LPF - Exam 3 Review 2023 Questions and Answers Solved Correctly

LPF - Exam 3 Review 2023 Questions and Answers Solved Correctly (T or F) An option gives you the right to buy or sell the underlying asset at a set price on or before the option's maturity date True (T or F) Purchasing derivatives is a form of speculating True (T or F) Long-term capital gains have favorable tax treatment over earned income True Which of the following investors will potentially receive dividends on their investments? Stockholders When you purchase an asset that generates a return, it is generally considered to be An investment Long term capital gains are taxed at _____ percent 15 Just as valuable as the tax break on capital gains income is the fact that you don't have to claim it -- and, therefore, you don't pay taxes on the asset until you Sell it Latisha invested $1,000 in XYZ stock. Two years later she sold the stock for $1,200. During the time she owned the stock, she received a total of $80 in dividends. What was her total return on this investment? 28% You recently purchased a stock for $30. It is now worth $40, and it paid a $5 dividend during the time you held it. Your rate of return on this stock is closest to which of the following? 50% One should keep in mind that when it comes to tax advantages, ______ is/are better than _____ Capital gains; ordinary income If you were to purchase common stocks issued by large, nationally known companies with sound financial histories with solid dividend and growth records you would own what are called Blue-chip stocks (T or F) The market price of the stock is a reflection of the potential earnings per share of the firm True (T or F) Holding several types of stock can greatly reduce the risk in your portfolio True (T or F) A stock market index is a measure of the performance of a group of stocks that represent the market or a sector of the market True Nathan noticed that a company that has great potential just declared a _____ because its stock price was getting too high for the small investor to buy the stock. The company will substitute more shares for the existing shares of stock without increasing the market value of the firm Stock split A _____ increases the number of stock shares outstanding by replacing each existing share of stock with a stated number of new shares Stock split You have just purchased 10 shares of a stock selling at $50 per share. Since that time, the company was found to be in violation of several environmental laws and has several major lawsuits outstanding. Which of the following statements is most correct? You could lose up to your $500 investment Common stockholders are entitled to elect the company's board of directors. Usually one share of stock is equal to _____ vote(s) One A _____ is a measure of the performance of a group of stocks that represent the market Stock market index All of the following are stock market indexes EXCEPT The Russell 100 A bond has a par value of $1,000, a market price of $300, and a 9% coupon rate. It will mature in 5 years. What is the current yield of the bond? 48.27% Suppose you just purchased a corporate bond with a par value of $1,000 for $951.25. It carries a 7% coupon rate and will mature in 5 years. What is the yield to maturity? 8.23% What is the par value of a corporate bond that was issued with an 9% annual coupon, pays $45 in semiannual interest, and is due in 15 years? 1,000.00 Michael Milkman has suggested that you consider the purchase of some bonds that are rated BB or below. He is asking you to purchase _____ bonds All of the above: Junk; very risky; high-yield Because there is no default or call risk associated with government bonds, they generally pay _____ rate of interest than other bonds A lower XYZ company issued bonds three years ago with a 7% coupon rate. Today, the market rate of interest was lowered to 4%. What most likely will happen next? XYZ company will call their bonds in The _____ is the face value of a bond, and the amount that is returned to the bondholder at maturity Par value The largest single player and payer in the bond market Is the US government What is the value of a $1,000 par value bond with a 12% annual coupon that will mature in 5 years if the bond is currently priced to yield 10%? $1,075.82 Suppose that you have a bond that has a par value of $1,000 and a coupon interest rate of 9%. Its current price is $950 and it will mature in 7 years. What is the yield to maturity? 10.03% (T or F) Social factors exert the broadest and deepest influence over a person's consumer behavior False (T or F) Limited decision making typically occurs when a consumer is buying an unfamiliar, expensive product or an infrequently bought item False Which is NOT a consumer advocacy group? Consumer Reports Which would NOT help you resolve a problem with a defective product you have purchased? Discarding receipts and warranties Which government organization enforces federal antitrust and consumer protection laws? The Federal Trade Commission Which government organization inspects and grades foods? The Food and Drug Administration Which government organization oversees the safety of toys, cribs, power tools, electronics, and furniture? The US Consumer Product Safety Commission Which is true of public utilities? They are legal monopolies Which are two important reasons for U.S. laws that restrict business practices? Preserve competition and protect consumers Which requires that manufacturers inform consumers about the ingredients and raw materials used in the making of a product? The Fair Packaging and Labeling Act John Kennedy Jr. and his wife Caroline both perished in the same plane crash. Which of the following clauses would identify who is assumed to have perished first? Common disaster clause Because Toby and Jenny's children are under the age of 18 they should name a _____ to care for them and manage their property should Toby and Jenny pass away Guardian We may prepare a _____ to appoint someone to legally act on our behalf in the event we become mentally incapacitated and a _____ to state our wishes in the event of a terminal illness or injury Durable power of attorney; living will