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Questions and Answers
The primary way investors in stock make money is through:
The primary way investors in stock make money is through:
- I. Capital Gains. II. Dividends.
- III only.
- I and III only.
- I only.
- I and II only. (correct)
If you buy shares of a stock at $94.10 per share, what is your dividend yield if the dividend is $3.35 per share?
If you buy shares of a stock at $94.10 per share, what is your dividend yield if the dividend is $3.35 per share?
3.56%
To have equity in a company means that:
To have equity in a company means that:
- III. You have an ownership interest in the firm.
- II. You receive dividends when distributed by the firm.
- I only.
- I. You have lent money to the firm.
- II and III only. (correct)
All of the following are true of market capitalization classifications, except?
All of the following are true of market capitalization classifications, except?
What is Concord Corporation worth to you if the stock price is $33.57, dividends paid are $1.31, expected growth is 8%, and your required return is 9%?
What is Concord Corporation worth to you if the stock price is $33.57, dividends paid are $1.31, expected growth is 8%, and your required return is 9%?
Which of the following statements is true about investment strategies?
Which of the following statements is true about investment strategies?
Jason's current effective interest rate earned on the bond is _______________ and when the bond matures he will receive _________________:
Jason's current effective interest rate earned on the bond is _______________ and when the bond matures he will receive _________________:
What is the fair market value of a bond with a par value of $1000, coupon payment of $30, and 9-year maturity if current interest rates are 3%?
What is the fair market value of a bond with a par value of $1000, coupon payment of $30, and 9-year maturity if current interest rates are 3%?
Mutual funds can be broadly classified into two categories:
Mutual funds can be broadly classified into two categories:
By how many percentage points did passively managed large company mutual funds outperform actively managed mutual funds over a recent 10-year period?
By how many percentage points did passively managed large company mutual funds outperform actively managed mutual funds over a recent 10-year period?
If all of the following mutual funds are designed to passively mimic the S&P 500 stock index, which mutual fund would be the best choice?
If all of the following mutual funds are designed to passively mimic the S&P 500 stock index, which mutual fund would be the best choice?
Which of the following investment features is more common among mutual funds and less common among ETFs?
Which of the following investment features is more common among mutual funds and less common among ETFs?
Given Ramos's attitude as an aggressive investor, what type of investment should he select if his goal is to beat the market?
Given Ramos's attitude as an aggressive investor, what type of investment should he select if his goal is to beat the market?
The largest ETFs are:
The largest ETFs are:
SIPC insurance covers:
SIPC insurance covers:
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Study Notes
Investment Basics
- Investors earn money from stocks primarily through capital gains and dividends.
Dividends and Yield
- Bramble Corp. net profit is $9.60 per share with a $3.35 dividend. Buying at $94.10 results in a dividend yield of 3.56%.
Equity Ownership
- Having equity in a company signifies ownership interest and the right to receive dividends when distributed.
Market Capitalization
- Market caps classifications:
- Small cap: less than $2 billion
- Large cap: $8 billion and above
- Mid cap: between $4 billion and $8 billion
Stock Valuation
- Concord Corporation is valued at $141.48 with a stock price of $33.57, a dividend of $1.31, and expected growth at 8% per year; required return is 9%.
Investment Strategy
- Successful investment strategies often combine basic analysis with intuition rather than relying solely on luck or intuition.
Bonds and Interest Rates
- Jason's bond purchase for $1,080 has an effective interest rate of 7.41% and will return $1,000 at maturity.
Bond Valuation
- A bond with a $1,000 par value, $30 coupon payment, and 9-year maturity is valued at $1,000 when current interest rates are at 3%.
Mutual Fund Categories
- Mutual funds fall into two main categories: passive management and active management.
Performance of Mutual Funds
- On average, passively managed large company mutual funds outperformed actively managed ones by 0.94 percentage points over a recent decade.
Selecting Mutual Funds
- Among mutual funds mimicking the S&P 500, Mutual Fund C, with the lowest expense ratio of 0.07%, is the best choice.
Investment Features
- Professional active management is more common in mutual funds, while low expenses and diversification are prevalent in both mutual funds and ETFs.
Investment Choices
- An aggressive investor like Ramos seeking to outperform the market should consider actively managed mutual funds.
Dominant ETFs
- The largest ETFs available are index-based ETFs, as they typically have broader market exposure.
SIPC Insurance
- SIPC insurance protects cash in customer accounts up to $250,000 and securities in accounts up to $500,000, ensuring investor's assets are safeguarded.
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