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Finance 095, Set 4

A bond selling below par value is selling at
a discount
Value funds look for stocks with relatively all the following except
rapid growth
Home Appliance Warehouse, Inc. would like to set up a retirement plan for its employees that encourages employees to save for their own retirement. The company is willing to match employee contributions. Which of the following plans would be appropriate in this situation?
401(k) plan
Which of the following was not an intention of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010?
recapitalize banks
A no-load fund has no
administrative charges
In investment terminology, selling stock that you have borrowed is known as a
short sale
Which of the following bond mutual funds would provide tax-free income?
municipal bond fund
The purpose of the social security retirement program is to
provide a basic adequate income to eligible retirees
Which of the following are characteristic of exchange-traded mutual funds?
traded on listed exchanges
The Employee Retirement Income Security Act (ERISA) provides
minimum standards for retirement plans
You have been offered an opportunity to buy shares of a diversified collection of securities. You will be investing in
mutual funds
Normal retirement age is typically defined as ___ years of age
What are the tax characteristics of qualified retirement plans?
All of the above are characteristics
Both load and no-load funds will always charge a
management fee
A company has a beta of 1.0; if the market goes down by 8%, the value of the company’s stock will
decline 8%
An estate plan would be least likely to need revision when
a son graduated from college
Buying on margin is buying
with borrowed funds
Back end loaded mutual funds are most appropriate for
an investor with a short time horizon
The biggest unknown factor that retirees have when estimating their retirement needs and income is
Portfolio management involves making decisions in order to
meet your investment needs and objectives
Corporate ownership is evidenced by
common stock
Which of the following is an order to sell a stock when the market price drops to or below a specified level?
stop loss order
The current market value of all the securities a mutual fund owns is called the
net asset value
Having money taken automatically from your paycheck and put into a mutual fund is an example of
an automatic investment plan
An unmarried investor with few responsibilities should be able to accept ___ better than two people who are married with young children
Your real and personal property that can be transferred according to the terms of a will is called your
probate estate
A group of funds managed by a single company which offers conversion privileges is called a
fund family
Advantages of exchange traded funds over mutual funds include all of the following except
better diversification
Employees of a nonprofit corporation can contribute to a(n)
Attractive features of a 401(k) plan can include
matching contributions and tax deferral
A codicil is a(n)
revision to a will
If you die without a will you are said to have died
A fund that invests only in a particular industry would be a ___ fund
Stockbrokers are also known as
account executives
What type of REIT is most attractive to income oriented investors?
A balanced fund that emphasizes growth in capital is called a(n)
growth and income fund
Risk and return are ___ related
Bond prices and current interest rates are ___ related
Instructing your broker to buy or sell a stock at a particular prices is a
limit order
The major advantage of mutual funds to the small investor is
A ___ plan combines some of the features of a defined contribution plan with features of a defined benefit plan to produce a plan that is more portable than a traditional defined benefit plan
cash balance
Annuities are administered by
insurance companies
The major mistake(s) people make in retirement planning is(are)
saving too little
The probate estate consists of
all of the above
Annual increases in the social security benefit check are related to
current cost of living
An immediate order to buy or sell common stock at the best price is a
market order
During a bear market, security prices generally
decline in value
Which of the following types of risk affect owners of fixed income securities more than owners of equity securities
purchasing power risk
A convertible bond is usually a
During a bull market
prices go up
The need for retirement planning is increased by the uncertainties of
all of these
The goal of estate planning is to
all of the above
If a company’s common stock is traded on an exchange, the company is said to be
listed on the exchange
A characteristic of defensive stocks is
price stability in economic decline
Mary Ann contributed $5,000 to her 401(k) plan. If Mary Ann is in the 15% marginal tax bracket, this retirement contribution saved her approximately ___ in federal income taxes
The approximate yield-to-maturity of a bond is greater than the stated rate of interest when
purchased at discount
Major sources of retirement income include
all of these
The federal government regulates securities markets through the
Securities and Exchange Commission
Selling equities you don’t own and buying them back to cover the sale is
short selling in anticipation of a bear market in that security
The most widely followed stock average is the
Dow Jones Industrial Average
Bonds issued by subdivisions of the U.S. government but not guaranteed by the government are called
agency bonds
When setting retirement goals you should consider
all of these
The first step in retirement planning is to
set retirement goals
In which of the following type of investment is the most liquidity risk?
Which of the following statements about preferred stock is true?
dividends must generally be paid to preferred shareholders before dividends may be paid to common shareholders
A Roth IRA
all of the above are true
Stock profitability is often measured by
return on equity
Which of the following is an advantage of owning growth stocks?
low PE ratio
The proceeds of a variable annuity are dependent on the
investment return
An example of a type of plan where the amount the employee receives at retirement is dependent on investment return is a
defined contribution plan
The easiest way to invest in foreign stock is to purchase
international mutual funds
In order to avoid penalties, one must typically start taking minimum distributions from most retirement accounts by age
70 1/2
You will receive the largest monthly payment under an annuity contract when the selected payment option is the
life annuity with no refund
The Smith family owns 200 shares of Elta stock. The company declared a 5% stock dividend. The Smiths now own
One can maximize the monthly Social Security benefit amount by delaying taking retirement benefits until age
A(n) ___ actually runs the portfolio and makes the buy and sell decisions
money manager
The most common reason given for investing is
saving for retirement
An essential ingredient of an effective investment strategy is
enough money to diversify
The employer retirement plan that is intended to promote employee productivity and allows the employer to vary the amount of annual contributions is a
Profit sharing plan
Cash dividends on common stock are most often paid
The fund whose main objective is to simply match the market known as a(n) ____ fund
none of these
A mutual fund allows investors to
become owners of a widely diversified portfolio of securities
Only the strongest, most stable and safe-return companies can be called
blue chip stocks
A stock portfolio containing 80% common stock is most likely to be appropriate for
a young single worker putting money aside for retirement
You should review your estate plan every
3-5 years
Redeeming your mutual fund shares might result in a charge called
a back-end load
A high inflation rate would result in a high degree of
purchasing power risk
Employee contributions to ___ plans do not reduce taxable income
thrift and savings
A mutual fund with an objective of both growth and income is a(n)
balanced fund
Social security benefits for retirees less than 65 years of age may be reduced if
wages and salaries exceed certain limits
Fully insured status requires 40 ___ of employment covered by social security
In you withdraw funds from a pension plan before age 59 1/2, you will have to pay a ___ federal income tax penalty
The maximum sales charge a no load mutual fund can charge
none of these
Funds to finance social security come from
compulsory contributions from employee, employer, and self-employed
Self directed retirement accounts aimed at self-employed persons include
When cash dividends on stock are paid, but the stockholder has these dividends automatically reinvested, what are the federal income tax implications?
Taxes must be paid in the year the dividends are paid at ordinary income tax rates
The amount of money in your defined contribution retirement portfolio will depend on
all of these
To most stockholders, the main advantages of common stock investment are
attractive returns and active trading
The following mutual fund fees are paid directly from the investor
Annual Account Maintenance Fee

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