Personal Finance

Do corporations issue stock because it is a form of debt capital? No, it is a form of equity.
Is the most important priority that an investor in preferred stock enjoys is receiving cash dividends before common stockholders are paid any cash dividends? Yes
The most important priority that an investor in preferred stock enjoys is receiving cash dividends before common stockholders are paid any cash dividends. Yes
Do corporations issue preferred stock because it provides an alternative to financing through corporate bonds or common stock? Yes
Is a blue-chip stock is too speculative for most investors? No
A stock that pays higher than average dividends is called an income stock. Yes
A defensive stock is a stock that typically sells for less than $l. No, it is a stock that remains stable during declines in the economy.
Today, it is possible for investors to use the Internet to access a corporation’s home page in order to evaluate an investment in its stock. Yes
It is common for professional advisory services like Mergent’s, Standard & Poor’s, and Value Line to charge for more detailed financial information than provided on other Internet Web sites. Yes
The federal government requires corporations selling new issues of securities to disclose information about corporate earnings, assets and liabilities, products or services, and the qualifications of top management in a prospectus. Yes
Many investors and analysts believe that a corporation’s ability or inability to generate earnings in the future may be one of the most significant factors that account for an increase or decrease in the value of a stock. Yes
If a corporation’s earnings decline, the stock’s value usually increases. No, the stock’s value will decrease.
An increase in a corporation’s earnings per share is a healthy sign. Yes
The current yield for a stock investment is calculated by dividing annual income amount by the investment’s current market value. Yes
The secondary market is a market for existing financial securities that are current traded among investors. Yes
As a rule of thumb, the more active the investor is, the more sense it makes to use computers to trade online. Yes
What investment had the best return since 1900? common stocks
What are dividends are paid out of? profits, and dividend payments must be approved by the firm’s board of directors.
The following statements are true: Corporations are required by law to distribute annual reports. Stockholders must approve any major changes to corporate policies. Stockholders usually cast one vote per share at the corporation’s annual meeting. Stockholders may vote in person or by proxy.
Which of the following statements are true: Most board members like to keep stockholders happy. Few things will unite stockholders into a powerful opposition force more rapidly than omitted or lowered dividends. Intelligent investors must be concerned about future after-tax profits. If a cash dividend is declared by the board of directors, each stockholder by law receives an equal amount per share.
When the board of directors approves a two for one stock split, the price for each share of stock: decreases in value.
The par value for a share of preferred stock is: an assigned dollar value that is printed on a stock certificate.
What is a callable preferred stock? The type of stock in which stockholders are assured that omitted dividends will be paid to them before other dividends are paid
Who makes the decision to convert preferred stock to common stock? the stockholder
What is convertible preferred stock preferred stock that can be exchanged for common stock
A very safe investment that generally attracts conservative investors is what kind of stock. A blue-chip
What is a stock that pays higher than average dividends? income stock
What is a stock that remains stable during declines in the economy? defensive stock
What is stock that follows the business cycle of advances and declines in the economy? cyclical stock
What is a stock issued by a corporation that has the potential of earning above-average profits when compared to other firms in the economy? growth stock
What is a stock that sells for less than $l a share? A penny stock
What is a prospectus? The federal government requires that a corporation selling a new issue of securities must disclose information about the company and its finances.
What can you do by using projected earnings? You can calculate a projected price per share of stock.
How is book value determined? By deducting liabilities from assets and dividing the remainder by the number of shares of stock outstanding.
What is a primary market? A market in which an investor purchases financial securities (via an investment bank or other representative from the issuer of those securities.
What is a secondary market? A market for existing financial securities that are currently traded between investors.
What is the excessive buying and selling of securities to generate commissions called? churning
Generally, your retirement will last only about 15 years. No, it will last much longer
Saving just a little bit regularly today for your retirement will help. Yes, any little bit will help in the long run.
