Project #82706 - Stocks, Bonds, and Mutual Funds

Three Parts... one part is below (and attached), other two are attached

 

Chapter 16: Stocks, Bonds, and Mutual Funds

 

 

 

Unit 16.1 Stocks

 

 

 

 

 

1)

 

To protect creditors, corporations cannot pay dividends that exceed their earnings. (T or F)

 

 

 

A True B False

 

 

 

 

 

 

 

 

 

2)

 

If a corporation goes out of business, preferred stockholders are paid first, creditors next, and finally common stockholders. (T or F)

 

 

 

A True B False

 

 

 

 

 

 

 

 

 

3)

 

Happy Corporation has issued 575,000 shares of common stock and 100,000 shares of cumulative preferred stock. Annual dividends on the cumulative preferred stock are $2 per share. Last year, dividends of $1.25 per share were paid to preferred stockholders. This year the board of directors decided to distribute $1,080,000 in dividends. If you own 300 shares of common stock, what is the amount of your annual dividend?

 

 

 

A $275,000 B $805,000 C $420 D $1.40

 

 

 

 

 

 

 

 

 

4)

 

All stockbrokerage companies provide the same type of services. (T or F)

 

 

 

A True B False

 

 

 

 

 

 

 

 

 

5)

 

The New York Stock Exchange is located on Wall Street in New York City. (T or F)

 

 

 

A True B False

 

 

 

 

 

 

 

 

 

6)

 

When investors are optimistic about the overall economy and the stock market, stock prices rise; this is referred to as a bull market. (T or F)

 

 

 

A True B False

 

 

 

 

 

 

 

 

 

7)

 

Observe the following stock quote. Which statement is true? .

 

 

 

A The highest price during the last 52 weeks is $53.02 per share.

 

B 74,450 shares were sold this day.

 

C The closing price the preceding day was $53.10 per share.

 

D The Yld% is found by dividing the Div amount by the $62.93 High price.

 

 

 

 

 

 

 

 

 

Problems 8 and 9, Evaluate an investment in 100 shares of stock.

 

 

 

 

 

8)

 

You buy the 100 shares at a price of 23.25 and incur brokerage fees totaling $110. What is your total cost?

 

 

 

A $2,325 B $3,225 C $2,215 D $2,435

 

 

 

 

 

 

 

 

 

9)

 

Four years later, you sell the stock at a price of 34.75 and incur brokerage fees totaling $130. What are your net proceeds?

 

 

 

A $3,605 B $3,345 C $3,354 D $3,475

 

 

 

 

 

 

 

 

 

10)

 

A companys stock is priced at $50.50 per share. Earnings per share are $4.21. What is the PE ratio?

 

 

 

A 8.3 B 12.0 C 0.08 D 12.5

 

 

 

 

 

 

 

 

 

11)

 

What does a PE ratio of 36.1 mean?

 

 

 

A A buyer will get a dividend of 36.1 cents per share

 

B A buyer must pay 36.1 cents for each dollar of earnings

 

C A buyer must pay approximately $36.10 for each $1 of earnings

 

D A buyer must pay approximately $36.10 for each $1 of dividends

 

 

 

 

 

 

 

 

 

12)

 

One stock has a PE ratio of 18.1. Another has a PE ratio of 37.5. Based on the PE ratios (i.e., assume that future earnings will remain the same as recent earnings), the stock with the PE ratio of 37.5 is the best buy. (T or F)

 

 

 

A True B False

 

 

 

 

 

 

 

 

 

13)

 

What accounts for investors buying a stock with a high PE ratio?

 

 

 

A The investors apparently feel that the company has a poorer future than is indicated by current earnings.

 

B The investors apparently feel that the company has a better future than is indicated by current earnings.

 

C The investors are hoping that dividends increase.

 

D The investors are hoping that the stock price will decrease.

 

 

 

 

 

 

 

 

 

 

 

Unit 16.2 Bonds

 

 

 

 

 

14)

 

Municipal bonds are often in denominations of $5,000. (T or F)

 

 

 

A True B False

 

 

 

 

 

 

 

 

 

15)

 

All bonds pay regular interest checks. (T or F)

 

 

 

A True B False

 

 

 

 

 

 

 

 

 

16)

 

Interest from corporate bonds is taxable. (T or F)

 

 

 

A True B False

 

 

 

 

 

 

 

 

 

17)

 

Bonds with a high degree of risk often pay a lower-than-normal interest rate. (T or F)

 

 

 

A True B False

 

 

 

 

 

 

 

 

 

For Problems 18 and 19, assume you own a 25-year 7% bond that pays interest annually and matures in 18 years. You are thinking about selling the bond.

