Exam 4

Question 1

Useful investment goals are..

Answer 1

specific and measurable

Question 2

emergency fund

Answer 2

An amount of money you can obtain quickly in case of immediate need.

Question 3

speculative investment

Answer 3

A high-risk investment made in the hope of earning a relatively large profit in a short time.

Question 4

liquidity

Answer 4

The ability to buy or sell an investment quickly without substantially affecting the investment’s value.

Question 5

municipal bonds

Answer 5

A debt security issued by a state or local government.

Question 6

general obligation bond

Answer 6

A bond backed by the full faith, credit, and taxing power of the government that issued it.

Question 7

revenue bond

Answer 7

A bond that is repaid from the income generated by the project it is designed to finance.

Question 8

corporate bond

Answer 8

A corporation’s written pledge to repay a specified amount of money with interest.

Question 9

debenture

Answer 9

A bond that is backed only by the reputation of the issuing corporation.

Question 10

How long do treasury bills have a maturity of?

Answer 10

4-52 weeks

Question 11

mortgage bond

Answer 11

A corporate bond secured by various assets of the issuing firm.

Question 12

proxy

Answer 12

A legal form that lists the issues to be decided at a stockholders’ meeting and requests that stockholders transfer their voting rights to some individual or individuals.

Question 13

stock split

Answer 13

A procedure in which the shares of stock owned by existing stockholders are divided into a larger number of shares.

Question 14

earnings per share

Answer 14

A corporation’s earnings divided by the number of outstanding shares of a firm’s common stock.

Question 15

dividend yield

Answer 15

The annual dividend amount divided by the stock’s current price per share.

Question 16

book value

Answer 16

Determined by deducting all liabilities from the corporation’s assets and dividing the remainder by the number of outstanding shares of common stock.

Question 17

primary market

Answer 17

Determined by deducting all liabilities from the corporation’s assets and dividing the remainder by the number of outstanding shares of common stock.

Question 18

Nasdaq

Answer 18

an electronic marketplace for stocks.

Question 19

account executive

Answer 19

A licensed individual who works for a brokerage firm and buys or sells securities for clients; also called a stockbroker.

Question 20

market order

Answer 20

A request to buy or sell a stock at the best available price.

Question 21

dollar cost averaging

Answer 21

A long-term technique used by investors who purchase an equal dollar amount of the same stock at equal intervals.

Question 22

margin

Answer 22

A speculative technique whereby an investor borrows part of the money needed to buy a particular stock.

Question 23

selling short

Answer 23

Selling stock that has been borrowed from a brokerage firm and must be replaced at a later date.

Question 24

option

Answer 24

The right—but not the obligation—to buy or sell a stock at a predetermined price during a specified period of time.

Question 25

mutual fund

Answer 25

Pools the money of many investors—its shareholders—to invest in a variety of securities such as stocks, bonds, money market instruments, and other assets.

Question 26

what are the three general types of mutual funds

Answer 26

closed end, exchange traded, and open end

Question 27

closed end fund

Answer 27

A fund in which shares are issued by an investment company only when the fund is organized.

Question 28

exchange traded funds

Answer 28

A fund that invests in the stocks or other securities contained in a specific stock or securities index

Question 29

open end fund

Answer 29

A mutual fund in which shares are issued and redeemed by the investment company at the request of investors.

Question 30

net asset value (NAV)

Answer 30

(Market value of portfolio less liabilities)/number of shares outstanding

Question 31

contingent deferred sales load

Answer 31

A 1 to 5 percent charge that shareholders pay when they sell shares in a mutual fund.