1) Lavon has his money invested into an asset that has averaged the following re

Question

1) Lavon has his money invested into an asset that has averaged the following returns the last three years: +22%, -8%, +13%. Most likely what type of asset is he invested in?
A) Corporate bonds
B) Income producing Real Estate
C) Gold coins
D) Common stock

2) You have just recently started your investment activities for retirement. You were happy to learn from your broker that your investor's account balance would be insured for up to $500,000 through the ________ in the event their brokerage firm goes bankrupt.
A) FDIC
B) FSLIC
C) NCUA
D) SIPC
E) FTC

3) The net income of the firm is $4 million dollars. The firm will pay $500,000 in dividends to the preferred shareholders. There are currently 1 million shares of common stock outstanding. What are the earnings per share for this firm?
A) $4.00
B) $3.50
C) $4.50
D) None of the above are correct

4) What could possibly happen if you sell a bond before the maturity date?
A) You could have a capital gain.
B) You could have a capital loss.
C) You could break even with the price you paid for the bond.
D) All of the above are correct.
E) Both A and C are correct.






5) When comparing which mutual fund to invest in, which of the following would be important to consider?
A) Load
B) Net Asset Value
C) Expense ratio
D) All of the above are correct
E) Both A and C are correct.

Explanation / Answer

1 D) Common Stock Gold coins, and income producing real estate are stable Corporate bonds, provide steady cash flow, but the risk is in default - however this isn't related to asset returns 2) Sorry - I can't answer this one since im based in Australia 3) B $3.50 EPS = (net income - dividends on preferred stock)/common stock outstanding = (4MM - 0.5MM)/1MM = 3.50 4) D Will depend on the current yield curve, but all are possible 5) D NAV and Expense ratio are definitely important

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