1) The structure of yields generally suggests that longterm bonds have greater yields.
2) Interest earned and received appears on the individual’s balance sheet.
3) If the price of common stock falls, the value of a convertible preferred stock will also
tend to fall.
4) Since virtually all investments involve risk, the individual should develop a
diversified portfolio.
5) Contributions to an IRA appear on the individual’s estimate of cash receipts and
disbursements.
6) In a “best effort” sale of securities, the risk of the
sale rests with the investment banker.
7) The primary role of organized securities exchanges is to raise capital (money) for
firms.
8) The net asset value of a mutual fund rises when it distributes capital gains.
9) A diversified portfolio requires the securities of at least fifty firms.
10) Buying a call and a treasury bill produces similar results as buying a stock and a
put.
11) According to the Black/Scholes option valuation model, the value of a call option
rises as interest rates increase.
12) Even if technical analysis accurately predicted the direction of stock prices,
commissions from frequent trading may consume any excess return the investor earns.
13) If an investor anticipated that interest rates would rise, that individual should sell an
option to buy Treasury bonds
14) One of the first steps an investor should take is to establish the goals of the
portfolio.
15) A farmer hedges by simultaneously buying and selling futures contracts.
16) Publiclyowned stock that is not listed on an exchange
is traded in the overthecounter markets such as the Nasdaq stock market.
17) If financial markets are efficient, that negates the importance of financial planning.
18) When an investor sells a contract and subsequently
offsets (closes) the position, the individual experiences neither losses nor profits.