question

Mutual funds often sell directly to investors

answer

True

question

Investing Requires a fairly large sum such as $5,000 to get started

answer

False

question

Investing and speculating are two entirely different activities

answer

True

question

Owning common stock represents an equity investment

answer

True

question

A prospectus describes the firm and the issue of a new security

answer

True

question

There are a variety of investment vehicles including which of the following:

answer

Common stock, bonds, preferred and convertible securities, real estate

question

Which of the following is an order to sell a stock when the market price drops to or below a specified level

answer

Stop loss order

question

You have been offered an opportunity to buy shares of a diversified collection of securities. You will be investing in:

answer

Mutual funds

question

Which of the following types of brokers is most likely to involve an investor trading electronically from his or her personal computer

answer

Online broker

question

The most important investment prerequisites are

answer

Adequate income and insurance

question

Long-term securities are traded in the money market

answer

False

question

Investing is considered a short-term activity that involves the buying and selling of securities

answer

False

question

An investment in a financial futures contract would represent a fairly low risk investment

answer

False

question

Prices are rising in bear markets, indicating economic optimism

answer

False

question

Mutual funds provide professional management and diversification that individual investors - especially those with limited resources - can rarely obtain on their own.

answer

True

question

During a bull market...

answer

Sock prices go up

question

Which of the following is least likely to be an investment objective?

answer

Pay monthly bills

question

The most common reason given for investing is

answer

Saving for retirement

question

Buying a(n) ____ would not be an investment.

answer

automobile

question

Which of the following is a true statement about the Dow Jones Industrial Average?

answer

It is based on 30 industrial stocks

question

The Federal Deposit Insurance Corporation insures brokerage firm deposits.

answer

False

question

There is a trade-off between earning a high current income from an investment and obtaining significant capital appreciation from it.

answer

True

question

Without using margin accounts, common stock holders can not lose more than they initially invest in a common stock.

answer

True

question

A company with low financial risk has little to no long-term debt.

answer

True

question

All securities involve risk of some kind.

answer

True

question

Interest rate risk is greater for stocks than for bonds.

answer

False

question

A bond with a yield to maturity that equaled or exceeded an investor's desired rate of return is considered an attractive investment.

answer

True

question

A characteristic of defensive stocks is...

answer

Price stability in economic decline

question

Corporate ownership is evidenced by

answer

Common stock

question

Only the strongest, most stable and safe-return companies can be called

answer

blue chip stocks

question

The easiest way to invest in foreign stock is to purchase

answer

international mutual funds

question

_____ stocks are really purchased as a gamble rather then because they have a proven history of good performance.

answer

Speculative

question

Compound interest is a very important concept when evaluating the return on an investment you plan to hold for a long time.

answer

True

question

Common stocks pay a guaranteed dividend each year.

answer

False

question

The returns you expect from securities are income and growth.

answer

True

question

An investment is acceptable if the expected rate of return is greater than the desired rate of return.

answer

True

question

Business risk considers the possibility that the firm may fail.

answer

True

question

Stocks whose price movements who tend to follow the business cycle are called what?

answer

Cyclical Stocks

question

A high inflation rate would result in a high degree of

answer

purchasing power risk

question

One of the more appealing features of a common stock is that stock investments offer

answer

Ownership with limited liability

question

In which of the following type of investment is the most liquidity risk present...

answer

Land

question

Security investors incur varying degrees of risk. Business risk is related to

answer

the potential success or failure of the firm

question

You received a cash dividend from your stock investment this year. This is taxable income.

answer

True

question

Changes in the value of securities due to social, political, or economic factors are referred to as market risk.

answer

True

question

Index funds are actively managed.

answer

False

question

Socially responsible funds have experienced lower return than other types of funds of similar risk.

answer

True

question

Spiders and Diamonds are examples of ETF's.

answer

True

question

The price per share of a closed-end investment fund could be lower than its NAV.

answer

True

question

For most investors, the best way to deal in foreign securities is through an international mutual fund.

answer

True

question

The author recommends small investors should stick to...

answer

no-load funds

question

Index funds have provided competitive rates of return because

answer

their quotes are lower than other stock funds, it is difficult to outperform the market, they have very low turnover rates, they are tax efficient.

question

Redeeming your mutual fund shares might result in a charge called a

answer

back-end load

question

Investment company earnings come from

answer

interest, dividends, and capital gains

question

Investors tend to use mutual funds for which of the following reasons

answer

diversification, professional management, financial returns, convenience.

question

Open-ended mutual funds are guaranteed, they can not lose value.

answer

False

question

The price an investor can sell his shares of an open-end mutual fund share is the net asset value.

