personal finance chapter 14

Since 1926, stocks as measured by the Standard & Poor’s 500 Index have returned on average about 10 percent a year. true
A proxy is a legal form that lists the issues to be decided at a stockholders’ meeting and requests that stockholders transfer their voting rights to some individual or individuals true
Amy Farmer just received a legal form in the mail from a firm in which she owns stock. This form lists the issues to be decided at the annual stockholders’ meeting and asks her to give written permission for someone else to vote for her if she cannot attend. What form has she received in the mail? proxy
Jeff Goldblum has just purchased a security which has no maturity date and no promised payments. He can recoup his investment by either selling the security to another individual or to the issuer, if the issuer ever makes an offer to buy it. What type of security did Jeff purchase? Common stock
Christopher Pratt just bought shares of common stock. Which one of the following is he entitled to based on his ownership of these shares? Right to vote on major corporate issues
A blue-chip stock is too speculative for most investors. false
A cyclical stock is a stock that follows the business cycle of advances and declines in the economy. true
The federal government requires corporations selling new issues of securities to disclose information about itself in a prospectus. Which of the following must be disclosed? All of these must be disclosed.
A very safe investment that generally attracts conservative investors is called a(n) ____________ stock. blue chip
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. true
Which one of the following statements is false? To date, it is impossible to determine corporate earnings by using the internet.
Mellon Manufacturing has after-tax income of $3 million. It also has 2 million shares of stock outstanding. What is the firm’s earnings per share? $1.50
Barker Creek Clothing has after-tax income of $12.8 million. It also has 32 million shares of stock outstanding. What is the firm’s earnings per share? $0.40
A securities exchange is a marketplace where member brokers who are representing investors meet to buy and sell securities. true
A market order is a request that a stock be purchased or sold at the current market price. true
A market in which an investor purchases financial securities (via an investment bank or other representative) from the issuer of those securities is called the ____________ market. primary
A market for existing financial securities that are currently traded among investors is called the ____________ market. secondary
Most speculators use a buy and hold technique. false
A long-term technique used by investors who purchase an equal dollar amount of the same stock at equal intervals in time is called: dollar cost averaging
Which one of the following statements is true? Investors buy on margin because doing so offers them the potential for greater profits.

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