FP 100T Week 5 WileyPLUS Weekly Exam

FP 100T Week 5 WileyPLUS Weekly Exam

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FP 100T Week 5 WileyPLUS Weekly Exam

 

In this graded assignment you are assessed on the content covered in this weeks’ readings, activities, and assignments. To help you prepare, it is recommended that you first complete this week’s Learning Path and Self-Test Learning Activities prior to completing this exam.

 

Complete the Week 5 Exam covering this week’s assigned readings:

 

• “Chapter 12: Investing in Stocks and Bonds”

 

• “Chapter 13: Investing in Mutual Funds and Real Estate”

 

Note: Work submitted in WileyPLUS does not count toward attendance. Be sure to post at least two times each week in the online classroom to avoid being auto-dropped from the course.

 

Question 1

 

A share of noncallable preferred stock has a par value of $100 and pays 7 percent annual interest. Which of the following statements is true?

 

The stock will pay $7 per year in interest as long as the company is in existence.

 

The stock will pay $7 in interest in the first year, but the amount paid in future years will depend on what happens to interest rates in the future.

 

The stock will pay $100 per year in interest for 20 years.

 

The stock will pay $7 per year in interest and will pay the investors back the $100 par value at maturity.

 

Question 2

 

Your answer is correct.

 

Which of the following statements regarding bonds and inflation risk is true?

 

Rising inflation will generally cause bond prices to also rise.

 

Bonds are less influenced by inflation risk than are common stocks.

 

Long-term bonds have less inflation risk than short-term bonds.

 

Bond investors will require higher yields on bonds if inflation rises.

 

Question 3

 

Your answer is correct.

 

Aeryn Soon is a potential investor of Hippy Dippy Inc.’s preferred stock, which is currently selling for $475 per share. Hippy Dippy pays an annual dividend of $40, and Aeryn’s required return is 8 percent. Should she purchase this preferred stock or NOT? Why?

 

Yes, because the value of the preferred stock is $500.

 

No, because the value of the preferred stock is $250.

 

Yes, because the value of the preferred stock is $250.

 

No, because the value of the preferred stock is $500.

 

Question 4

 

Yield to maturity is a popular measure because it tells an investor

 

the annualized yield they will earn if they hold the bond to maturity.

 

the yield they will earn if they sell the bond today.

 

how much interest they will receive each year.

 

none of the above.

 

Question 5

 

Your answer is correct.

 

Riskier companies tend to pay ________ dividends than less risky companies.

 

higher

 

lower

 

Question 6

 

Aliyah purchased Verizon Communications stock in April 2015 for $48.90 per share. She sold the stock one-year later for $54.01 per share. Calculate her capital gains yield.

 

5.11%

 

9%

 

9.46%

 

10.45%

 

Question 7

 

Your answer is correct.

 

A bond investor is a/ an

 

creditor.

 

lender and creditor.

 

lender.

 

owner.

 

Question 8

 

Your answer is correct.

 

Large-cap companies have market capitalization greater than or equal to

 

$10 million.

 

$1 billion.

 

$5 billion.

 

$100 million.

 

Question 9

 

Your answer is correct.

 

When a stock split occurs,

 

owners of stock end up with a lower proportionate number of shares.

 

the company expects the value of shares to go down in the future.

 

the price of new shares is lower than the old price.

 

the market usually views the split as bad news about future prospects for the company.

 

Question 10

 

Your answer is correct.

 

Which of the following portfolio strategies is the most risky?

 

Investing 100 percent in a small-cap technology company

 

Investing 50 percent each in a small-cap technology company and a blue chip manufacturing company

 

Investing 100 percent in a blue chip manufacturing company

 

Investing equally in 20 stocks that are all in different industries

 

Question 11

 

John is considering purchasing some preferred stock from BBCC Corp. The company pays a $30 annual dividend on its preferred stock, and John believes he should earn 7 percent on the stock based on the company’s risk profile. What is the value of the stock per share?

 

$428.57

 

$42.86

 

$2.10

 

$210.00

 

Question 12

 

Your answer is correct.

 

The most common arrangement for bond coupon payments is

 

fixed-rate interest paid in semiannual payments.

 

floating-rate interest paid in annual payments.

 

zero-coupon payments.

 

indexed-rate payments.

 

Question 13

 

Your answer is correct.

 

Which statement regarding load mutual funds is true?

 

The most common type of load is a front-end load.

 

The load can be as high as 10 percent of the purchase price of the shares.

 

A back-end load is part of the expense ratio.

 

Load funds make more sense for active investors than buy-and-hold investors.

 

Question 14

 

Your answer is correct.

 

The basic equation for real estate return on investment is the increase in value plus the net rental income, minus the interest expense, all of which is divided by which financial component?

 

beginning investment

 

capital appreciation

 

ending outlay

 

market price

 

Question 15

 

Your answer is correct.

 

A life-cycle fund purchases assets designed to meet the needs of individuals in

 

retirement only.

 

middle-income earning years.

 

a particular stage of life.

 

high-income-earning years.

 

Question 16

 

Your answer is correct.

 

Financing the purchase of an investment in real estate with a mortgage at the time of borrowing at a low rate of interest and investing in assets that earn more than what they cost puts you ahead of the game due to the concept of

 

leverage.

 

diversification.

 

return on investment.

 

price appreciation.

 

Question 17

 

Your answer is correct.

 

Which fund classification would a focus on only stocks of Chinese companies match?

 

Growth fund

 

Income fund

 

Balanced fund

 

International fund

 

Question 18

 

Maryanne invested $1,000 in a mutual fund three weeks ago and noticed she was charged $85 for the purchase. Which kind of fund did she likely buy?

 

a front-end load fund

 

a back-end load fund

 

a no-load fund

 

an initial load fund

 

Question 19

 

Your answer is correct.

 

Which fund classification would a focus on assets that pay interest and/or dividends match?

 

Growth fund

 

Income fund

 

Balanced fund

 

Global fund

 

Question 20

 

Your answer is correct.

 

Most open-end mutual funds charge a front-end load, which is

 

a sales charge or commission paid by investors each year that they own shares in the fund.

 

a brokerage fee that is paid to a broker for selling mutual funds in the secondary market for an investor.

 

the annual expenses on the fund divided by the net asset value.

 

a sales charge or commission paid by an investor when purchasing shares in a mutual fund.

 

Question 21

 

Your answer is correct.

 

ABC Fund has 9 million shares outstanding. The fund’s portfolio is now valued at $300 million and the fund owes $18 million to the fund advisors and $5 million for rent and wages. What is the net asset value of the fund?

 

$30.78

 

$31.33

 

$33.00

 

$34.78

 

Question 22

 

Your answer is correct.

 

Which is a characteristic of an exchange-traded fund (ETF)?

 

Shares are traded in the secondary market like shares in a closed-end fund.

 

Shares trade at the net asset value like shares in an open-end fund.

 

The number of shares outstanding is fixed as in a closed-end fund.

 

The shares are invested only in common stock of publicly traded corporations.

 

Question 23

 

Your answer is correct.

 

Another term for back-end load is

 

distribution load.

 

contingent deferred sales charge.

 

management load.

 

operational load.

 

Question 24

 

Your answer is correct.

 

When a mutual fund assesses a charge at the time of a purchase it is called a(n) ________load.

 

front-end

 

back-end

 

redemption

 

initial

 

Question 25

 

If a firm has total expenses of $1 million and total assets of $20 million, what would the expense ratio be?

 

0.05 percent

 

0.5 percent

 

5 percent

 

50 percent

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