Question 1

Book value per share is determined by:

Accepted Answer

A)  deducting liabilities from assets and dividing the remainder by owner's equity.
B)  deducting liabilities from assets and dividing the remainder by the number of shares of stock outstanding.
C)  dividing liabilities by the number of shares of stock outstanding.
D)  dividing assets by the number of shares of stock outstanding.
E)  dividing the sum of assets and owner's equity by the number of shares of stock outstanding.F) C) and E)
G) B) and D)

Question 2

A stock that sells for less than $1 per share is called a _____ stock.

Accepted Answer

A)  fractional
B)  penny
C)  dollar
D)  ten-dollar
E)  coinF) B) and E)
G) B) and C)

Question 3

The Arnold Fertilizer Company's stock is selling for $55 in the market and its earnings per share is $5.The company is projected to grow at a rate of 22% over the next year.What is this company's price/earnings to growth (PEG) ratio?

Accepted Answer

A)  11.00
B)  9.09
C)  0.50
D)  50.00
E)  22.73F) A) and E)
G) A) and D)

Question 4

An investment theory based on the assumption that a stock's intrinsic or real value is determined by the future earnings of the company is called the ____________ theory.

Accepted Answer

A)  fundamental
B)  technical
C)  efficient market
D)  primary
E)  marketF) C) and D)
G) A) and C)

Question 5

The record date is the date that the actual dividend payment is made to stockholders.

Accepted Answer

A) True 
 B)False

Question 6

Amy Farmer just received a legal form in the mail from a firm in which she owns stock.This form lists the issues to be decided at the annual stockholders' meeting and asks her to give written permission for someone else to vote for her if she cannot attend.What form has she received in the mail?

Accepted Answer

A)  equity
B)  proxy
C)  voting rights
D)  dividends
E)  call optionF) C) and D)
G) All of the above

Question 7

A stock split is a procedure in which a stockholder's common stock is exchanged for preferred stock.

Accepted Answer

A) True 
 B)False

Question 8

If a stock has a 2-for-1 split:

Accepted Answer

A)  the value of the stock is guaranteed to increase.
B)  the value of the stock is guaranteed to decrease.
C)  total market capitalization increases.
D)  total market capitalization decreases.
E)  total market capitalization does not changE.F) D) and E)
G) None of the above

Question 9

James Brewer purchased 100 shares of stock for $72 a share.James also paid $55 commission.What was the total purchase price for this transaction?

Accepted Answer

A)  $55.00
B)  $127.00
C)  $7,237.50
D)  $7,255.00
E)  $7,347.50F) C) and D)
G) B) and C)

Question 10

Preferred stock is often referred to as a middle investment as it has features similar to both common stock and corporate bonds.

Accepted Answer

A) True 
 B)False

Question 11

Valerie Kilmer owns stock in the Williams Widget Company.She was just advised that in the near future she will be receiving two shares for every one share she owns today.What has the company declared that will cause this change to her shares?

Accepted Answer

A)  extra dividend
B)  capital gains distribution
C)  stock split
D)  stock repurchase
E)  stock conversionF) B) and E)
G) C) and D)

Question 12

Which one of the following statements is true?

Accepted Answer

A)  Corporations are required by law to report all activities to their stockholders each month.
B)  Stockholders must approve major changes to corporate policies.
C)  Stockholders must approve the sale of all goods and services by the company.
D)  Corporations are required by law to have two stockholder meetings each year.
E)  Stockholders may vote only by proxy.F) A) and C)
G) B) and E)

Question 13

The type of stock in which stockholders are assured that omitted dividends will be paid to them before other dividends are paid is ____________ stock.

Accepted Answer

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

Question 14

A market for existing financial securities that are currently traded among investors is called the ____________ market.

Accepted Answer

A)  technical
B)  fundamental
C)  efficient
D)  secondary
E)  primaryF) A) and E)
G) A) and D)

Question 15

James Green just bought a security which he expects will provide him with a quarterly cash payment,although that payment is not guaranteed.In fact,he expects the amount of the payment to vary over time.What type of payment is he expecting to receive?

