1. Investment Unit
4 Corner Review

2. Which of the following is not a true statement?
A. No one is going to make you save the money you need to start an investment program.
B. To be useful, investment objectives must be specific and measurable.
C. Investment goals must be tailored to the particular financial needs of the individual.
D. Because investment objectives deal with the future, it is useless to make long-term goals.

3. Which of the following steps should be completed before starting an investment program? 
A. Pick out at least two stocks or bonds to invest in.
B. Work to balance your budget.
C. Save at least $10,000 to invest.
D. Invest in certificates of deposit.

4. All of the following statements are considered to be good advice for a potential investor before starting a personal investment program except
A. Work to balance your budget.
B. Increase credit purchases and make installment payments in order to increase cash available for investing.
C. Manage your credit card debt.
D. Start an emergency fund.

5. A _____________ is an employer-sponsored retirement account.
A. TRA account
B. 301(a) account
C. 509(re) account
D. 401(k) account

6. As people approach retirement, which of the following holds true for most?
A. They choose more speculative investments.
B. Their choices of investments do not change.
C. They choose more conservative investments.
D. They choose more risky investments.

7. The potential return on any investment should
A. Be directly related to the risk the investor assumes.
B. Be inversely related to the risk of the investment.
C. Not have any relationship to the risk of any investment.
D. Be inversely related to the risk the investor assumes.

8. Which of the following risks reduces your buying power?
A. Inflation
B. Interest rate
C. Business failure
D. Market

9. Which of the following risks deals with fluctuations due to economic conditions?
A. Inflation
B. Interest rate
C. Business failure
D. Market

10. Which of the following risks deals with the possibility that bad management, unsuccessful products, or other factors will cause the firm to be less profitable than originally anticipated?
A. Inflation
B. Interest rate
C. Business failure
D. Market

11. Timothy Calibe owns common stock in XYZWidgets. com
Timothy Calibe owns common stock in XYZWidgets.com. To reduce his business failure risk, he should
A. Buy more common stock in XYZWidgets.com.
B. Buy preferred stock in XYZWidgets.com.
C. Buy bonds in XYZWidgets.com.
D. Continue to evaluate his investment in XYZWidgets.com after the purchase.

12. Which of the following describes a growth company?
A. The company pays a large dividend.
B. Earnings are reinvested in the company for future growth.
C. Sales revenues are not growing.
D. The company invests most of its money in safe securities like government bonds.

13. 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. Income.
B. Growth.
C. Liquidity.
D. Business failure risk.

14. If you can leave your funds alone for 5-10 years or more, which of the following investments would be most appropriate? 
A. Certificates of deposit
B. Short-term government bonds
C. Highly rated corporate bonds
D. Stocks and mutual funds

15. To maximize profit or reduce dollar losses when you sell your investments, it is important to do all of the following except
A. Keep purchase records.
B. Monitor current values to spot opportunities for when to sell.
C. Identify commissions or fees paid.
D. Identify original dollar costs after you sell investments.

16. A discounted security means that the actual purchase price is trading at
A. The face value.
B. Less than the maturity value.
C. Greater than the face value.
D. The value at maturity.

17. Which of the following statements is false?
A. The federal government sells bonds and securities to obtain financing.
B. U.S. government Treasury securities carry a reduced risk of default when compared to stocks.
C. U.S. Treasury securities offer lower income potential than stocks.
D. Individual investors who purchase U.S. government securities must hold the investments until maturity.

18. A bond backed by the full faith, credit, and unlimited taxing power of the government that issued it is called a ____________ bond.
A. debenture
B. mortgage
C. secured
D. general obligation

19. A debt security issued by a state or local government is known as a
A. Treasury bond.
B. Municipal bond.
C. Corporate bond.
D. Subordinated bond.

20. Generally, interest on corporate bonds is normally paid every
A. Month.
B. Three months.
C. Six months.
D. Nine months.

21. If overall interest rates in the economy rise, a corporate bond with a fixed interest rate will generally
A. Increase in value.
B. Decrease in value.
C. Remain unchanged.
D. Become worthless.

22. Amanda wants to be part of the ownership for a corporation
Amanda wants to be part of the ownership for a corporation. She should invest in
A. Bonds.
B. Common stock.
C. Dividends.
D. A savings account.

23. A distribution of money, stock, or other property that is paid to owners of a company is called a
A. Bond.
B. Common stock.
C. Dividend.
D. Savings account.

24. All of the following statements are correct except
A. Dividends are paid out of profits.
B. Dividend payments must be approved by the stockholders.
C. A dividend can be a distribution of money, but it can also be stock or other property.
D. Dividends are not mandatory.

25. Why does a company split its stock?
A. The stock is trading at a low price, and the company wants to increase its stock value.
B. It wants fewer shares outstanding.
C. The stock is trading at a high price, and the company wants to bring the price in line with a theoretical ideal range.
D. It wants the total market capitalization to be lower than the current level.

26. Megan decided to start investing in stocks
Megan decided to start investing in stocks. Which of the following should she do first?
A. Base her investing decisions on hot tips she hears at work.
B. Buy stocks based solely on her stockbroker's recommendation.
C. Choose stocks based on recommendations from her family members.
E. Research the corporations she is interested in as well as their industries.

