in2 - FINAN 1200 Fall 2009 Test 5 True / False Questions 1....

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FINAN 1200 Fall 2009 Test 5 True / False Questions 1. (p. 417-419) The potential return of any investment should be directly related to the risk that the investor assumes. TRUE 2. (p. 422) When investing in global investments, changes in the currency exchange rate may affect the return on your investment. TRUE 3. (p. 423) Liquidity is the ease with which an asset can be converted to cash without a substantial loss in dollar value. TRUE 4. (p. 424) Because of the growth potential, stocks or mutual funds that invest in stocks should be the only type of securities included in the investment portfolio for most people. FALSE 5. (p. 424) Asset allocation is the process of spreading your assets among several different types of investments to lessen risk. TRUE 6. (p. 426) Because of the age factor, most young investors tend to invest a large percentage of their nest egg in growth-oriented investments. TRUE 7. (p. 428) Preferred stock represents the most basic form of corporate ownership. FALSE 8. (p. 428) Bondholders generally receive interest payments every six months. TRUE 9. (p. 428-429) Mutual funds range from very conservative to extremely speculative investments. TRUE 10. (p. 430-431) Once you have painstakingly developed a financial plan, it is not wise to change it. FALSE Multiple Choice Questions 11. (p. 413) 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? A. $2,150 B. $4,300 C. $8,600 D. $12,900 E. $43,000 1
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FINAN 1200 Fall 2009 Test 5 12. (p. 414-416) Twenty years ago, you began investing $2,000 a year. Because your investments earned an average of 8 percent a year, your investment portfolio has a current dollar value of $92,000. How much did you earn on your investments over the 20-year period of time? A. $2,000 B. $40,000 C. $52,000 D. $92,000 E. $132,000 13. (p. 421) A $1,000 corporate bond pays 6.5 percent a year. What is the annual interest you will receive each year? A. $0.65. B. $6.50. C. $65 D. $1,060.50 E. $1,065 14. (p. 423) The ease with which an investment can be converted to cash without a substantial loss in dollar value is called the: A. asset value. B. liquidity factor. C. immediate quotient. D. fixed cost factor. E. variable cost factor. 15. (p. 424) Terry Hamilton has just received $30,000 from an uncle who died and is trying to decide how to invest it. She has done some research has decided that about 30% of the money should go into large cap stocks, 20% into medium cap stocks, 15% into small cap stocks, 10% into bonds, 10% into foreign stocks and 15% into cash. She thinks that even if one area does not do that well, the rest will so that her overall return will be pretty good. What aspect of investing is Terry most concerned about? A.
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in2 - FINAN 1200 Fall 2009 Test 5 True / False Questions 1....

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