answer

True

question

By definition, all ETF are no-load funds.

answer

True

question

Mutual funds may be classified by the types of securities they purchase.

answer

True

question

The most important advantage of a mutual fund is pooled diversification.

answer

True

question

Having money taken automatically from your paycheck and put into a mutual fund is.an example of

answer

an automatic investment plan

question

Which of the following bond mutual funds would provide tax-free income?

answer

Municipal bond fund

question

An annual fee charged by some mutual funds to cover marketing and distribution expenses is the

answer

12(b)-1 fee

question

A mutual fund allows investors to

answer

become owners of a widely diversified portfolio of securities.

question

A _____ is a type of investment that is required by law to pay out nearly all earnings to owners.

answer

real estate investment trust

question

A fund's objective must be stated in its prospectus.

answer

True

question

The major benefit to small investors of mutual funds is diversification.

answer

True

question

Another name for a mutual fund is

answer

an open-end investment company

question

It really makes little difference whether you start retirement savings at age 25 or at age 45.

answer

False

question

Self-employer workers pay twice as much for Social Security coverage compared to employed workers.

answer

True

question

Most people are too conservative when investing their retirement funds.

answer

True

question

If one is unsure about the facts needed to estimate retirement needs, it is better to do nothing for a few years.

answer

False

question

Social security benefits alone can usually fund a comfortable retirement.

answer

False

question

The proceeds of a variable annuity are dependent on the

answer

Investment return

question

The major mistake(s) people make in retirement planning is(are)

answer

Saving too little

question

The major financial benefit of beginning your retirement funding early is related to

answer

increased cost of living

question

Annuities are administered by

answer

insurance companies

question

A Roth IRA

answer

is funded with after tax dollars, allows interest or dividends to accrue tax free, permits you to withdraw your contribution at any time, provides for tax-free earnings if you hold the account 5 years and are 59 ½ at withdrawal.

question

Supplemental retirement plans are usually voluntary.

answer

True

question

Government assistance, primarily Social Security, is the largest single source of income for the average retiree.

answer

True

question

Even the best retirement plan needs to be reviewed every few years.

answer

True

question

By itself, Social Security is sufficient allow a worker and spouse to maintain their preretirement standard of living.

answer

False

question

The first step in retirement planning is to identify retirement goals.

answer

True

question

The cost of an annuity varies with the

answer

age of the annuitant at issue, age of the annuitant when payment begins, method of proceeds distribution, sex of the annuitant.

question

Funds to finance social security come from

answer

compulsory contributions from employee, employer, and self-employed.

question

The need for retirement planning is increased by the uncertainties of

answer

inflation, social security benefits, the assets you hold, your pension benefits.

question

When setting retirement goals you should consider

answer

what you want to do in retirement, your expected standard of living, your proposed level of income, special retirement activities and projects.

question

The amount of money in your defined contribution retirement portfolio will depend on

answer

the age at which you begin contributing, the amount of money you deposit each month, the rate of return on your savings.

question

Individuals are being forced to assume more and more responsibility for their own retirement.

answer

True

question

Intestacy results from dying without a valid will.

answer

True

question

Probate property includes only real property.

answer

False

question

More damage is done to estates by doing nothing than by doing the wrong thing.

answer

True

question

A potential estate planning problem is improper distribution of assets.

answer

True

question

Property held in different states does not complicate the estate planning process.

answer

False

question

A will is used to

answer

name a personal representative to guide the distribution of the estate, name a guardian for persons and property, specify the distribution of tax burdens to beneficiaries.

question

When writing a will, you should seek the professional services of

answer

attorneys

question

A will is a legal document outlining the plan for

answer

disposition of your assets

question

In the absence of a valid will, the heir most generally favored would be the

answer

Spouse

question

Which of the following are requirements of a valid will?

answer

Mental capacity, freedom of choice, proper execution.

question

Knowing where parents keep important documents is essential to the estate planning process.

answer

True

question

Liquidity is important in an estate to pay for death costs and possible taxes.

answer

True

question

Gathering data on all aspects of the family is an important estate planning function.

answer

True

question

Funeral expenses are examples of second-level death-related costs.

answer

False

question

One should make a copies of his will and store them in different places.

answer

True

question

Life insurance could alleviate estate problems caused by

answer

lack of liquidity

question

The goal of estate planning is to:

answer

accumulative, preserve, distribute

question

The decedent's personal representative is called a(n)

answer

executor

question

____ would be a first-level death-related cost.

answer

Funeral expenses

question

Estate planning is closely related to

answer

tax and investment planning & retirement and investment planning

question

Insufficient capital can cause problems paying estate taxes.

answer

True

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