FIN2100 Ch. 14- 19 Test Questions and
All Correct Answers 2025-2026
Updated.
Chapter 14 - Answer
Beta - Answer Perfect correlation- 1
High risk- >1
Low risk- <1
IPO - Answer Means initial public offering. Occurs when a corporation sells stock to the
general public for the first time. Issued in the primary market, typically highly prized.
Systematic Risk - Answer Occurs because of overall risks in the market and the economy. Not
possible to mitigate through diversification. Includes economic crisis, increasing interest rates,
changes in purchasing power and war.
Non- systematic Risk - Answer Affects a specific company or industry. Can be mitigated
through diversification.
Market Order - Answer A request to buy or sell stock at the current market value.
Stop Order - Answer A request to sell a stock at the next available opportunity after its
market price reaches a specified amount.
Limit Order - Answer A request to buy or sell a stock at a specified price or price range.
Qualified Dividends - Answer Taxed at 15% or lower rates. REITs and most preferred
dividends are not qualifying.
Non- qualified Dividend Payments - Answer REITs and most preferred dividends.
Short Term Capital Gains - Answer Taxed at ordinary rates
Long Term Capital Gains - Answer Taxed at lower rates (15% or lower)
, Capital Loss Limit - Answer $3,000/ year
Large Market Cap - Answer Greater than $25B
Small Market Cap - Answer Greater than $600M but less than $2B
Medium Market Cap - Answer Greater than $2B up to $25B
U.S. Market Cap... - Answer Mostly large cap and about 42% of the world
Cost Basis - Answer Identify lots sold or use FIFO (first in, first out)
Blue Chip Stock - Answer Safe investment in strong and respected companies, attract
conservative investors.
Example- GE, Walmart
Income Stock - Answer Pays higher than average dividend yield.
Example- utility stocks
Growth Stock - Answer Earns above average profits of all firms in the economy. Less than
30% of profits are paid out as dividends, balance is reinvested in the firm. Investors appreciation
in stock price.
Example- Panera, Apple
Value Stock - Answer Stocks where the underlying value of the asset is worth more than the
current trading price. Merger value, fix up value.
Primary Markets - Answer An investor purchases financial securities via an investment bank
from the issuer of those securities. New stocks are introduced here.
Secondary Markets - Answer A market for existing financial securities that are currently
traded among investors. Most stocks are traded here.
Equity Risk Premium - Answer The additional return investors receive by investing in higher
risk stocks vs risk free investments.
Example-
All Correct Answers 2025-2026
Updated.
Chapter 14 - Answer
Beta - Answer Perfect correlation- 1
High risk- >1
Low risk- <1
IPO - Answer Means initial public offering. Occurs when a corporation sells stock to the
general public for the first time. Issued in the primary market, typically highly prized.
Systematic Risk - Answer Occurs because of overall risks in the market and the economy. Not
possible to mitigate through diversification. Includes economic crisis, increasing interest rates,
changes in purchasing power and war.
Non- systematic Risk - Answer Affects a specific company or industry. Can be mitigated
through diversification.
Market Order - Answer A request to buy or sell stock at the current market value.
Stop Order - Answer A request to sell a stock at the next available opportunity after its
market price reaches a specified amount.
Limit Order - Answer A request to buy or sell a stock at a specified price or price range.
Qualified Dividends - Answer Taxed at 15% or lower rates. REITs and most preferred
dividends are not qualifying.
Non- qualified Dividend Payments - Answer REITs and most preferred dividends.
Short Term Capital Gains - Answer Taxed at ordinary rates
Long Term Capital Gains - Answer Taxed at lower rates (15% or lower)
, Capital Loss Limit - Answer $3,000/ year
Large Market Cap - Answer Greater than $25B
Small Market Cap - Answer Greater than $600M but less than $2B
Medium Market Cap - Answer Greater than $2B up to $25B
U.S. Market Cap... - Answer Mostly large cap and about 42% of the world
Cost Basis - Answer Identify lots sold or use FIFO (first in, first out)
Blue Chip Stock - Answer Safe investment in strong and respected companies, attract
conservative investors.
Example- GE, Walmart
Income Stock - Answer Pays higher than average dividend yield.
Example- utility stocks
Growth Stock - Answer Earns above average profits of all firms in the economy. Less than
30% of profits are paid out as dividends, balance is reinvested in the firm. Investors appreciation
in stock price.
Example- Panera, Apple
Value Stock - Answer Stocks where the underlying value of the asset is worth more than the
current trading price. Merger value, fix up value.
Primary Markets - Answer An investor purchases financial securities via an investment bank
from the issuer of those securities. New stocks are introduced here.
Secondary Markets - Answer A market for existing financial securities that are currently
traded among investors. Most stocks are traded here.
Equity Risk Premium - Answer The additional return investors receive by investing in higher
risk stocks vs risk free investments.
Example-
