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FCS 340 Final Exam | Actual Exam Questions |
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What is a closed-end mutual fund? What is an open-end mutual fund? - ✔✔ Closed- shares issued by an investment company only when fund is organized Open- shares issued and redeemed by the investment company at the request of investors What is the net asset value? When is the net asset value calculates? - ✔✔value of a mutual fund / at the end of every day What is a load fund? What is a no-load fund? - ✔✔Load- a mutual fund where investors pay commission every time they buy shares No-load- individual investors pay no sales charge What is a contingent deferred sales load? - ✔✔ 1 - 5% charge that shareholders pay when they sell shares in a mutual fund How much can you expect to pay in management fees for most mutual funds? - ✔✔Between .25-1.5% of the fund's net asset value What is a 12b-1 fee? - ✔✔Fee that an investment company pays to avoid the costs of advertising and marketing a mutual fund What is expense ratio? - ✔✔Amount investors pay for all of a mutual fund's management fees and operating fees Why do investors purchase mutual funds? - ✔✔diversification and professional management Is there any significant differences between the performance of a load fund and a no-load fund? Explain.
- ✔✔No. Up to you if you want to pay the cost of sales commission that comes with the load fund.
What do experts recommend investors look for in an expense ratio? - ✔✔Less than 1% What is an equity income fund? - ✔✔Invest in stocks issued by company with long history of paying dividends (provides income to shareholders) What type of mutual fund for an elderly person concerned about safety of his money or investment? - ✔✔Intermediate US bond fund What is a growth fund? - ✔✔investment in company expecting higher than average revenue and earn growth (tend to invest in large) What is an asset allocation fund? - ✔✔investment in different types of investments (stocks, bonds, fixed- income securities, money market) What are index funds? How do their performance compare to managed funds? - ✔✔- invest in the same companies included in an index
- index funds outperform managed funds 80% of the time How can an investor make money with mutual funds? - ✔✔shares in a fund are sold; the profit from the increase in value is called capital gain What is a "family of funds"? - ✔✔Group of mutual funds managed by an investment company How can you get information about various mutual funds? - ✔✔internet, mutual fund websites, and advisory services (but you have to pay for those) What mutual fund earnings are considered taxable income? - ✔✔income dividends What is the most popular method of purchasing open-end mutual funds? - ✔✔through a regular account transaction
What does the term liquidity mean? - ✔✔easily accessible (cash) How do you compute net worth? - ✔✔assets - liabilities = net worth What is a cash flow statement? - ✔✔A personal income and expenditure report What is the difference between a fixed expense and a variable expense? - ✔✔- Fixed: set costs each month
- Variable: varying costs Itemized deductions - ✔✔Expenses you can deduct from income What is open-ended credit? What is closed-ended credit? - ✔✔- Open: keep charging until maxed out (credit card)
- Closed: borrow set amount each month (mortgage) What are some examples of common tax-deferred retirement plans? - ✔✔401k, IRA, Keogh (pay taxes later) What should you do if your identity is stolen? - ✔✔Contact your credit bureau What should be your first step if you have trouble paying your bills? - ✔✔Contact you creditor Why do most financial advisers recommend avoiding service contracts? - ✔✔Higher costs, low necessity What are common financial benefits of home ownership? - ✔✔Building equity, property values increase What is earnest money? - ✔✔Putting down money to show you're in good faith
How can you increase the speed in which you build up equity in your home? - ✔✔Take out a shorter mortgage (15 instead of 30) When should you consider refinancing a mortgage? - ✔✔When interest rates are falling What is typically covered by a home insurance policy? - ✔✔Land property, personal property, etc. What type of insurance should you purchase to protect your boat and skiing equipment? - ✔✔Personal Property Floater Ideally, according to financial experts, what type of health insurance should you purchase? - ✔✔basic with "major" in the title Review the various life insurance needs. Easy, DINK, Nonworking spouse - ✔✔- Easy: gross income x 7yrs x 70%
- Dual Income No Kids: assumes spouse will work after death of spouse
- Nonworking Spouse: # yrs until youngest turns 18 x $10, What are the major differences between term insurance and whole life insurance? - ✔✔Whole has higher premium at first, but remains the same with no fluctuation What is an annuity? When should you consider purchasing annuities? - ✔✔- Annuity: financial contract from insurance company that gives you regular income
- Consider after fully financing other retirement funds Why is equity financing a popular choice for long term financing for corporations? - ✔✔You don't have to pay it back (like having stock) True or False: Because investment objectives deal with the future, it is useless to make long term goals - ✔✔false
