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Exam 13: Investing Fundamentals

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Question 51

Multiple Choice

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Allison Peavy wants to invest but is worried about risk: In particular, she is worried that bad management and increased competition in the wireless phone market will make these companies less profitable than expected. What type of risk is Allison most concerned with?

A) Inflation
B) Interest rate
C) Business failure
D) Systematic
E) None of these

F) A) and E)
G) A) and D)

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Question 52

Multiple Choice

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Twenty years ago, you began investing $250 a month. Because your investments earned an average of 8 percent a year, your investment portfolio has a current dollar value of $145,000. How much did you earn on your investments over the 20-year period of time?

A) $142,000
B) $80,000
C) $85,000
D) $140,000
E) $132,000

F) A) and B)
G) A) and C)

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Question 53

Multiple Choice

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Eric Peltz earns $80,000 a year. His monthly expenses total $4,300. What is the minimum amount of money that Mr. Peltz should set aside in an emergency fund?

Asset allocation is the process of spreading your assets among several different types of investments to lessen risk.

The amount of time that your investments have to work for you is an important factor when managing your investment portfolio.

Normally, corporate bondholders receive interest:

Jack Masters earns $40,000 a year. His monthly expenses total $2,100. What is the minimum amount of money that Mr. Masters should set aside in an emergency fund?

Which one of the following is a true statement?

A credit ceiling on a credit card is determined by the borrower and is the dollar amount that they want to borrow using the cash advance provision on their credit card.

Bondholders generally receive interest payments every six months.

Liquidity is the ease with which an asset can be converted to cash without a substantial loss in dollar value.

In how many of the years since 1926 have stocks lost money?

The ease with which an investment can be converted to cash without a substantial loss in dollar value is called the:

Bob and Mary Martin are both 35 years old. Although they graduated from college almost 15 years ago, they have never developed a diversified investment program. What extra money they had was invested in high-tech stocks that did quite well until the last five years. Then, with the economic downturn, they encountered major losses. How could asset allocation have reduced the dollar amounts of the Martin's losses?

Which one of the following investments offers the least amount of growth potential?

All of the following statements are considered to be good advice for a potential investor starting an investment program except:

A $1,000 corporate bond pays 6.5 percent a year. What is the annual interest you will receive?

The fees for investor services and newsletters generally range from ____________ per year.

Which one of these investments pools the funds of many investors and hires a professional money manager to manage those funds?

The fees for investor services and newsletters usually range between $30 and $1,000 per year.