Final Exam – Chapter 12 Finance

question

one of the more appealing features of a common stock is that the stock investments . . .
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offer ownership with a limited liability.
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corporate ownership is evidenced by . . .
answer

common stock
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_____ stocks are really purchased as a gamble rather then because they have a proven history of good performance.
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speculative
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the easiest way to invest in foreign stock is to purchase . . .
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international mutual funds
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T/F: an investment is acceptable if the expected rate of return is greater than the desired rate of return.
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True
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T/F: a company with low financial risk has little to no long-term debt.
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True
question

T/F: a bond with a yield to maturity that equals or exceeded an investors desired rate of return is considered an attractive investment.
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True
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T/F: compound interest is a very important concept when evaluating the return on an investment you plan to hold for a long time.
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True
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T/F: all securities involve risk of some kind.
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True
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T/F: business risk considers the possibility that the firm may fall.
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True
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T/F: interest rate risk is greater for stocks than for bonds.
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False
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stocks whose price movements who ten to follow the business cycle are called . . .
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cyclical stocks
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T/F: changes in the value of securities due to social, political, or economic factors are referred to as a market risk.
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True
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T/F: you received a cash dividend from your stock investment this year. this is a taxable income.
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True.
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T/F: without using margin accounts, common stock holders can not lose more than they initially invest in a common stock.
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True
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T/F: the returns you expect from securities are income and growth.
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True
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T/F: common stocks pay a guaranteed dividend each year.
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False
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a high inflation rate would result in a high degree of . . .
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purchasing power risk
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in which of the following type of investment is the most liquidity risk present . . .
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land
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a characteristic of defensive stocks is . . .
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price stability in economic decline
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security investors incur varying degrees of risks. business risk is related to . . .
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the potential success or failure of the firm
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only the strongest, most stable and safe-return companies can be called . . .
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blue chip stocks

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