Financial Services 400 Test 3

Front 1

Growth stock investors sometimes buy stocks selling at very high prices relative to earnings and book values when they perceive that even high P/E and P/B ratios fail to fully reflect the superior growth capabilities of leading firms in dynamic industries.

Back 1

True

Front 2

Growth stock investors are often attracted to companies with the near-term potential for a favorable change in regulation or public policy.

Back 2

False

Front 3

There is often little relation between projected EPS growth and historical EPS growth.

Back 3

True

Front 4

Ideally, growth companies generate sufficient funds for above-average growth from debt.

Back 4

False

Front 5

Growth stock investors favor aggressive companies that sell at attractive valuations when value is measured in terms of low P/E ratios.

Back 5

False

Front 6

Growth stock investors are usually willing to accept far larger than typical levels of risk in the pursuit of above-average long-term investment results.

Back 6

True

Front 7

The fed funds rate is the interest rate charged on loans made by the Federal Reserve to member banks

Back 7

False

Hint 7

Discount rate

Front 8

The bond markets functions largely as an OTC market.

Back 8

True

Front 9

An interesting characteristic of the corporate bond market is its relatively low trading volume

Back 9

True

Front 10

In the bond market, a round lot is measured in terms of $1 million in par value

Back 10

True

Front 11

Most bonds are bought by institutions, such as pension funds, insurance companies, and mutual funds

Back 11

True

Front 12

A treasury bond bid of 99:2 means that a buyer is willing to pay $996.25

Back 12

False

Hint 12

$990.625

Front 13

Municipal bonds typically sell at a higher price than corporate bonds of a similar risk class

Back 13

True

Hint 13

need to adjust for tax rate

Front 14

For corporate bonds, a brokerage statement is the bond investor's only proof of ownership

Back 14

True

Front 15

A debenture is a corporate bond backed by specific assets

Back 15

False

Hint 15

not backed by any assets

Front 16

A debenture that is subordinated comes ahead of every other creditor but still behind preferred and common stock

Back 16

False

Hint 16

Last in line

Front 17

T.I.P.S.

Back 17

Treasure Inflation Protected Securities

Front 18

Primary Dealers are obligated to bid at every auction for their own account and on behalf of customers and to make a continuous secondary market in Treasury securities.

Back 18

True

Front 19

Municipal bonds are interest-bearing securities issued by local government that are typically free of federal income taxes.

Back 19

True

Front 20

General Obligation bonds are paid back from tax income.

Back 20

True

Front 21

Revenue bonds are paid from a specific project.

Back 21

True

Front 22

Most debt securities carry a fixed rate of interest.

Back 22

True

Front 23

If a bond is trading for less than face mount (usually $1,000) it is trading at a discount

Back 23

True

Front 24

A bond's settlement dates is the date on which the buyers receives interest income.

Back 24

False

Front 25

Many bond investors prefer long-term bonds for their comparative stability of principal and interest payments

Back 25

False

Hint 25

Higher risk due to interest rate risk

Front 26

Call provisions allow the investor to reclaim principal at a specified date and price.

Back 26

False

Hint 26

Issuers can recall bonds not investors

Front 27

Put provisions allow the investor to reclaim principal at a specified date and price.

Back 27

True

Front 28

A .3% fall in yield represents a 30-basis point decline in rates

Back 28

True

Front 29

An increase in the expected rate of inflation tends to lower the value of outstanding bonds.

Back 29

True

Front 30

The segmented market hypothesis suggests that yield curves reflect the hedging and maturity needs of institutional investors

Back 30

True

Front 31

The longer the duration, the less sensitive is a bond's prices to fluctuations in market interest rates.

Back 31

False

Front 32

The per-share value of a mutual fund's stock, bond, and cash reserve holdings net of liabilities is called the fund's net asset value

Back 32

True

Front 33

Load funds are sold directly by mutual fund management companies to investors without commission.

Back 33

False

Hint 33

No-load

Front 34

Operating expense ratios tend to be lowest for specialized funds that invest in illiquid sectors of the market or in smaller and riskier foreign markets.

Back 34

Fasle

Hint 34

won't be on test

Front 35

If a fund charges any 12b-1 fees, it may not call itself a no-load fund even if it has no other sales charges.

Back 35

False

Front 36

Although all money market funds expect to maintain a steady net asset value of $1 per share, there is no assurance that they will be able to do so under all types of market conditions

Back 36

True

Front 37

During robust economic expansions, growth mutual funds do well. During periods of economic recession, value mutual funds do better.

Back 37

True

Front 38

The amount of money invested in mutual fund is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other agency of the U.S. government.

Back 38

True

Front 39

In assessing fund performance and risk, it is usually sufficient to consider fund performance over the most recent one-, six- and twelve-month periods

Back 39

False

Front 40

A significant advantage of investing in mutual funds is the broad diversification they offer.

Back 40

True

Front 41

A significant disadvantage of investing in mutual funds is the capital gains distributions

Back 41

True

Front 42

One common method for assessing a mutual fund's return is to compare it to the average performance of mutual funds with similar investing styles.

Back 42

True

Front 43

Mutual funds that are given Morningstar's 5 star rating tend to outperform during the next three years

Back 43

False

Front 44

The investment advisor makes the buy and sell decisions for a mutual fun portfolio

Back 44

True

Front 45

Investors can best replicate the returns generated by popular indices through ETF's

Back 45

True

Front 46

Open-end mutual fund shares trade on a stock exchange

Back 46

False

Hint 46

Close ended...open-end must buy and sell by mutual fund company

Front 47

Investors must show that they qualify as "wealthy" in order to invest in a hedge fund

Back 47

True

Front 48

Funds with a high turnover rate tend to distribute more short-term capital gains.

Back 48

True

Front 49

Growth stock investors are often fierce advocates of buying the best companies in the best industries

Back 49

True

Front 50

Enormous financial leverage is often used to transform a mediocre business into a wonderful franchise

Back 50

False

Front 51

When new markets are undergoing explosive growth, overcoming long-established customer loyalty is most difficult.

Back 51

False

Front 52

Several important growth stocks have been created through sophisticated financial engineering

Back 52

False

Front 53

Growth made possible by a continuing series of beneficial mergers and acquisitions often provides an attractive basis for sustainable above-average investor returns

Back 53

False

Front 54

One of the most important pitfalls tied to growth stock investing is that the approach seldom offers clear guidance about how much is too much to pay for a stock with attractive growth prospects.

Back 54

True

Front 55

Good companies always make good investments

Back 55

False

Front 56

Financial analyst recommendations tend to be optimistic

Back 56

true