Exam 1 - USU FIN 3300 – Investments
Questions and Answers
The total dollar return on a share of stock is defined as the - ANSWER-capital gain or
loss plus any dividend income.
The dividend yield is defined as the annual dividend expressed as a percentage of the: -
ANSWER-initial stock price.
When the total return on an investment is expressed on a per-year basis it is called the:
- ANSWER-effective annual return.
The rate of return earned on a U.S. Treasury bill is frequently used as a proxy for the: -
ANSWER-risk-free rate.
The risk premium is defined as the rate of return on: - ANSWER-a risky asset minus the
risk-free rate.
The standard deviation is a measure of: - ANSWER-volatility.
A frequency distribution, which is completely defined by its average (mean) and
variance or standard deviation, is referred to as a(n): - ANSWER-normal distribution.
The average compound return earned per year over a multi-year period is called the: -
ANSWER-geometric average return.
The average compound return earned per year over a multi-year period when
investment inflows and outflows are considered is called the: - ANSWER-dollar-
weighted average return.
Stacey purchased 300 shares of Coulter Industries stock and held it for 3 months before
reselling it. What is the value of "m" when computing the annualized return on this
investment? - ANSWER-4.0
If you multiply the number of shares outstanding for a stock by the price per share, you
are computing the firm's: - ANSWER-market capitalization.
Which one of the following had the highest average return for the period 1926-2018? -
ANSWER-small-company stocks
, Asset allocation is the: - ANSWER-distribution of investment funds among various
broad asset classes.
A Roth IRA: - ANSWER-invests after-tax dollars.
A brokerage account in which purchases can be made using credit is referred to as
which type of account? - ANSWER-margin
Which one of the following best describes the term "initial margin"? - ANSWER-Amount
of cash that must be paid to purchase a security on margin
The minimum equity that must be maintained at all times in a margin account is called
the: - ANSWER-maintenance margin.
When your equity position in a security is less than the required amount, your brokerage
firm will issue a: - ANSWER-margin call.
This morning, Josh sold 800 shares of stock that he did not own. This sale is referred to
as a: - ANSWER-short sale.
A company that owns income-producing real estate such as an apartment complex or a
retail shopping center is called a(n): - ANSWER-REIT
To be considered liquid, a security must: - ANSWER-be able to be sold quickly with
little, if any, price concession.
Brooke has decided to invest 55% of her money in large company stocks, 40% in small
company stocks, and 5% in cash. This is a(n) ________ decision. - ANSWER-asset
allocation
The SIPC: - ANSWER-protects investors from missing assets when a brokerage firm
closes.
An investor who follows a fully active strategy will: - ANSWER-move money between
asset classes as well as try to select the best performers in each class.
Which one of the following decisions falls under the category of asset allocation? -
ANSWER-Determining that thirty percent of a portfolio should be invested in bonds
Martin has an investment account with William, who is a broker with City Brokerage.
Martin believes that William has mishandled his account by churning it. If he files a
complaint against William seeking compensation, the case will most likely be decided
by: - ANSWER-an arbitration panel.
Questions and Answers
The total dollar return on a share of stock is defined as the - ANSWER-capital gain or
loss plus any dividend income.
The dividend yield is defined as the annual dividend expressed as a percentage of the: -
ANSWER-initial stock price.
When the total return on an investment is expressed on a per-year basis it is called the:
- ANSWER-effective annual return.
The rate of return earned on a U.S. Treasury bill is frequently used as a proxy for the: -
ANSWER-risk-free rate.
The risk premium is defined as the rate of return on: - ANSWER-a risky asset minus the
risk-free rate.
The standard deviation is a measure of: - ANSWER-volatility.
A frequency distribution, which is completely defined by its average (mean) and
variance or standard deviation, is referred to as a(n): - ANSWER-normal distribution.
The average compound return earned per year over a multi-year period is called the: -
ANSWER-geometric average return.
The average compound return earned per year over a multi-year period when
investment inflows and outflows are considered is called the: - ANSWER-dollar-
weighted average return.
Stacey purchased 300 shares of Coulter Industries stock and held it for 3 months before
reselling it. What is the value of "m" when computing the annualized return on this
investment? - ANSWER-4.0
If you multiply the number of shares outstanding for a stock by the price per share, you
are computing the firm's: - ANSWER-market capitalization.
Which one of the following had the highest average return for the period 1926-2018? -
ANSWER-small-company stocks
, Asset allocation is the: - ANSWER-distribution of investment funds among various
broad asset classes.
A Roth IRA: - ANSWER-invests after-tax dollars.
A brokerage account in which purchases can be made using credit is referred to as
which type of account? - ANSWER-margin
Which one of the following best describes the term "initial margin"? - ANSWER-Amount
of cash that must be paid to purchase a security on margin
The minimum equity that must be maintained at all times in a margin account is called
the: - ANSWER-maintenance margin.
When your equity position in a security is less than the required amount, your brokerage
firm will issue a: - ANSWER-margin call.
This morning, Josh sold 800 shares of stock that he did not own. This sale is referred to
as a: - ANSWER-short sale.
A company that owns income-producing real estate such as an apartment complex or a
retail shopping center is called a(n): - ANSWER-REIT
To be considered liquid, a security must: - ANSWER-be able to be sold quickly with
little, if any, price concession.
Brooke has decided to invest 55% of her money in large company stocks, 40% in small
company stocks, and 5% in cash. This is a(n) ________ decision. - ANSWER-asset
allocation
The SIPC: - ANSWER-protects investors from missing assets when a brokerage firm
closes.
An investor who follows a fully active strategy will: - ANSWER-move money between
asset classes as well as try to select the best performers in each class.
Which one of the following decisions falls under the category of asset allocation? -
ANSWER-Determining that thirty percent of a portfolio should be invested in bonds
Martin has an investment account with William, who is a broker with City Brokerage.
Martin believes that William has mishandled his account by churning it. If he files a
complaint against William seeking compensation, the case will most likely be decided
by: - ANSWER-an arbitration panel.
