Finance Exam 4 Quiz Questions

Which of the following steps should be completed before making your first investment? Work to balance your budget
A______is an employer-sponsored retirement account, and participating in one is one of the easiest ways to begin an investment program a. 401(k) account
Gwendolyn and Jack Francis are investors with no financial training or investment background. Which approach will they likely take? a. They will choose investments with less risk
Which of the following is not one of the four components of the risk factor to be considered when evaluating investments? a. Stock risk
Which of the following risks associated with preferred stocks or government or corporate bonds is a result of changes in rates in the economy? a. Interest rate risk
Inflation risk deals with a. A reduction in purchasing power
Which of the following describes a growth company? a. Profits are reinvested in the company for future growth
If your main focus is to be able to buy or sell an investment quickly without substantially affecting the investment’s value, you are most concerned with a. Liquidity
investments is the most liquid? a. Interest-bearing checking account
A fancy way of saying you need to diversify your investments is a. Don’t pull all of your eggs in one basket
Which of the following has returned an average of almost 10% per year since 1926? a. Stock
If you need access to your funds in two years or less, which of the following investments would be least appropriate? a. Stock and mutual funds
If you can leave your funds alone for 5-10 years or more, which of the following investments would be most appropriate? a. Stock and mutual funds
When investing, in your role as an investor you should not… a. Let the investment manage themselves
After you purchase an investment, you should a. Continually evaluate your investment
U.S. government security issued in $100 units with maturities of more than 1 year but not more than 10 years is called a a. Treasury note
A bond that is repaid from the income generated by the project it is designed to finance is called(n)… a. Revenue bond
Interest paid to corporate bond owners is a. Tax-deductible for the corporation
Bonds of a single issue that mature on different dates are called ____________ bonds. a. Serial
A distribution of money, stock, or other property that is paid to the stockholders of a company is called a a. Dividend
Megan decided to start investing in stocks. Which of the following should she do first? a. Research the corporations she is interested in as well as their industries
Annual reports a. May be sent to all stockholders on an annual basis.
This calculation uses the current price per share and the annual amount of money paid to investors from the company. a. Dividend Yield
This calculation includes the yearly dividends in dollars plus the increase in the original purchase price of the investment. a. Total Return
Total return equals a. Yearly dividends in dollars plus capital gains
Yearly dividends in dollars plus capital gains a. Annual dividend amount/Current price per share.
Book value equals a. (Assets − Liabilities)/Number of shares outstanding
The NYSE is an example of a(n a. Securities exchange
Excessive buying and selling of securities to generate commissions is called a. Churning
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 a. Limited order
Gavin has owned MNOP stock for several years and has seen the stock increase in value from $20 to $35. He wants to “lock in” his gains, so he needs to place an order that will sell his stock at the next available opportunity after its market price drops to $33. What kind of order should he use? a. Stop-loss order
if you bought a stock on July 1, 2016, and sold it on July 15, 2016, you may be a(n) a. trader and investor
Investors who earn larger returns because they borrow part of the money needed to by a particular stock are using which of the following techniques? a. Buying on margin
The opportunity, but not the obligation, to buy a security within a specified period of time at a guaranteed price is a. A call option
The opportunity, but not the obligation, to sell a security within a specified period of time at a guaranteed price is a. A put option
Which type of fund has the prices determined by factors of supply and demand like the prices of a stock? a. Closed-end funds
Which of the following types of stock funds invest in stock traded within one specific region of the world? a. Regional funds
Sally wants to invest in a fund that invests only in stock. Which of the following will meet her needs? a. Midcap Funds
Thomas wants to invest in a fund that invests in stock, bonds, and money market instruments. Which of the following will meet his needs? a. Asset allocation funds
Which of the following contains a letter from the president of the investment company, detailed financial information, a schedule of investments, and a letter from the fund’s independent auditors? a. Mutual funds annual report
When you sell your shares in a mutual fund, you may receive a profit that results from an increase in value called a. Capital gain
major reasons that investors purchase mutual funds a. Diversification and professional management
Whose shares are issued and redeemed by the investment company at the request of investors? a. Open-end funds
Which of the following types of stock funds invests in stock issued by companies with a long history of paying dividends? a. Equity income funds
How do mutual funds provide returns to their shareholders a. Income dividends, capital gain distribution and capital gains
Payments to a fund’s shareholders that result from the sale of securities in the fund’s portfolio are a. Capital gain distribution
if you hold mutual fund shares in your Roth individual retirement account, the taxes on reinvested income will be a. Eliminated
An “average” older (65+) household spends more money on: – Housing than on cash contributions, entertainment, and clothing combined
When you retire, you will probably spend more money on: – Health insurance.
When planning for retirement, inflation: – Should be considered since income received earlier in retirement will buy more than the same amount received later in retirement due to the rising prices of goods and services.
When an employer’s contribution is used to buy stock in the company for its employees, it has a – Stock bonus plan
An employer’s contribution will vary according to the company’s profits in a – Profit-sharing plan
Vesting is the right to receive the – Employer’s contributions to a pension plan even if the employee leaves the company before retiring.
Julian’s annual contributions to his retirement are not tax-deductible, but his earnings accumulate tax-free. He is investing in a – Roth IRA.
Jill is 45 years old and thinks that her future tax rate will be lower than what she currently pays, so she wants to defer her taxes on her contributions of up to $5,500 in 2017. Which plan would allow her to meet her goals? – Regular IRA
Another name for a Coverdell account is a(n) – Education IRA.
When estimating your budget or spending plan at retirement, you should consider all of the following except – Withdrawing all retirement savings within five years of retirement.
An estate consists of – Everything you own.
The best definition of estate planning is A definite plan for managing property during one’s lifetime and at one’s death.
Sean’s estate planning should – Take the needs of his wife and children into account.
Which of the following is not an important document associated with estate planning? – Spending plan or budget.
Jacob is updating his estate planning and wants to draft a legal document that leaves everything to his spouse. He is writing a(n) – Simple will.
Darlene is updating her estate planning and wants to set up a legal document that leaves $5. 34 million to her husband. She is writing a(n) – Stated amount will.
A will prepared on a pre-printed form from a stationery store is called a(n) – Statutory will.
The letter of last instruction is – A non-legally binding document that provides information regarding your death such as funeral arrangements.
A(n) ______ administers a trust. – trustee
A(n) ____ cannot be changed or ended. – irrevocable trust
This tax is only imposed by state governments. – Inheritance tax
Robert’s wife Fiona does not work, and they file a joint tax return. Robert can contribute on behalf of Fiona into a – Spousal IRA.
Estate planning is an essential part of – Both retirement planning and financial planning
A handwritten will is known as a(n) – Holographic will.
A codicil is – A document that explains, adds, or deletes provisions in an existing will.

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