Question 1

If the board of directors approves a two for one stock split, an investor who owns 200 shares before the split owns ____________ shares after the split.

Accepted Answer

A)   75
B)   200
C)   225
D)   400
E)   450F) A) and B)
G) C) and E)

Question 2

Oil-Slick Shipping stock was priced at $70 at the beginning of the year. Over the year the corporation paid a dividend of $3.25 and its stock price at year-end was $65. What is the trailing dividend yield?

Accepted Answer

A)   4.6 percent
B)   4 percent
C)   5 percent
D)   5.4 percent
E)   6 percentF) A) and B)
G) A) and C)

Question 3

Which of the following statements is not true?

Accepted Answer

A)   When buying stock on margin, an investor borrows part of the money necessary to buy a particular stock.
B)   Usually, the brokerage firm lends the money or arranges for the loan in a margin transaction.
C)   Investors buy on margin because doing so offers them the potential for greater profits.
D)   The margin requirement is set by the exchanges.
E)   The current margin requirement is identical for all exchanges.F) None of the above
G) B) and D)

Question 4

Convertible preferred stock may be exchanged, at the corporation's option, for a specified number of shares of common stock.

Accepted Answer

A) True 
 B)False

Question 5

The type of stock that may earn more than the stated dividend if the firm has a good year is ____________ stock.

Accepted Answer

A)   common
B)   convertible preferred
C)   participating preferred
D)   cumulative preferred
E)   callable preferredF) A) and C)
G) B) and E)

Question 6

A cyclical stock is a stock that follows the business cycle of advances and declines in the economy.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following statements is not true?

Accepted Answer

A)   Most board members like to keep stockholders happy.
B)   Few things will unite stockholders into a powerful opposition force more rapidly than omitted or lowered dividends.
C)   Intelligent investors must be concerned about future after-tax profits.
D)   If a cash dividend is declared by the board of directors, each stockholder by law receives an equal amount per share.
E)   Corporate dividends are always paid in cash.F) B) and E)
G) B) and D)

Question 8

Becky Harie bought GBX Corporation stock for $24.38 a share. After six months, she received $2.25 in dividends and the market value the stock was $25.01 a share. If Becky decided to sell the stock at this time, what would be her shareholder return?

Accepted Answer

A)   11.52 percent
B)   23.03 percent
C)   11.81 percent
D)   23.63 percent
E)   22.62 percentF) A) and D)
G) C) and D)

Question 9

A large-cap stock is a stock issued by a company that has capitalization of $150 million or less.

Accepted Answer

A) True 
 B)False

Question 10

The price-earnings ratio is calculated by dividing the earnings per share of a stock by its fair market value.

Accepted Answer

A) True 
 B)False

Question 11

A long-term technique used by investors who purchase an equal dollar amount of the same stock at equal intervals in time is called a

Accepted Answer

A)   dollar cost averaging.
B)   dividend reinvestment plan.
C)   buy and hold technique.
D)   regulated transaction.
E)   secured transaction.F) D) and E)
G) A) and B)

Question 12

Anne owns 300 shares of Lily Industries. Suppose that for the last calendar quarter, Lily Industries paid $.30 a share. What is the total amount she received in her dividend cheque for this quarter?

Accepted Answer

A)   0
B)   $.30
C)   $45.00
D)   $90.00
E)   $180.00F) D) and E)
G) A) and D)

Question 13

Equity financing is a popular choice to provide long-term financing for a corporation because

Accepted Answer

A)   a lender is always available to provide this type of financing.
B)   it does not have to be repaid.
C)   repayment doesn't have to be made for ten years or more.
D)   only interest must be paid for the first five years.
E)   it does not cost anything to sell in the primary market.F) B) and C)
G) A) and E)

Question 14

A small cap stock is a stock that typically sells for less than 1$ per share.

Accepted Answer

A) True 
 B)False

Question 15

A stock that pays higher than average dividends is called an income stock.

Accepted Answer

A) True 
 B)False

Question 16

The annual shareholder return is the beginning-of-year stock price divided by the stocks annual dividend.

Accepted Answer

A) True 
 B)False

Question 17

The beta is an index that compares the risk associated with a specific stock issue with the risk of the stock market in general.

Accepted Answer

A) True 
 B)False

Question 18

The Cumulative feature of a preferred stock is that a corporation may exchange, at its option, for a specified amount of money.

Accepted Answer

A) True 
 B)False

Question 19

Assume that you purchased 50 shares of Home Depot stock for $35 a share, that you received an annual dividend of $0.30 a share, and that you sold your Home Depot stock for $40 a share at the end of one year. What is the total return for your investment? (Ignore commission amounts for this question.)

Accepted Answer

A)   10.00 percent
B)   12.50 percent
C)   13.25 percent
D)   14.29 percent
E)   15.14 percentF) B) and C)
G) A) and E)

Question 20

Capital gains yield is the stock's appreciation in value divided by its end-of-year stock price.

Accepted Answer

A) True 
 B)False

Exam 11: Investing in Stocks

Convertible preferred stock may be exchanged, at the corporation's option, for a specified number of shares of common stock.

Correct AnswerverifiedShow Answer

Equity financing is a popular choice to provide long-term financing for a corporation because

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Anne owns 300 shares of Lily Industries. Suppose that for the last calendar quarter, Lily Industries paid $.30 a share. What is the total amount she received in her dividend cheque for this quarter?

Correct AnswerverifiedShow Answer

The type of stock that may earn more than the stated dividend if the firm has a good year is ____________ stock.

Correct AnswerverifiedShow Answer

A cyclical stock is a stock that follows the business cycle of advances and declines in the economy.

Correct AnswerverifiedShow Answer

Capital gains yield is the stock's appreciation in value divided by its end-of-year stock price.

Correct AnswerverifiedShow Answer

Becky Harie bought GBX Corporation stock for $24.38 a share. After six months, she received $2.25 in dividends and the market value the stock was $25.01 a share. If Becky decided to sell the stock at this time, what would be her shareholder return?

Correct AnswerverifiedShow Answer

The Cumulative feature of a preferred stock is that a corporation may exchange, at its option, for a specified amount of money.

Correct AnswerverifiedShow Answer

Which of the following statements is not true?

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The beta is an index that compares the risk associated with a specific stock issue with the risk of the stock market in general.

Correct AnswerverifiedShow Answer

A small cap stock is a stock that typically sells for less than 1$ per share.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A stock that pays higher than average dividends is called an income stock.

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The annual shareholder return is the beginning-of-year stock price divided by the stocks annual dividend.

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A large-cap stock is a stock issued by a company that has capitalization of $150 million or less.

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If the board of directors approves a two for one stock split, an investor who owns 200 shares before the split owns ____________ shares after the split.

Correct AnswerverifiedShow Answer

A long-term technique used by investors who purchase an equal dollar amount of the same stock at equal intervals in time is called a

Correct AnswerverifiedShow Answer

Which of the following statements is not true?

Correct AnswerverifiedShow Answer

The price-earnings ratio is calculated by dividing the earnings per share of a stock by its fair market value.

Correct AnswerverifiedShow Answer

Oil-Slick Shipping stock was priced at $70 at the beginning of the year. Over the year the corporation paid a dividend of $3.25 and its stock price at year-end was $65. What is the trailing dividend yield?

Correct AnswerverifiedShow Answer

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