
Current events
Renovations
Wages
11
What is the chief reason corporations issue stock?
To raise money for the corportation
To secure tax advantages
To give consumers ownership in their company
To help the economy
12
What is the largest equities market in the world?
New York Stock Exchange (NYSE)
counter (OTC) market
NASDAQ market
American StockExchange (AMEX)
13
Publicly held corporations
Are listed first on the New York Stock Exchange
Are not-for-profit organizations
Have shares of stock that are held by public (outside) investors
Guarantee a positive return to investors
14
When a corporation or govt agency borrows money from an investor and pays interest and principal to that same investor.
Savings account
Bond
Certificate of deposit
Common stock
15
Which of the following investment products is guaranteed by the federal government?
U.S. Treasury notes
Corporate bonds
Common stock
Preferred stock
16
Robyn is an investor. Which financial product makes her a shareholder in a corporation?
Bond mutual funds
Bonds
Common stocks
Certificate of deposit
17
Which of the following is your right as a shareholder of common stock?
The right to hire officers of the corporation
The right to receive dividends if paid
The right to receive discounts on products or services
The right to receive interest payments
18
Carmen sold her stock in ABC company for a higher price per share than she bought it for. She realized a:
Capital loss
Dividend
Capital surplus
Capital gain
19
Which of the following best describes diversification?
Reducing risk by investing in different types of securities
Putting all your investments in two financial instruments
Investing in different types of bonds
Avoiding any risk by investing in blue chips
20
Buying a treasury bill (T -bill) is best for investors who are looking for
a place to invest between $100-500
an investment that matures in 10-30 years.
a higher yield on their investment that corporate bonds offer.
a secure, low risk investment
21
David bought stock for $4,000 and one year later he sold it for $1,000. The sale resulted in a:
Price earning
Capital loss
Market value
Yield
22
Jennie owns Disney shares and cannot attend the annual stockholder meeting. She can:
Assign her stock voting rights to her husband
Vote by mail or online through a proxy
Notvote unless she is at the meeting
Plan to attend the stockholders meeting next year
23
Mutual funds are:
Usually less risky than investing in a money market
Guaranteed to increase in value
An investment that holds wide range of different investment instruments
An investment portfolio managed by the investor
24
After 5 years of owning a Roth (IRA)a person wants to buy his first home, the person can withdraw money
but must pay a set penalty at the time of withdrawal.
tax and penalty free.
an owed taxes are deferred until retirement.
and have penalties deferred untilretirement.
25
Before the Kiss Corporation can issue stocks or bonds, it must register the issue with:
The World Bank
The Federal Reserve
Its Board of Directors
The Securities and Exchange Commission (SEC)
26
Lucy grandparent gave her a Series EE savings bond that will be worth $1,000 at maturity. Her grandparents paid
$750 for the bonding
These bonds are gifts for long term depositors
$500 for the bond
$1,000 for the bond
27
A factor that is likely to affect the market price of a stock is:
The number of corporate employees
Corporate profits
The age of the corporation
Wages
28
Investors select “blue chip” stocks because they:
Can avoidfinancial difficulties
Are listed on the American Stock Exchange
Are large public corporations
Have a reputation for quality management and sometimes pay dividends

WBH EPF on Investing Flashcards | StudBud