Chapter 13 – Investing Fundamentals
61. (p. 433) 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?
62. (p. 435) Allison Peavy wants to invest but is worried about risk: In particular, she is worried
that bad management and increased competition in the wireless phone market will make these
companies less profitable than expected. What type of risk is Allison most concerned with?
Chapter 13 – Investing Fundamentals
63. (p. 435) Which one of the following statements is true?
64. (p. 436) 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?
Chapter 13 – Investing Fundamentals
65. (p. 435) A decrease in the value of stocks, bonds, or other investments may cause investors
to experience ____________ risk.
66. (p. 436) An investor concerned with a predictable source of income provided by an
investment would choose:
67. (p. 443) Which one of the following investments offers the least amount of growth
potential?
Chapter 13 – Investing Fundamentals
68. (p. 436) Which one of the following investments offers the greatest growth potential?
69. (p. 439) Matt Jackson is single and 24. He has just graduated from college and obtained a job
making $26,400 a year. Which one of the following investments would you recommend for
his long-term investment program?
70. (p. 436) The ease with which an investment can be converted to cash without a substantial
loss in dollar value is called the:
Chapter 13 – Investing Fundamentals
71. (p. 436) Which one of the following investments offers the greatest liquidity?
72. (p. 436) Which one of the following investments offers the least liquidity?
73. (p. 436) 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?
Chapter 13 – Investing Fundamentals
74. (p. 436) Carl Reimer has just received an inheritance of $40,000 from his mother and is
trying to decide how to invest it. Carl is young and earns a good salary. Carl wants to invest in
a small cap mutual fund. While he won’t receive much in the way of cash dividends, the
companies are reinvesting significant amounts so the sales revenue and earnings in the future
will be much larger. What aspect of investing is Carl most concerned about?
75. (p. 437) Based on historical performance, which one of the following investments is most apt
to provide an average return of 10 percent a year between now and the year 2025?
Chapter 13 – Investing Fundamentals
76. (p. 437) Terry Hamilton has just received $30,000 from an uncle who died and is trying to
decide how to invest it. She has done some research has decided that about 30% of the money
should go into large cap stocks, 20% into medium cap stocks, 15% into small cap stocks, 10%
into bonds, 10% into foreign stock, and 15% into cash. She thinks that even if one area does
not do that well, the rest will so that her overall return will be pretty good. What aspect of
investing is Terry most concerned about?
77. (p. 437) What is the primary goal of asset allocation?
Chapter 13 – Investing Fundamentals
78. (p. 439) Which one of the following statements is true?
79. (p. 443) Which one of the following investments would rank the highest with regard to
safety?
80. (p. 440) Equity capital is money:
Chapter 13 – Investing Fundamentals
81. (p. 440) A firm is short on cash. Which of the following would be paid first?
82. (p. 440) Garrett Jennings is thinking about buying an investment that represents the most
basic form of business ownership and pays a dividend. The dividend on this investment is
paid after all other payments and dividends have been made. Which investment is Garrett
thinking about purchasing?
83. (p. 440) 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?
Chapter 13 – Investing Fundamentals
84. (p. 441) Audrey is thinking about an investment that involves buying a written pledge by a
corporation to repay a specified amount of money. It also pays interest every 6 months until it
matures. What investment is Audrey thinking about purchasing?
85. (p. 440) A corporation selling stock is obligated to:
86. (p. 440) Which of the following is a true statement?
Chapter 13 – Investing Fundamentals
87. (p. 441) The money obtained by a company from selling corporate bonds:
88. (p. 441) Normally, corporate bondholders receive interest:
89. (p. 441) The maturity dates for most bonds range between ____________ years.