Accepted Answer

A)  option premium
B)  interest
C)  capital gain
D)  dividend
E)  rebateF) A) and E)
G) B) and C)

Question 16

The stock exchange known to trade stock for innovative,growth companies is the:

Accepted Answer

A)  NYSE.
B)  NASDAQ.
C)  American Stock exchange.
D)  S & P 100.
E)  STSE.F) A) and B)
G) A) and C)

Question 17

Which type of preferred stock can be exchanged for common stock at the stockholder's option?

Accepted Answer

A)  none of the other answers
B)  convertible
C)  participating
D)  cumulative
E)  callableF) B) and C)
G) B) and E)

Question 18

In order for a corporation's stock to be bought and sold on the New York Stock Exchange,the corporation must meet certain requirements.Which one of the following incorrectly states one of those requirements?

Accepted Answer

A)  A corporation's annual earnings before income taxes must be at least $10 million per year for the last three consecutive he most recent three years.
B)  All of the requirements listed in the other answers are correct.
C)  The market value of its publicly held stock must exceed $25 million.
D)  A corporation must have a total of at least 400 U.S.shareholders and at least 1,100,000 total shares outstanding.
E)  A corporation must have at least $75 million in revenues for the most recent year.F) A) and B)
G) All of the above

Question 19

Acme Widget,Inc.has one million shares of common stock outstanding at a price per share of $85.The company earned $5 million after taxes.The annual dividend is $3.50 per share.The firm has assets of $125,000,000 and liabilities of $25,000,000.What is the dividend yield?

Accepted Answer

A)  3.50 percent
B)  1.43 percent
C)  5.00 percent
D)  4.12 percent
E)  3.44 percentF) A) and D)
G) B) and E)

Question 20

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) D) and E)

Exam 14: Investing in Stocks

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

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Preferred stock is often referred to as a middle investment as it has features similar to both common stock and corporate bonds.

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The record date is the date that the actual dividend payment is made to stockholders.

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A stock split is a procedure in which a stockholder's common stock is exchanged for preferred stock.

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The stock exchange known to trade stock for innovative,growth companies is the:

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Which one of the following statements is true?

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A market for existing financial securities that are currently traded among investors is called the ____________ market.

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An investment theory based on the assumption that a stock's intrinsic or real value is determined by the future earnings of the company is called the ____________ theory.

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Amy Farmer just received a legal form in the mail from a firm in which she owns stock.This form lists the issues to be decided at the annual stockholders' meeting and asks her to give written permission for someone else to vote for her if she cannot attend.What form has she received in the mail?

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Valerie Kilmer owns stock in the Williams Widget Company.She was just advised that in the near future she will be receiving two shares for every one share she owns today.What has the company declared that will cause this change to her shares?

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Which type of preferred stock can be exchanged for common stock at the stockholder's option?

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A stock that sells for less than $1 per share is called a _____ stock.

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The type of stock in which stockholders are assured that omitted dividends will be paid to them before other dividends are paid is ____________ stock.

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If a stock has a 2-for-1 split:

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James Brewer purchased 100 shares of stock for $72 a share.James also paid $55 commission.What was the total purchase price for this transaction?

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James Green just bought a security which he expects will provide him with a quarterly cash payment,although that payment is not guaranteed.In fact,he expects the amount of the payment to vary over time.What type of payment is he expecting to receive?

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Acme Widget,Inc.has one million shares of common stock outstanding at a price per share of $85.The company earned $5 million after taxes.The annual dividend is $3.50 per share.The firm has assets of $125,000,000 and liabilities of $25,000,000.What is the dividend yield?

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Book value per share is determined by:

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In order for a corporation's stock to be bought and sold on the New York Stock Exchange,the corporation must meet certain requirements.Which one of the following incorrectly states one of those requirements?

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The Arnold Fertilizer Company's stock is selling for $55 in the market and its earnings per share is $5.The company is projected to grow at a rate of 22% over the next year.What is this company's price/earnings to growth (PEG) ratio?

Correct AnswerverifiedShow Answer

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