1. Security investors incur varying degrees of risk. Business risk is related to
ID: 2697964 • Letter: 1
Question
1. Security investors incur varying degrees of risk. Business risk is related to__
a. price level changes in the economy.
b. investor behavior in the market.
c. the debt-to-equity ratio of the firm.
d. the potential success or failure of the firm.
e. security price fluctuations.
2. In which of the following types of investment is the most liquidity risk?
a. common stock
b. corporate bonds
c. treasury bonds
d. land
e. mutual fund shares
3. Which of the following types of risk affect owners of fixed income securities more than owners of equity securities?
a. business risk
b. financial risk
c. market risk
d. purchasing power risk
e. non of these
4. Companies with a great deal of long-term debt would rate fairly high in ___risk.
a. market
b. event
c. business
d. financial
e. liquidity
5. Suppose the EPS of Wal-Mart stock was $2 and the current price per earnings ratio is 10. What is the current price of Wal-Mart stock?
a. $5
b. $8
c. $20
d. $40
e. Cannot compute with given information
6. U-Need-This has $12 million liabilities, $12 million preferred stock, 10 million shares of common stock outstanding, and $39 million in total assets. The book value is ___
a. $2.00 per share
b. $4.30 per share
c. $4.10 per share
d. $1.50 per share
e. none of these
7. A Puppy Pet Services $1,000 bond has a 7.5% coupon rate, matures in 2010 and is currently quoted at 82. The current yield is __
a. 6.15%
b. 7.50%
c. 9.15%
d. 10.27%
e. 11.43%
8. Sunshine Mining Bonds have a $1,000 face value, pay $95 annual interest, mature in 2004, and are currently quotes at $1,302.50. The coupon rate of interest is ___
a. 8.500%
b. 9.500%
c. 13.025%
d. 13.052
e. can't tell from the information given
9. The approzimate yeild-to-maturity of a bond is greater than the stated rate of interest when___
a. purchased at face value
b. purchased at discount
c. purchased at premium
d. market rates of interest decline
e. market rates of interest are constant
10. John Smith is in the 28 percent tax bracket. If he were to purchase a $1,000 municipal bond that had a stated interest rate of 6.9%, the taxable equivalent would be
a. 6.900%
b. 8.261%
c. 9.583%
d. 12.105%
e. 14.625%
11. Earnings limitations on social security benefits cease at age ___
a. 60
b. 62
c. 66
d. 70
e. 72
12. Which of the following are reasons for making lifetime gifts?
a. appreciation in value
b. credit limit
c. impact of marital deduction
d. gift exclusion
e. all of these
13. Your gross estate is reduced by the ___ to determine the adjusted gross estate.
a. state death tax credit
b. orphan's deduction
c. martial deduction
d. funeral and administrarive expenses
e. previous year's income tax
14. the most favorable tax treatment results when you transfer your estate (after death) to your ___
a. children
b. spouse
c. parent
d. employer
e. siblings
15. Mike gave his 25 year old son $13,000 worth of stock in 2009. When Mike died in 2010, that stock was worth $15,000. How much of that gift would potentially be subject to the federal gift and estate tax?
a. $30,000
b. $ 15,000
c. $13,000
d. 2,000
e. $0
16. The goal of estate planning is to:
a. accumulate
b. preserve
c. distribute
d. all of these
e. non of these
17. Why does an estate "Break Up"?
a. dealth related costs
b. inflation
c. improper use of vehicles of transfer
d. lack of liquidity
e. all of these
Explanation / Answer
1.d......
2.d......
3.d......
4.d.....
11.c........
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