FINN 30003 Personal Financial Management Exam 4 (Chapters 14-15, 17) - Mara Lynch, Uark

Before investing you should consider paying off debt

True

3 multiple choice options

Common stock

A certificate issued by a firm to raise funds that represents partial ownership in the firm

Preferred stock

A certificate issued by a firm to raise funds that entitles shareholders to first priority to receive dividends

One of the differences between common and preferred stock is that preferred stock offers____

A more predictable income

3 multiple choice options

Secondary market

A market where existing stocks are traded

In the secondary market, stock prices are determined by_____

supply and demand

3 multiple choice options

One of the attractive features of mutual funds is that they offer a small investor a diversified portfolio and professional management

True

3 multiple choice options

Growth stocks offer

great opportunities for capital appreciation

3 multiple choice options

All of the following gains from investments are taxed as ordinary income

•Interest

•Coupon Payment

Short-term capital gains

The return you will earn on certain stocks and bonds is uncertain because specific prices are not guaranteed

True

3 multiple choice options

Measuring an investment's risk

- Range of returns

- Standard deviation

- Subjective measures of risk

The risk-return relationships means...

The higher the risk, the higher the return

3 multiple choice options

New York Stock Exchange (NYSE)

The stock exchange with the most stringent listing requirements

Nasdaq Stock Market (NASDAQ)

Does not have a physical location; is an electronic communications network to buy and sell stock

Brokerage Commissions (Fees)

Fees charged by brokerage firms vary according to the services offered

Market order

An order (execute a transaction) to buy or sell a stock at its prevailing market price

Income statement

Shows the firm's operating results over a period of time

Typically or generally, Stocks perform better when interest rates are_____

low

3 multiple choice options

Consumer price index (CPI)

A measure of inflation that represents prices of consumer products such as groceries, household products, housing and gasoline

Consumer Price Index (CPI) is one of the most commonly used measures of what?

Inflation

3 multiple choice options

A mutual fund is a diversified portfolio of stocks and/or bonds depending on what the manager has purchased

True

3 multiple choice options

Motives (advantages) for investing in mutual funds:

- Diversification of your interest

- Professional management

When you begin to safe retirement and general wealth building, it is wise to invest in mutual funds because they what?

they provide instant diversification

3 multiple choice options

Closed-end mutual funds

funds that sell shares to investors but do not repurchase them; instead fund shares are purchased and sold on stock exchanges

Closed-end mutual funds

-Do not repurchase shares from investors

-Are bought and sold on stock exchanges

-May sell above or below NAV

While not all mutual funds have loads or commissions, they all have management fees and expenses that are charged to whom?

the mutual fund shareholders

3 multiple choice options

When evaluating a mutual funds, which are investing in the same types of securities/markets, you should compare:

I. Historical performance

II. Management fees

III. 12b-1 expenses

All of them

3 multiple choice options