1) The future value of an annuity of $100 at 6 percent
for ten years exceeds $1,000.
2) Securities must be sold before capital gains taxation applies.
3) If a $1,000 convertible bond may be converted into 25 shares, the exercise
(conversion) price is $40 a share.
4) Lower cash flow may be the result of higher depreciation expense.
5) An investor concerned with safety of principal may purchase preferred stock instead
of bonds issued by the same company.
6) Comparisons of stock performance should use percentage changes instead of
absolute price changes.
7) In-the-money stock index options are not exercised.
8) Open market operations is the buying and selling of securities by the Federal
Reserve.
9) Arbitrage pricing theory is a multi-variable model used to explain securities returns.
10) The federal government only issues marketable securities such as treasury bills.
11) The relationship between a firm and its state of incorporation is specified in the
bylaws.
12) Value investors tend to prefer stocks with low price to sales and price to book ratios.