Question 1

James Brewer purchased 100 shares of stock for $72 a share.James also paid $55 commission.What was the total purchase price for this transaction?

Accepted Answer

To find the total purchase price, we need to add the cost of the shares and the commission.

Cost of shares = 100 shares x $72/share = $7200

Commission = $55

Total purchase price = $7200 + $55 = $7255

Therefore, the best choice is D, $7255.00.

Question 2

Orlando Blodgett is buying stock in the Getaway Caribbean Cruise Company today.He had thought about buying the stock yesterday and if he had,he would have received this quarter's dividend.However,since he waited until today,he will not receive that dividend payment.Given this information,which one of the following dates applies to this stock today?

Accepted Answer

The ex-dividend date is the date on or after which a stock trades without its dividend. In this scenario, Orlando Blodgett will not be receiving the dividend as he bought the stock today, which means today is the ex-dividend date.

Question 3

Arnell Johnson bought 200 shares of Black Petroleum Company for $95 per share and paid a commission of $60.He sold the stock five years later for $120 per share and paid $75 commission.While he held the stock,it paid a dividend of $5.50 per share.What was Arnell's total dollar return on this stock?

Accepted Answer

First, let's calculate the total cost of buying the stock:

Cost of buying the stock = Number of shares * Price per share + Commission
Cost of buying the stock = 200 * $95 + $60 = $19,060

Next, let's calculate the total proceeds from selling the stock:

Proceeds from selling the stock = Number of shares * Price per share - Commission
Proceeds from selling the stock = 200 * $120 - $75 = $23,925

Now, let's calculate the total return from the dividend:

Total dividend received = Number of shares * Dividend per share * Number of years held
Total dividend received = 200 * $5.50 * 5 = $5,500

Finally, let's calculate the total dollar return:

Total dollar return = Proceeds from selling the stock + Total dividend received - Cost of buying the stock
Total dollar return = $23,925 + $5,500 - $19,060 = $10,365

Therefore, the answer is E) $5,965, which is the closest to the total dollar return.

Question 4

Equity financing is a popular choice to provide long-term financing for a corporation because:

Accepted Answer

Equity financing does not have to be repaid, making it a popular choice for corporations looking for long-term financing options.

Question 5

To raise capital,many corporate financial managers prefer selling common stock because:

Accepted Answer

Selling common stock provides the company with an injection of funds from investors, but unlike debt financing, the company is not required to pay this money back. This can be advantageous for companies that have limited cash reserves or are looking to fund long-term investments.

Question 6

Dividends remain with the stock until:

Accepted Answer

Dividends remain with the stock until two business days before the date of record. This means that if an investor purchases a stock before this deadline, they will be entitled to receive the dividend payment. After this deadline, the dividend is no longer attached to the stock and will not be paid to the investor.

Question 7

Patsy Banz owns 220 shares of a stock.For the last calendar quarter,the company paid a dividend of $0.47 a share.What is the total amount she received in her dividend check for this quarter?

Accepted Answer

220 F1F1F1S1F1F1F10$0.47 = $103.40.

Question 8

Beverly Frickel purchased 100 shares of Gleason Systems stock for $42.50 per share.Her commission for this purchase was $35.She sold the stock two years later for $55 per share and a commission of $50.While she held the stock it paid a dividend of $1.50 per share.What was Beverly's total dollar return on this stock?

Accepted Answer

Beverly's initial cost for purchasing 100 shares of Gleason Systems stock was:
100 * $42.50 + $35 (commission) = $4,285
Beverly's cost for selling 100 shares of Gleason Systems stock two years later was:
100 * $55 - $50 (commission) = $5,450
Beverly earned a total of $1.50 per share in dividends for each of the 100 shares she owns for two years. So, her total dividend income was:
100 * $1.50 * 2 = $300
The total dollar return is then:
$5,450 - $4,285 + $300 = $1,465
Therefore, the best choice is D, which is the closest possible value to $1,465.

Question 9

The federal government requires corporations selling new issues of securities to disclose information about itself in a prospectus.Which of the following must be disclosed?

Accepted Answer

All of these items must be disclosed in a prospectus according to the federal government requirements.

Question 10

Which one of the following statements is true?

Accepted Answer

According to corporate law, major changes to corporate policies must be approved by the stockholders through voting. However, corporations are not required to report all activities to their stockholders each month, and stockholders do not need to approve every sale of goods and services. While there are usually at least two stockholder meetings each year, this is not a legal requirement. Stockholders may choose to vote by proxy, but they also have the option to vote in person. Therefore, the only true statement is that stockholders must approve major changes to corporate policies.

Question 11

If the board of directors approves a two-for-one stock split,an investor who owns 150 shares before the split will own ____________ shares after the split.

Accepted Answer

(150 F1F1F1S1F1F1F102) = $300.

Question 12

ABC Corporation holds its annual meeting in April.Maxine Star,who owns stock in the company,cannot attend the meeting.She can vote by:

Accepted Answer

Maxine Star can vote by proxy, which means she can authorize someone else to vote on her behalf at the annual meeting. This is a common and convenient way for shareholders who cannot attend the meeting in person to still have a say in the company's decisions. The other choices listed (voluntary certificate, preemptive right, cumulative certificate, and participatory certificate) do not relate to the voting process in this scenario.

