 |
| 1 | |
A share of common stock represents: |
| | A) | A claim from a lender to a borrower. |
| | B) | A share in the company's assets. |
| | C) | A share of ownership of the company. |
| | D) | An unlimited liability to the owner of the stock. |
|
|
|
| 2 | |
The fact that common stockholders are residual claimants means: |
| | A) | The stockholders receive their dividends before any other residuals are paid. |
| | B) | The stockholders receive the remains after everyone else is paid. |
| | C) | The stockholders are paid any past due dividends before other claims are paid. |
| | D) | The common stockholders are responsible for all corporate debts.. |
|
|
|
| 3 | |
The concept of limited liability says a stockholder of a corporation: |
| | A) | Is liable for the corporation's liabilities, but nothing more. |
| | B) | Cannot receive dividends that exceed their investment. |
| | C) | Cannot own more than fiver percent of any public corporation. |
| | D) | Cannot lose more than their investment. |
|
|
|
| 4 | |
An index number is a valuable tool because: |
| | A) | The number by itself provides all of the useful information needed. |
| | B) | The index provides a meaningful measurement scale to calculate percentage changes. |
| | C) | The index is more stable than the data it reflects. |
| | D) | It does not require any calculations to compute percentage changes. |
|
|
|
| 5 | |
The Dow Jones Industrial Average is an example of: |
| | A) | A simple average. |
| | B) | A value weighted index. |
| | C) | A price-weighted index. |
| | D) | A secondary market. |
|
|
|
| 6 | |
If The Dow Jones Industrial Average increases to 10250 from 9800; the percentage change in the index is: |
| | A) | 0.459% |
| | B) | 4.59% |
| | C) | 0.00459% |
| | D) | 450.0% |
|
|
|
| 7 | |
The most broadly based stock index in use is: |
| | A) | The Dow Jones Industrial Average. |
| | B) | The Nasdaq Composite Index. |
| | C) | The Wilshire 5000. |
| | D) | The Standard and Poor's 500 Index. |
|
|
|
| 8 | |
You start with a $1000 portfolio; it loses 40% over the next year, the following year it gains 50% in value; At the end of two years your portfolio is worth: |
| | A) | $900 |
| | B) | $600 |
| | C) | $1000 |
| | D) | $1100 |
|
|
|
| 9 | |
The Dividend-Discount Model of stock valuation: |
| | A) | Takes the annual dividend, adds it to the expected future selling price and divides by the number of years to get the current price. |
| | B) | Takes the net present value of expected dividends and add it to the future sale price of the stock. |
| | C) | Takes the net present value of the expected future price of the stock and add the annual dividend. |
| | D) | Is an application of the net present value formula. |
|
|
|
| 10 | |
If we ignore risk, the dividend discount model says the fundamental price of a stock is simply: |
| | A) | The current dividend divided by the interest rate less the dividend growth rate. |
| | B) | The annual growth rate of the dividend minus the interest rate divided by the current dividend. |
| | C) | The current dividend divided by the interest rate plus the dividend growth rate |
| | D) | The current dividend divided by the dividend growth rate less the interest rate. |
|
|
|
| 11 | |
The Theory of Efficient Markets: |
| | A) | Allows for higher than average returns if the investor takes higher than average risk. |
| | B) | Says Insider-information makes markets less efficient. |
| | C) | Rules out high returns due to chance. |
| | D) | Assumes people have equal luck. |
|
|
|
| 12 | |
Consider a game which involves the rolling of a fair pair of dice. The winner is the individual who calls the outcome correctly, the loser obviously called the wrong outcome. The Theory of Efficient Markets would say: |
| | A) | Part of the key information is to know the outcomes of the previous tosses. |
| | B) | Part of the key information is to know the skill of the person you are playing against. |
| | C) | The key information is to know the probabilities of the outcome and the expected payoff. |
| | D) | All of the above. |
|
|
|
| 13 | |
Professor Jeremy Siegel, of the University of Pennsylvania, did research that points out: |
| | A) | Investors should only own stocks for short periods of time to maximize returns. |
| | B) | Over the long-run, bonds are less risky than stocks. |
| | C) | Over the long run, bonds frequently outperform stocks. |
| | D) | Over the long run, stocks are less risky than bonds. |
|
|
|
| 14 | |
Stock market bubbles can lead to: |
| | A) | An inefficient allocation of resources. |
| | B) | Stock market crashes. |
| | C) | Patterns of volatile returns from the stock market. |
| | D) | All of the above. |
| | E) | Only b and c |
|
|
|
| 15 | |
When stock prices reflect fundamental values: |
| | A) | All investors will experience capital gains. |
| | B) | All companies will have an easier task of obtaining financing for investment projects. |
| | C) | The allocation of resources will be more efficient. |
| | D) | The overall level of the stock market should move higher continuously. |
| | E) | a and d |
|
|
.