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Exam 13: Investing Fundamentals

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Question 21

Multiple Choice

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An emergency fund should be deposited in a:

A) savings account at the highest available interest rate.
B) six-month certificate of deposit.
C) checking account.
D) safe place at home.
E) safe deposit box in a bank vault.

F) A) and E)
G) None of the above

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Question 22

Multiple Choice

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Which one of the following is a true statement?

A) When choosing an investment,it is not necessary to consider the risk factor.
B) During inflationary times,there is a risk that the financial return on an investment will not keep pace with the rate of inflation.
C) The interest rate risk associated with investments in bonds is the result of changes in business conditions faced by companies.
D) The risk of business failure deals with changes in the value of stocks and bonds due to changes in interest rates in the market.
E) The prices of stocks,bonds,and other investments never fluctuate in the market.

F) B) and E)
G) A) and B)

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Question 23

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Once you have made a decision to buy an investment,there is no need for continued evaluation.

Which one of the following investments would rank the highest with regard to safety?

Lester McCann wants to invest but is worried about risk.In particular,he is worried that the money he invests today will not buy as much ten years from now.What type of risk concerns Lester?

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

Which one of the following would not be considered a safe investment for a conservative investor?

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?

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

Bill Teague has just gotten a gift of $20,000 from his parents and is trying to decide how to invest it.He is thinking about investing in a money market mutual fund because he knows he can withdraw the money from the money market mutual fund whenever he needs it with little chance of loss in value.What aspect of investing is Bill most concerned about?

John Hernandez is 24 and has saved enough money to fund an adequate emergency fund.In addition,he has saved $5,600 that can be used to fund an investment program.He is single,has no dependents,and would like to retire when he is 60.Which one of the investment factors listed below would be most important for an investor like Mr.Hernandez?

Normally,corporate bondholders receive interest:

During inflationary times,there is a risk that the financial return on an investment will not keep pace with the rate of inflation.

Which one of the following is the most readily available source of current price information for an investment in stocks or bonds?

Which one of the following investments offers the least liquidity?

A line of credit is a short-term loan that is approved before the money is actually needed.

When investing in global investments,changes in the currency exchange rate may affect the return on your investment.

Accurate recordkeeping can help you spot opportunities to maximize profits or reduce dollar losses when you sell your investments.

Mike Lively is thinking about buying an investment that represents an ownership claim on a company.The most important priority he has with this investment is receiving his dividends before dividends are paid on other types of investments.What investment is Mike thinking about purchasing?

A decrease in the value of stocks,bonds,or other investments may cause investors to experience ____________ risk.