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Ch. 11: Financial Markets

Total questions: 40

Worksheet time: 20mins

Name
Class
Date
1.

_____ refers to the time at which payment to a bondholder is due.

a)

par value

b)

coupon rate

c)

maturity

2.

A _____ is an option to buy shares of stock at a specified time in the future.

a)

call option

b)

portfolio

c)

bear market

3.

____ is defined as the annual rate of return on a bond if the bond were held to maturity.

a)

yield

b)

dividend

c)

coupon rate

4.

A _____ is an option to sell shares of stock at a specified time in the future.

a)

call option

b)

put option

c)

bull market

5.

Spreading out your investments to reduce risk is known as _____.

a)

portfolio

b)

diversification

c)

par value

6.

_____ is defined as an action taken today that will create benefits in the future.

a)

diversification

b)

yield

c)

investment

7.

A(n) _____ is a stock that reinvests its earnings in the business instead of paying regular dividends.

a)

growth stock

b)

municipal bond

c)

mutual fund

8.

A _____ is defined as an investment report to potential investors.

a)

portfolio

b)

prospectus

c)

pension fund

9.

_____ is the difference between a higher selling price and a lower selling price, resulting in a financial gain for the seller.

a)

yield

b)

capital loss

c)

capital gain

10.

_____ is defined as money an investor receives above and beyond the sum of money initially invested.

a)

return

b)

stock

c)

bond

11.

By utilizing _____, an investor can earn profits by buying bonds at a cut rate.

a)

coupon rate

b)

discount from par

c)

daytrading

12.

_____ refers to a period of time during which the stock market steadily rises.

a)

maturity

b)

bull market

c)

financial asset

13.

In a _____, many investors sell their stocks in anticipation of lower profits.

a)

mutual fund

b)

capital gain

c)

bear market

14.

_____ is defined as the amount paid to purchase a bond that will be repaid at maturity.

a)

maturity

b)

par value

c)

coupon rate

15.

With a _____, the savings of many individuals are pooled together and invested in a variety of stocks, bonds, and other financial assets.

a)

mutual fund

b)

municipal bond

c)

call option

16.

____ is defined as a claim on the property or income of a borrower.

a)

financial asset

b)

stock

c)

equity

17.

A _____ is defined as a collection of financial assets.

a)

portfolio

b)

pension fund

c)

prospectus

18.

Which of the following is a stock exchange which features technology companies, and all trades are done on the computer?

a)

the S & P 5000

b)

NYSE

c)

Dow Jones

d)

Nasdaq

19.

The practice of making high risk financial decisions in hopes of getting a big return is called

a)

diversification.

b)

speculation.

c)

day trading.

d)

junk bond.

20.

A _____ is a lower-rated, potentially higher-paying bond.

a)

pension fund

b)

junk bond

c)

common stock

d)

municipal bond

21.

Corporations pay out part of their profits in the form of a _____ to their stockholders.

a)

coupon rate

b)

call option

c)

bond

d)

dividend

22.

Which of the following would NOT directly cause the price of a stock to change?

a)

A shiny new corporate office building in sunny Florida

b)

Supply and Demand

c)

Company earnings

d)

How investors feel about the company

23.

All of the following are examples of financial intermediaries EXCEPT

a)

a credit union.

b)

a finance company.

c)

a stock certificate.

d)

a life insurance company.

24.

To finance the building of a new police station, the government of the city of Richmond is MOST likely to issue a

a)

junk bond.

b)

treasury bond.

c)

municipal bond.

d)

money market bond.

25.

A stock split is MOST likely to occur when

a)

a company is losing money.

b)

the price of a stock becomes too high.

c)

the stock market is doing poorly overall.

d)

stockholders demand higher dividends.

26.

You are a financial advisor whose client wants stocks that pay regular dividends. You advise him to buy

a)

income stock.

b)

common stock.

c)

preferred stock.

d)

growth stock

27.

Buying stock in order to sell it quickly in an effort to have your money grow faster than the general level of stock prices is known as

a)

early phase of development.

b)

diversification.

c)

long-term investing.

d)

short-term investing.

28.

Using the Standard & Poor’s index to gauge bond quality, which of the following symbols correctly identifies the highest investment grade?

a)

AAA

b)

Aaa

c)

C

d)

D

29.

A __________ generally declines less during a recession and shows less growth during an expansion than other stocks.

a)

junk bond

b)

cyclical stock

c)

defensive stock

d)

income stock

30.

Purchasing a stock by paying only a fraction of its price and borrowing the remainder of the purchase price is called

a)

buying in a bull market.

b)

buying in a bull market.

c)

buying on debt.

d)

buying on margin.

31.

Which of the following is the only correct example of equity?

a)

a treasury bill

b)

a treasury bond

c)

a share of stock

d)

a long-term certificate of deposit

32.

Which of the following is the only correct example of a blue-chip stock?

a)

A large, well-known company traded on the NYSE

b)

An established company that is traded over the Internet

c)

A foreign-owned company that operates in the US

d)

A new start-up firm

33.

All of the following are basic components of bonds EXCEPT

a)

par value

b)

coupon rate

c)

maturity

d)

liquidity

34.

In a(n) __________, people who specialize in buying and selling stock represent the interests of a company without the company actually getting involved.

a)

OTC market

b)

primary market

c)

bear market

d)

secondary market

35.

The index that shows how certain stocks have traded every business day since 1896 is called

a)

NYSE

b)

Nasdaq

c)

S & P 500

d)

Dow Jones

36.

In which of the following structures are the most trade made?

a)

OTC market

b)

NYSE

c)

Nasdaq

d)

Chicago Board of Trade

37.

A _________ generally declines more during a recession and shows more growth during an expansion than other stocks.

a)

junk bond

b)

cyclical stock

c)

income stock

d)

defensive stock

38.

To __________ means to base decisions on an assessment of costs and benefits.

a)

speculate

b)

day trade

c)

diversify

d)

economize

39.

Which of the following includes investors as actual voting owners of the company?

a)

income stock

b)

common stock

c)

growth stock

d)

preferred stock

40.

Which of the following is NOT a characteristic of savings bond?

a)

they are issued by the government

b)

they can be used to help pay for public works project

c)

they are sold in low denominations

d)

they carry a high risk