Chapter 14 – Investing in Stocks
65. (p. 468) A stock that pays higher than average dividends is called a(n) ____________ stock.
66. (p. 468) A stock that remains stable during declines in the economy is called a(n)
____________ stock.
67. (p. 468) A stock that follows the business cycle of advances and declines in the economy is
called a(n) ____________ stock.
Chapter 14 – Investing in Stocks
68. (p. 468) A stock issued by a corporation that has the potential of earning above-average
profits when compared to other firms in the economy is called a(n) ____________ stock.
69. (p. 468) A stock that sells for less than $1 per share is called a _____ stock.
70. (p. 468) Which one of the following statements is true?
Chapter 14 – Investing in Stocks
71. (p. 469) By using the Yahoo! Finance website, an investor can find all of the following
information on a stock except its:
72. (p. 470) Which one of the following is a true statement?
73. (p. 472) The federal government requires that a corporation selling a new issue of securities
must disclose information about the company and its finances in a(n):
Chapter 14 – Investing in Stocks
74. (p. 468) Anthony Edwards wants to diversify his portfolio by adding a stock that maintains a
stable value when the economy declines. What type of stock does Anthony want to add to his
portfolio?
75. (p. 468) George Clancy wants to diversify his portfolio by adding a stock that has a value
which moves in direct relation to the business cycle. What type of stock is George thinking
about adding to his portfolio?
76. (p. 468) Sean Barber wants to invest in a stock that is relatively safe, suitable for
conservative investors, and less speculative than other stocks. What type of stock best fits
Sean’s requirements?
Chapter 14 – Investing in Stocks
77. (p. 468) Kay Powers wants to diversify her portfolio by investing in a firm that has the
potential to earn above average profits compared to other firms in the economy. What type of
stock is Kay thinking about adding to her portfolio?
78. (p. 468) Which one of the following statements is false?
79. (p. 473) Mellon Manufacturing has after-tax income of $3 million. It also has 2 million
shares of stock outstanding. What is the firm’s earnings per share?
Chapter 14 – Investing in Stocks
80. (p. 473) Barker Creek Clothing has after-tax income of $12.8 million. It also has 32 million
shares of stock outstanding. What is the firm’s earnings per share?
81. (p. 473) Masterworks Manufacturing has after-tax profits that total $625,000. If the firm has
250,000 shares, what is the amount of earnings per share?
Chapter 14 – Investing in Stocks
82. (p. 473) Last year, High-Tech Electronics earned $1.50 per share. If the current market value
for a share of stock is $45, what is the firm’s P/E ratio?
83. (p. 473) Acme Widget, Inc. has 1,000 shareholders who own a total of one million shares of
its common stock. The stock currently sells for $85 per share. The company earned $5 million
after taxes. The annual dividend is $0.50 per share. The firm has assets of $125 million and
liabilities of $25 million. What is the P/E ratio?
Chapter 14 – Investing in Stocks
84. (p. 475) Acme Widget, Inc. has one million shares of common stock outstanding at a price
per share of $85. The company earned $5 million after taxes. The annual dividend is $3.50 per
share. The firm has assets of $125,000,000 and liabilities of $25,000,000. What is the
dividend yield?
85. (p. 475) To calculate dividend yield, the annual dividend amount per share is divided by the
_______ per share.
Chapter 14 – Investing in Stocks
86. (p. 475) Becky Martinez paid $65 a share for stock in GBX Corporation. The stock has a
current market value of $48 a share and pays $1.60 a year in dividends. What is the dividend
yield?
87. (p. 475) The stock of ABC Company has a current market price of $75. The corporation has
paid a dividend of $3.75 over the last 12 months and has earnings per share of $5. What is the
dividend yield?
Chapter 14 – Investing in Stocks
88. (p. 476) Assume that you purchased 100 shares of a stock for $55 a share, that you received
an annual dividend of $2.00 a share, and that you sold your stock for $65 a share at the end of
one year. What is the total return on your investment? (Ignore commission amounts for this
question.
89. (p. 476) Assume that you purchased 100 shares of a stock for $70 a share, that you received
an annual dividend of $0.60 a share, and that you sold your stock for $80 a share at the end of
one year. What is the total return for your investment? (Ignore commission amounts for this
question.)
Chapter 14 – Investing in Stocks
90. (p. 476) A yield calculation that takes into account the total return, the original investment,
and the time that the investment is held is called ____________ yield.
91. (p. 478) Acme Widget, Inc. has 1,000 shareholders who own a total of one million shares of
its common stock. The company earned $10 million after taxes and paid out $4 million in
dividends. The firm has assets of $125 million and liabilities of $25 million. What is the book
value per share?
Chapter 14 – Investing in Stocks
92. (p. 477) Assume the beta for the stock market in general is 1.0 and the beta for World-Wide
Television Productions is 2.4. If the stock market increases in value by 10 percent, what is the
expected increase in value for the World-Wide Productions stock?
93. (p. 478) Book value per share is determined by:
Chapter 14 – Investing in Stocks
94. (p. 478) ABC Corporation has assets that total $12 million and liabilities that total $4
million. It also has 500,000 shares of stock outstanding. What is the ABC’s book value per
share?
95. (p. 478) Quincy Martin Manufacturing stock has a market value of $48 a share. If the book
value is $40 a share, the firm’s market-to-book ratio is:
Chapter 14 – Investing in Stocks
96. (p. 479) An investment theory based on the assumption that a stock’s intrinsic or real value is
determined by the future earnings of the company is called the ____________ theory.
97. (p. 479) An investment theory based on the assumption that a stock’s market value is
determined by the forces of supply and demand in the stock market as a whole is called the
____________ theory.
98. (p. 479) An investment theory based on the assumption that stock price movements are
purely random is called the ____________ theory.