Your first step in retirement planning is to analyze your current assets and liabilities. Yes
You can depend on social Security and your company pension to pay for your basic living expenses. No, you need to have some other savings also
Is your net worth is equal to your assets minus liabilities? Yes
Do your assets include everything you own that has value? Yes
Your liabilities are everything you owe. Yes
Can the exact amount of money you will need in retirement be predicted accurately? No, you can only estimate
With more free time, many retirees spend more money on recreational activities. Yes
Social Security is an important source of retirement income for most Americans. Yes
Most people can qualify for reduced Social Security retirement benefits at age 62. Yes
In a Roth IRA, contributions are not tax-deductible, but earnings accumulate tax free. Yes
Social Security is a package of protection, providing retirement, survivors’, and disability benefits. Yes
With employer pension plans, your employer contributes to your retirement benefits, and sometimes you contribute too. Yes
The two most popular personal retirement plans are individual retirement accounts (IRAs) and Keogh accounts.
You can convert your tradition IRA to a Roth IRA. Yes
An annuity is a contract from an insurance company that provides an income for life. Yes
You can buy an annuity with a single payment or with periodic payments. Yes
The first step in stretching your retirement income is to make sure you are receiving all the income to which you are entitled. Yes
Dipping into savings during your retirement isn’t wrong, but you must do so with caution. Yes
Estate planning is an essential part of retirement planning. Yes
Every adult should have a written will. Yes
If you die without a valid will, you die intestate. Yes
A standard will costs between $50 and $100. No, it costs between $300 and $400.
A simple will leaves everything to the spouse. Yes
Probate is a legal procedure of proving a valid or invalid will. Yes
You should avoid probate because it is expensive, lengthy, and public. Yes
A formal will is usually prepared with an attorney’s assistance. Yes
A living will provides for your wishes to be followed if you become so physically or mentally disabled that you are unable to act on your own behalf. Yes
A power of attorney is a legal document authorizing someone to act on your behalf. Yes
An estate tax is a federal tax levied on the right of a deceased person to transmit his or her property and life insurance at death. Yes
What is a true statement regarding retirement living expenses? The exact amount of money you’ll need is impossible to predict.
What expenditures for retirees is likely to increase? health insurance
Your first step in retirement planning is to… Analyze your current assets and liabilities.
What expenditures for retirees is likely to decrease? clothing expenses
Stock bonus plans, profit sharing plans, and 401(k) pension plans are examples of a defined-contribution plan.
What are the two most popular personal retirement plans? Personal retirement plans and individual retirement accounts
Possible sources of income for many retirees include… Social Security, other public pension plans, employer pension plans, and personal retirement plans and annuities.
Estate planning involves: handling your property while you are alive, dealing with what happens to that property after your death, your family’s financial security in the event of your death, and your family’s financial security in the event of your spouse’s death. 399
Estate planning has two phases. The first phase consists of: acquiring and accumulating money.
What is a will? the legal declaration of a person’s mind as to the disposition of his or her property after his or her death.
What happens if you die without a valid will? The state’s law of descent and distribution becomes your will.
What type of will leaves everything to your spouse? A simple will
What will is sufficient for smaller estates? A simple will
What type will leaves one half of your adjusted gross estate to your spouse outright as a marital share? A traditional marital share will
What is a handwritten will called? A holographic will.
What is an executor or executrix? A person who will follow your instructions specified in your will
What is a guardian? A person who accepts the responsibilities of providing the children with personal care and managing the estate for them
What is a trustee? A person or institution that holds or generally manages property for the benefit of someone else under a trust agreement
What is a testamentary trust? A trust established by your will that becomes effective upon your death
What is an estate tax? A federal tax levied on the right of a deceased person to transmit his or her property at death-
What is an inheritance tax? A state tax levied on the right of an heir to receive all or part of the estate and life insurance proceeds of a deceased person
How many months after your death is the federal estate tax due and payable in cash? 9 months

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