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Exam 16: Managing Finances

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Question 91

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Asset allocation means buying several different kinds of investments rather than just one.

A) True
B) False

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Question 92

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Municipal bonds may be issued by federal,state,or local governments.

A) True
B) False

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Question 93

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Electronic communication networks have closed the door to around-the-clock and around-the-globe trading.

Aggressive growth funds seek minimum long-term capital growth.

A company is ripe for raiding when ________ .

Existing stocks and bonds are sold in a large secondary securities market which is handled by the New York Stock Exchange and by online trading with electronic communication networks.

How do firms meet their capital needs through debt financing and equity financing?

Short Case Scenario 16-1 Jessica is looking forward to a family reunion at the beach. She is the first in her family to have graduated from college. She started her studies at the local community college and transferred to a prestigious private college several hours from her family's home. Jessica's major in college was business administration with a concentration in finance. As she approaches the beach house where her family will be staying, Jessica is glad that her days of being quizzed and tested are over. She is looking forward to an opportunity to relax and to put her brain on "pause." However, Jessica's family has other plans for her. Almost before she emerges from her car, the questions begin. Jessica's great-aunt Irene is hoping for a little investment advice. Irene explains, "One of my CDs has recently matured and I'm hoping to roll it into an investment where I might make a little more interest. Your cousin Eddie has suggested that I invest in bonds, but I'm not sure what to think. You know, dear, Eddie's never been very bright and I'd be foolish to take his advice without a little more information. -Jessica's Aunt Irene is 80 years old.Should she consider the risk-return (risk reward)relationship?

Unlike many full-service brokers,discount brokers offer automated online services in all of the following EXCEPT:

Bear markets are periods of rising stock prices,generally lasting 12 months or longer.

Short Case Scenario 16-1 Jessica is looking forward to a family reunion at the beach. She is the first in her family to have graduated from college. She started her studies at the local community college and transferred to a prestigious private college several hours from her family's home. Jessica's major in college was business administration with a concentration in finance. As she approaches the beach house where her family will be staying, Jessica is glad that her days of being quizzed and tested are over. She is looking forward to an opportunity to relax and to put her brain on "pause." However, Jessica's family has other plans for her. Almost before she emerges from her car, the questions begin. Jessica's great-aunt Irene is hoping for a little investment advice. Irene explains, "One of my CDs has recently matured and I'm hoping to roll it into an investment where I might make a little more interest. Your cousin Eddie has suggested that I invest in bonds, but I'm not sure what to think. You know, dear, Eddie's never been very bright and I'd be foolish to take his advice without a little more information. -Jessica's brother wanders into the room."Jessica,my partnership is considering incorporating,and we're receiving conflicting advice about what type of stock to issue.I know that there is both common and preferred stock,but I don't know much more.We know we need money,but we don't know where to begin.What are the first steps in issuing stock?

Conservative investors prefer the higher risks and potential returns from long-term junk bonds and common stocks.

Each common share of common stock has a vote on major issues that are brought before the shareholders.

Any company can have a bad year and decide to reduce or omit dividend payments to stockholders.

Because of the uncertainties involved in stock prices,investment professionals believe day-to-day prices to be a generally poor indicator of any stock's real value.

Explain what aggressive growth funds are.

A stock exchange is an organization of individuals coordinated to provide an institutional auction setting in which stocks can be bought and sold.

Animal names have figured prominently in the stock market for years.Which animal listed below do we associate with a rising market?

If you invested $10,000 at seven percent interest for one year,you would earn $700 on your investment.If you reinvested the principal amount plus the interest you earned during the first year for another 4 years,how much would you end up with?

Today's NYSE is a hybrid market that utilizes both floor and electronic trading.