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Finance Practice questions

Terms in this set (29)

Which of the following are benefits related to stock​ ownership?

I. ease of trading
II. attractive inflation−adjusted rates of return
III. guarantee of long−term positive returns
IV. affordability
I, II and IV only
Shareholders can either exercise their rights granted via a rights offering or sell them to another investor.
True
An investment produced annual rates of return of​ 5%, 12%, − ​8% and​ 11% respectively over the past four years. What is the​ (sample) standard deviation of these​ returns?
9.2%
The internal rate of return takes into account the purchase​ price, the selling price and the timing of any income received from the investment.
True
Kayla purchased a stock for​ $56 a share and sold it six months later for​ $62. While she owned the​ stock, Kayla received two quarterly dividends of​ $0.70 per share.​ Kayla's annualized holding period return on this stock is
26.4%.
In recent years

A. broker markets have grown at the expense of dealer markets.

B. there has been a major consolidation of trading venues.

C. retail trading has come to be dominated by electronic communication networks while traditional broker and dealer markets have lost ground.

D.
dealer markets have grown at the expense of broker markets.
B. there has been a major consolidation of trading venues.
In a broker market such as the​ NYSE, the broker

A.
will first attempt to sell from his or her own inventory.
B.
will not be able to execute a trade if there are no matching buy and sell offers.
C.
will act as either broker or dealer depending on which will maximize his or her profit.

D.
must attempt to match sellers and buyers at the mid−point of the​ bid/ask spread.
D. must attempt to match sellers and buyers at the
mid−point
of the​ bid/ask spread.
Federal laws that control the sale of securities are called blue sky laws.
False
Which of the following is currently a requirement for a stock to be listed on the​ NYSE?

A.
Three consecutive years of profitable operations.
B.
Gross revenue of at least​ $15,000,000.
C.
A price of at least​ $10 per share.
D.
Global market capitalization of at least​ $200 million.
Global market capitalization of at least​ $200 million.
Maximum commissions for various types of trades are regulated by FINRA.
False
Assume that the​ S&P 500 composite stock index closes at​ 2,500. This means that
The average value of a company reflected in the Index has doubled from when the Index was at​ 1,250.
Dividends earned on securities held in street name by the brokerage are reported to the Internal Revenue Service and are considered taxable income to the investor.
True
Dr. Balcom is a busy opthamologist who has no time to trade during market hours. She likes Allergan products and thinks the stock is attractively priced at the​ day's close of​ $148.20. Over the past​ week, Allergan has traded between​ $145 and​ $160, fluctuating widely within each day. It is now​ 8:00 P.M. on a Wednesday evening. If Dr. Balcom wants to buy 200 shares of​ Allergan, she should
place a limit order to buy 200 shares at​ $148.20.
A stop − loss order on a short sale will be executed if the stock price rises above the specified price.
True
Investment clubs are legal partnerships.
True
A dividend payout ratio of​ 75% would be typical of
a profitable firm with limited growth prospects.
When the market rate of interest is higher than a​ bond's coupon​ rate, the bond will sell at a discount.
True
When the conversion value of a convertible bond exceeds the call price of the​ bond, the issuing company is likely to force conversion by calling the bonds.
True
If dividends are​ reinvested, the one period HPR for a fund is​ [(Ending NAV × Shares Held at End of Period − Beginning NAV × Shares Held at Beginning of​ Period)] /​ (Beginning NAV × Shares Held at Beginning of​ Period).
True
The best time to invest in precious metals and stones is when
international conditions are unstable and inflation is rising
Easy money can choke off the demand for real estate.
False
Real estate investment trusts may invest in
I. commercial properties such as shopping malls.
II. residential rental properties.
III. mortgages.
IV. combinations of property and real estate related debt.
​I, II, III and IV
The direct capitalization approach to real estate valuation considers the value of a property to be
the present value of all future income generated by the property.
Which of the following is an important general feature related to real estate investment

A.
Property rights
B.
Time horizon
C.
Physical property
D.
All of the above
Your answer is correct.
E.
Geographic area
All of the above
Speculative property typically includes raw land and investment properties that are expected to provide returns primarily from appreciation in value due to​ location, scarcity, and so​ forth, rather than from periodic rental income.
True
Under the cost approach to market​ value, an investor should not pay more for a property than it would cost to rebuild it at​ today's prices.
True
Prices of residential properties tend to weaken when
I. unemployment increases.
II. interest rates fall.
III. interest rates rise.
IV. economic levels are high.
I and III only
Demographics refers to measurable​ characteristics, such as household​ size, age​ structure, occupation, gender and marital status.
True
Which of the following key factors may have a negative effect on real estate​ values?
I. availability of similar properties.
II. availability of substitutes for the type of property.
III. restrictions on the use of the property.
IV. low interest rates.
​I, II, and III only
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