FIN 501 TEST BANK CH(1,2,3) LATEST EXAM QUESTIONS AND 100% CORRECT ANSWERS

FIN 501 TEST BANK CH(1,2,3) LATEST EXAM
QUESTIONS AND 100% CORRECT ANSWERS
Stocks are a(n) ________ investment representing ________ of a business.
A) direct; ownership
B) direct; debt
C) indirect; ownership
D) indirect; debt
A
An exchange traded fund that invests in the stocks of large corporations is an example of
A) direct investment.
B) indirect investment.
C) derivative investment.
D) tangible investment.
B
Which of the following has declined in recent years?
A) direct ownership of stock by individual investors
B) the percentage of foreign stocks held in typical portfolios
C) institutional ownership of common stocks
D) the timeliness of information available to investors
A
Debt represents funds loaned in exchange for
A) dividend income and the repayment of the loan principal.
B) dividend income and an ownership interest in the firm.
C) interest income and a partial ownership interest in the firm.
D) interest income and the repayment of the loan principal.
D
The government is generally
A) not involved in the financial markets.
B) the owner of the financial market.
C) a supplier of funds to the financial market.
D) a demander of funds in the financial market.
D
On a net basis, funds in the financial markets are generally supplied by
A) individuals.
B) both individuals and business firms.

,C) business firms.
D) the government.
A
A forum in which suppliers and demanders of funds make financial transactions is called a
financial
A) institution.
B) bank.
C) instrument.
D) market.
D
Which of the following are true concerning institutional investors?
I. Institutional investors are professionals who manage money for other people.
II. Banks, insurance companies and mutual funds are all institutional investors.
III. Institutional investors are individuals who invest indirectly through financial
institutions.
IV. Institutional investors invest large sums of money.
I, II, and IV only
Which of the following is NOT traded in the securities markets?
A) stocks
B) bonds
C) derivatives
D) real estate
D
Which of the following is an example of a tangible asset?
A) bonds
B) mutual funds
C) real estate
D) stocks
C
Which one of the following would be the most liquid investment?
A) stock
B) Series EE bond
C) money market mutual fund
D) real estate
C
Which of the following investments represents partial ownership of a corporation?
A) bonds

, B) mutual funds
C) commercial paper
D) common stock
D
Investors seeking a diversified, professionally managed portfolio of securities can purchase
shares of
A) preferred stock.
B) convertible securities.
C) insurance policies.
D) mutual funds.
D
One feature that mutual funds and exchange traded funds have in common is
A) they trade continuously throughout the trading day.
B) their portfolios are always based on one of the major market indexes.
C) they invest in broadly diversified portfolios of securities.
D) investors purchase share from the funds managers rather than from other investors.
C
Sarah purchased a stock one year ago at a price of $32 a share. In the past year, she has
received four quarterly dividends of $0.75 each. Today she sold the stock for $38 a share.
Her capital gain per share is A) $3.00.
B) $6.00.
C) $(6.00).
D) $9.00.
B (38-32)=6
Beginning investors with small amounts to invest should
A) avoid stock investments completely.
B) invest all of their money in one high quality stock.
C) buy mutual funds or exchange traded funds (ETFs).
D) buy a portfolio of very low priced stocks (penny stocks).
C
For a taxpayer in the 25% marginal tax bracket, a long-term capital gain realized in 2015
will be taxed at
A) 5%.
B) 10%.
C) 15%.
D) 25%.
C