 

 

 

 

 

18)

 

If the prevailing rate for similar bonds is 8.5%, buyers should be willing to pay a premium for your bond. (T or F)

 

 

 

A True B False

 

 

 

 

 

 

 

 

 

19)

 

If the prevailing rate for similar bonds is 7%, your bond will be priced at:

 

 

 

A Par B A discount C A premium D Need more information

 

 

 

 

 

 

 

 

 

For Problems 20-26, refer to the following bond quote.

 

 

 

 

 

20)

 

What is the coupon rate?

 

 

 

A 7.27% B 115.25% C 8.375% D 19%

 

 

 

 

 

 

 

 

 

21)

 

In what year does the bond mature?

 

 

 

A 19 years from now. B 19 years from the date the bond was issued.

 

C In the year 2019. D Need more information.

 

 

 

 

 

 

 

 

 

22)

 

How many bonds were sold this day?

 

 

 

A 23,200 bonds B 115 bonds C 232 bonds D 232,000 bonds

 

 

 

 

 

 

 

 

 

23)

 

Based on a $1,000 face value, what was the price for the last bond traded?

 

 

 

A $1,152.50 B $232,000 C $19,000 D $115,250

 

 

 

 

 

 

 

 

 

24)

 

Based on the price, the prevailing rate must be greater than the coupon rate. (T or F)

 

 

 

A True B False

 

 

 

 

 

 

 

 

 

25)

 

What was the closing price the previous day?

 

 

 

A $1,150 B $115,000 C $115,250 D $1,152.50

 

 

 

 

 

 

 

 

 

26)

 

The Cur Yld is found by:

 

 

 

A Multiplying the closing price by the coupon rate.

 

B Dividing the Net Chg by the closing price.

 

C Dividing the coupon rate by the closing price.

 

D Dividing the Net Chg by the coupon rate.

 

 

 

 

 

 

 

 

 

27)

 

You buy three $5,000 Treasury bonds at a price of 121:17. What is the total price?

 

 

 

A $6,075.5625 B $363.51 C $18,229.69 D $15,000

 

 

 

 

 

 

 

 

 

 

 

Unit 16.3 Mutual funds

 

 

 

 

 

28)

 

A person investing in mutual funds owns a small portion of a variety of things, rather than a large portion of one thing; this is known as diversification. (T or F)

 

 

 

A True B False

 

 

 

 

 

 

 

 

 

29)

 

A mutual fund has $32,785,000 of assets, $4,812,000 of liabilities, and 800,000 shares outstanding. What is the NAV?

 

 

 

A $40.98 B $34.97 C $50.25 D $6.02

 

 

 

 

 

 

 

 

 

30)

 

Some mutual funds, known as closed-end mutual funds, sell no additional shares after the initial offering. (T or F)

 

 

 

A True B False

 

 

 

 

 

 

 

 

 

31)

 

With a back-end load mutual fund, an investor pays a fee when the shares are purchased but none when the shares are sold. (T or F)

 

 

 

A True B False

 

 

 

 

 

 

 

 

 

 

 

Challenge problems

 

 

 

 

 

For Problems 32-36, tell whether the statement refers to stocks, bonds, both, or neither.

 

 

 

 

 

32)

 

With this investment, you are lending money to a corporation.

 

 

 

A Stock B Bond C Both D Neither

 

 

 

 

 

 

 

 

 

33)

 

For this investment, you may receive interest checks.

 

 

 

A Stock B Bond C Both D Neither

 

 

 

 

 

 

 

 

 

34)

 

A quote in the financial section of a newspaper looks like this: Wendys 719.

 

 

 

A Stock B Bond C Both D Neither

 

 

 

 

 

 

 

 

 

35)

 

The value of this investment can go down during ownership.

 

 

 

A Stock B Bond C Both D Neither

 

 

 

 

 

 

 

 

 

36)

 

With this investment, you become an owner of a corporation.

 

 

 

A Stock B Bond C Both D Neither

 

 

 

 

 

 

 

 

 

37)

 

A corporate bond pays 7.5% interest. A tax-free municipal bond pays 6.25% interest. Based on a 15% tax rate, the tax-free municipal bond has the greater after-tax return. (T or F)

 

 

 

A True B False

 

 

 

 

 

 

 

 

 

38)

 

Which bond purchased at par provides the greater return: a 7.3% corporate bond paying interest annually or a 7.2% corporate bond paying interest semiannually?

 

 

 

A The one paying 7.3% annually. B The one paying 7.2% semiannually.

 

C The two rates are equivalent. D Need more information.

 

Subject Mathematics
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