If your main focus is to have your investments increase in value, you are most concerned with _________. - ✔✔growth If your main focus is to be able to buy or sell an investment quickly without substantially affecting the investment's value, you are most concerned with __________. - ✔✔liquidity An __________________ account is probably the most liquid investment. - ✔✔interest bearing checking and savings The process of spreading your assets among several different types of investments to lessen risk is called _______________. - ✔✔asset allocation ________ investments typically has the largest potential investment return. - ✔✔Stock _______ investments typically has the most risk. - ✔✔Stock A portfolio that is 100 percent invested in stock would be indicative of a ______________ portfolio. - ✔✔very aggessive After you purchase an investment, you should ________ it's value. - ✔✔monitor What are examples of U.S. Treasury securities? - ✔✔Treasury bills, notes, bonds, and inflation-protected securities A security issued by the U.S. Treasury that protects the investor from inflation is called a ______. - ✔✔TIPS A bond backed by the full faith, credit, and unlimited taxing power of the government that issued it is called a ______________ bond. - ✔✔general obligation
A bond that is repaid from the income generated by the project it is designed to finance is called a _________ bond. - ✔✔revenue A debt security issued by a state or local government is known as a _________ bond. - ✔✔municipal Generally, interest on corporate bonds is paid every ____ months. - ✔✔ 6 Interest paid to corporate bond holders is tax deductible for the _____________. - ✔✔corporation's taxes to federal and state government A bond that is backed only by the reputation of the issuing corporation is called a __________ bond. - ✔✔debenture What is a call feature? - ✔✔corporation wants to pay off bonds A fund to which annual or semiannual deposits are made for the purpose of redeeming a bond issue is called a _________ fund. - ✔✔sinking If your monthly expenses total $2,200, you should save at least _________ in an emergency fund before focusing completely on your investment portfolio. - ✔✔$6,600 (3 month expenses) According to Suze Orman, how much of an investment portfolio should a 30-year old have in growth investments? - ✔✔ 110 - 30(age) = $80 in growth investments Since 1926, the average annual return for stocks has been about ____ percent. - ✔✔ 10 Amanda wants to be part of the ownership for a corporation. She should invest in _____________. - ✔✔common stock A distribution of money, stock, or other property that is paid to owners of a company is called a ____________. - ✔✔dividend
Victoria wants to purchase stock at the current market price. She should use a __________ order. - ✔✔market Karli wants to purchase DEF stock for $40 or less. She should use a ________ order. - ✔✔limit Hof has owned MNOP stock for several years and has seen the stock increase in value from $20 to $35. He wants to "lock in" his gains, so he needs to place an order that will sell his stock at the next available opportunity after its market price drops to $33. He should use a ________ order. - ✔✔limit Cece purchases stock and never plans to sell them. She could be considered to be using a _____________ technique. - ✔✔dollar cost averaging Jordan owns stock that pays a dividend. She does not want the cash now; instead, she would prefer to have more shares of stock. She should use an ________________ plan. - ✔✔automatic dividend reinvestment Lawson has $100 automatically invested in a stock each month. This way, he doesn't buy high and sell low. He is using ________________ technique. - ✔✔dollar cost averaging Madison sometimes borrows money from her broker to buy her stock. She is buying _____________. - ✔✔on margin The licensed individual who buys or sells investments for his or her clients is called an _______________.
- ✔✔account executive NYSE stands for _______. - ✔✔New York Stock Exchange NYSE is an example of a ___________ exchange. - ✔✔security Book value equals ______. - ✔✔(assets - liabilities) / shares outstanding
_____________ is a profitability ratio that uses the number of outstanding shares in the calculation. - ✔✔Earnings per share A stock issued by a corporation that has a capitalization of btwn $2 and $10 billion is called __________ stock. - ✔✔mid-cap A stock that typically sells for less than $1 per share is called a _________ stock. - ✔✔penny Daniel wants to invest in a security that can be converted to a different one that provides ownership in a company. He want to invest in _______________ preferred stock. - ✔✔convertable What does it mean if a company has a 4-for-1 split? - ✔✔There are 4 times as many stocks once they split If you own stock, you may receive income from __________, _______ ______, _________ ______ ________. - ✔✔dividends, stock split, increased stock value If you invest $4,000 per year over the next 40 years for retirement, what is true? - ✔✔A high rate of return will give you the highest total dollar return. Examples of safe investments would include (2)... - ✔✔government bonds and CDs __________ _______ risk deals with the possibility that bad management, unsuccessful products, or other factors will cause the firm to be less profitable than originally anticipated. - ✔✔Business failure Nathan owns common stock in XYZWidgets.com. To reduce his business failure risk, he should ________.
- ✔✔diversify What is a growth company? - ✔✔A company with increasing sales revenue; may be expanding; with high earning potential
