Chapter 12 Personal Finance Exam

Positive aspects about bonds include low risk as compared to equity
The commonly cited price for a bond in the financial press and on the Internet is usually its ________ bond price clean
Which of the following statements about risk is correct? the higher the risk, the higher the expected return
Companies with a great deal of long term debt are considered to have high ______ risk financial
When a bond is sold between coupon payment dates, the buyer pays the seller for the _________, which is the prorated share of the upcoming coupon payment accrued interest
A stock’s dividend yield is calculated as ________ the annual dividend received per share divided by the market price per share of stock
The business risk faced by an investor when investing in a company is related to: the firm’s ability to meet operating expenses in a timely manner
An example of event risk is: a corporate takeover
When evaluating a stock as a possible investment, one must consider: the net profit margin
Stock dividends represent non-taxable income
An investment that earns interest is said to be earning a ______. fully compounded rate of return
Which of the following investments have the highest liquidity risk? land
When the market interest rate decreases, the bond: price increases
________ is a measure of stock investors’ confidence in a corporation price/earnings ratio
The advantages of dividend reinvestment plan (DRP) may include: stock sold at a discount
The easiest way to invest in foreign markets is through: international mutual funds
The issuer of your corporate bond has the right to retire it at any time before maturity. You have a freely callable bond
Stock profitability is often measured by: return on equity
Bonds are issued: by corporations and state, local, federal governments
One of the advantages of common stock investments is: potential capital gains
Corporate ownership of an investor is evidenced by: common stocks held in a corporate
Stocks whose earnings have increased at an above average level over time are called growth stocks
Stocks whose prices tend to increase when the economy is in an expansionary stage and decline during a contractionary stage are called: cyclical stocks
When interest rates rise, bond prices will: fall
_______ risk results from the behavior of investors in the securities markets that may cause security prices to fluctuate market
Cash dividends on common stock are most often paid quarterly
Which of the following types of bonds is unsecured? debenture bonds
The ______ of a stock reflects stockholders’ confidence price/earnings ratio
If an investor wants a higher level of return on an investment, he or she should expect a higher risk exposure
The relevant sale or invoice price of a bond to the buyer, which adds the accrued interest to the quoted price, is its: dirty price
The quoted price of a bond minus accrued interest is the clean price
An investor receives return from an investment due to capital gains on sale of an investment
Which of the following is true of American Depositary Receipts (ADRs)? ADRs represent a stated number of shares in a specific foreign company
A bond selling below par value is selling at: a discount
_____________ dividends are the most common form of dividends cash
If you are looking for a guaranteed steady stream of income, you should invest in bonds
A stock generally issued by companies expected to provide an uninterrupted stream of dividends and good, long-term growth prospects is called blue-chip stocks
Bonds issued by political subdivisions of the U.S. government but not guaranteed by the government are called: agency bonds
In the stock market, the market of a large-cap stock is more than $10 billion
which of the following accounting measures indicates the amount of stockholder funds used to finance the firm? book value
The return on a ______ is an appropriate measure of the risk-free rate of return 90-day Treasury bill
Return on equity is calculated by: dividing net income by shareholder’s equity

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