27. A safe investment that generally attracts conservative investors is called a(n) _______ stock
A. blue chip
B. income
C. micro cap
D. midcap

28. An investment that pays higher than average dividends is called a(n) _______ stock.
A. blue chip
B. income
C. micro cap
D. midcap

29. Which of the following is some of the information found on a financial website such as
A. 52-week price range, number of shares traded (volume).
B. Market capitalization.
C. Dividend paid and yield.
D. All of this information is included.

30. Annual reports A. Are available from a company for a fee.
B. Are available only to current stockholders.
C. Include the same information as a prospectus.
D. Must be sent to all stockholders on an annual basis.

31. When analyzing a price-earnings ratio
A. A higher price-earnings ratio indicates pessimism because the price is too high compared to the earnings.
B. The higher the price-earnings ratio, the more investors are paying for earnings.
C. A low ratio indicates that investors expect higher earnings in the future.
D. Price-earnings ratios are helpful when comparing two companies in the same industry, but not to the market in general.

32. Which of the following is a profitability ratio that uses the number of outstanding shares in the calculation?
A. Capital gain
B. Earnings per share
C. Price per share
D. Net income

33. Total return equals A. Dividend yield.
B. Annual dividends in dollars plus capital gains.
C. Capital gains.
D. Annual dividends in dollars less capital gains.

34. Stephen wanted to become one of the owners of GHI Corp
Stephen wanted to become one of the owners of GHI Corp. when it finally was available to the general public. He participated in the
A. Initial public offering.
B. Investment bank.
C. Primary market.
D. Secondary market.

35. Kelly bought some stock using an investment bank from the issuer of those securities. She bought her shares on the
A. Initial public offering.
B. Investment bank.
C. Primary market.
D. Secondary market.

36. Terry wants to begin investing and needs some guidance because he is uncomfortable making investment decisions. He should use a(n)
A. Discount broker.
B. Full-service broker.
C. Market maker.
D. Online broker.

37. If you buy or sell with this technique, you may be required to pledge additional collateral or cash for a loan. 
A. A call option
B. Direct investing
C. Buying on margin
D. A put option

38. Rebecca owns stock that pays a dividend
Rebecca owns stock that pays a dividend. She does not want the cash now; instead she would prefer to have more shares of stock. She should use a
A. Buy-and-hold technique.
B. Direct investment plan.
C. Dividend reinvestment plan.
D. Dollar cost averaging technique.

39. Which type of fund has the prices determined by factors of supply and demand like a stock?
A. Closed-end fund
B. SEC government fund
C. Net asset value fund
D. No-load fund

40. Which of the following is a fund that invests in stocks or securities contained in a specific stock or securities index?
A. Closed-end fund
B. Exchange-traded fund
C. Net asset value fund
D. No-load fund

41. Whose shares are issued and redeemed by the investment company at the request of investors?
A. Exchange-traded fund
b. Net asset value fund
C. No-load fund
D. Open-end fund

42. How is an ETF similar to a closed-end fund?
A. An investor can purchase as little as one share of a fund.
B. Prices are determined by supply and demand and the value of stocks and other investments contained in the portfolio.
C. Prices are determined by investor expectations.
D. All of these are correct.

43. Many mutual funds charge a commission every time they are purchased by investors. These are called
A. Load funds.
B. Closed-end funds.
C. Exchange-traded funds.
D. Net asset value funds.

44. Which class of shares charges a commission when shares are purchased?
A. A
B. B
C. C
D. K

45. Which class of shares charges a commission when withdrawals are made during the first five years?
A. A B. B C. C D. K

46. 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 B. Growth funds C. Index funds D. International funds

47. Which of the following types of stock funds invests in stock issued by companies expecting higher-than-average revenue and earnings growth?
A. Equity income funds B. Growth funds C. Index funds D. International funds

48. Which of the following types of stock funds invests in the same companies included in the Standard & Poor's 500 stock index?
A. Equity income funds B. Growth funds C. Index funds D. International funds

49. If you start a new job and are offered the opportunity to participate in the company's 401(k) or 403(b) retirement plan, which of the following decisions can affect your financial future?
A. Participating in the retirement account as a way to reduce income taxes. B. Participating in the retirement account to take advantage of the employer's matching contributions. C. Basing your actual choice of investments on your age, how long before you retire, and your tolerance for risk. D. All of these decisions would have a financial impact.

50. Which of the following is not correct?
A. Over the years, the majority of managed mutual funds have failed to outperform the Standard & Poor's 500 stock index. B. Managed funds may be open-end funds or closed-end funds. C. A benchmark of a good fund manager is the ability to increase share value when the economy is good and retain that value when the economy is bad. D. A managed fund will outperform an index fund only 60% of the time.

51. Sally wants to invest in a mutual fund
Sally wants to invest in a mutual fund. The mutual fund must provide a(n) ____ to her.
A. analysis from a financial publication B. annual report C. prospectus D. quarterly report

52. Payments to investors related to the sale of securities in the fund's portfolio are
A. Capital gain distributions. B. Income dividends. C. Capital gains. D. Mutual fund money.

53. Which of the following is true about mutual funds and taxes?
A. Capital gain distributions are taxed when you sell your shares. B. Income dividends are taxed quarterly. C. Investment companies are required to send each shareholder a year-end statement that specifies how much each received in dividends and capital gain distributions. D. Capital gains distributions are not taxed.