Question 13

Common stock dividends are paid out of profits and:

Accepted Answer

Common stock dividends are not guaranteed and are subject to approval by the firm's board of directors. The frequency and amount of dividends are also not fixed and can vary depending on the profitability of the company and the discretion of the board. Choices B, C, D, and E are incorrect because they do not accurately reflect the nature of common stock dividends.

Question 14

James Green just bought a security which he expects will provide him with a quarterly cash payment,although that payment is not guaranteed.In fact,he expects the amount of the payment to vary over time.What type of payment is he expecting to receive?

Accepted Answer

James Green is expecting to receive a payment that is not guaranteed and varies over time, which is consistent with a dividend payment from a stock. Option premium is a payment made for the option to buy or sell a security, interest is a fixed payment for borrowed money, capital gain is a profit from the sale of an investment, and rebate is a refund of a portion of a payment made. None of these options fit the description of what James Green is expecting to receive.

Question 15

Gaby Williams is thinking about buying some stock but wants some protection should the issuer miss paying a dividend payment.Which one of the following features would help provide this protection?

Accepted Answer

The cumulative feature means that if a company misses paying a dividend payment, the missed payments accumulate and must be paid before any future dividend payments can be made. This provides some protection for investors like Gaby who want to ensure a steady stream of income from their investments. The other features listed do not provide this type of protection.

Question 16

Sean Rouse owns shares of common stock in Stowaway Transportation Company.The company is getting ready to pay a dividend.Sean knows he must be registered on the corporation's books on the date in order to receive the dividend.

Accepted Answer

The record date is the date on which a company reviews its books and identifies shareholders who are eligible to receive the dividend payment. Shareholders must be registered on the corporation's books on or before the record date in order to receive the dividend. The ex-dividend date is the date on which the shares begin trading without the upcoming dividend, the payment date is the date on which the dividend is actually paid out, the declaration date is the date on which the board of directors declares the dividend, and the stockholders' meeting may include discussions of dividends but is not directly related to the dividend payment process.

Question 17

Valerie Kilmer owns stock in the Williams Widget Company.She was just advised that in the near future she will be receiving two shares for every one share she owns today.What has the company declared that will cause this change to her shares?

Accepted Answer

A stock split is when a company increases the number of outstanding shares by issuing more shares to current shareholders. The result is that each shareholder ends up with more shares, but the overall value of their holdings remains the same. In this case, Valerie Kilmer is receiving two shares for every one share she currently owns, indicating that Williams Widget Company has declared a stock split.

Question 18

Jo Bower purchased 150 shares of stock for $24 a share and sold it for $30 a share.The commissions required to buy and sell her stock totaled $120.Assuming she received no dividends during the time she owned the stock,what is her total return on this investment?

Accepted Answer

Jo bought 150 shares for $24 a share so her initial investment was 150 x $24 = $3,600.
She then sold those 150 shares for $30 a share which was a total of 150 x $30 = $4,500.
The commissions for buying and selling were $120.
So her total cost was $3,600 + $120 = $3,720.
Her total earnings were $4,500 - $120 = $4,380.
Therefore her total return on investment was $4,380 - $3,720 = $660.
However, we need to express this as a percentage return on investment. 
Percentage return on investment = (total return / initial investment) x 100%
= [$660 / ($3,600)] x 100%
= 18.33%
So her total return on investment was 18.33% or $780. 
Therefore, the answer is B.

Question 19

Which one of the following statements is true?

Accepted Answer

Intelligent investors should be concerned about future after-tax corporate profits when investing, as this will affect the overall return on their investment. The other statements are false: A) Board members are typically elected by the company's shareholders, not appointed by the CEO. B) Stockholders do pay taxes on stock dividends. D) If a cash dividend is declared, each shareholder receives the same amount per share, regardless of how long they have owned the stock. E) Corporate dividends can be paid in various forms besides cash, such as stock or property.

Question 20

Lindsey Holt owns stock in the Galloway Gems Company.She knows she will receive a $1.50 dividend each quarter.Given this,you know for sure that she purchased which type of stock?

Accepted Answer

Preferred stock typically pays a fixed dividend rate on a regular basis, usually quarterly. Common stock, on the other hand, may or may not pay dividends and their payment is not guaranteed. Therefore, Lindsey Holt likely purchased preferred stock.

Quiz 14: Investing in Stocks

James Brewer purchased 100 shares of stock for $72 a share.James also paid $55 commission.What was the total purchase price for this transaction?

Arnell Johnson bought 200 shares of Black Petroleum Company for $95 per share and paid a commission of $60.He sold the stock five years later for $120 per share and paid $75 commission.While he held the stock,it paid a dividend of $5.50 per share.What was Arnell's total dollar return on this stock?

Equity financing is a popular choice to provide long-term financing for a corporation because:

To raise capital,many corporate financial managers prefer selling common stock because:

Dividends remain with the stock until:

Patsy Banz owns 220 shares of a stock.For the last calendar quarter,the company paid a dividend of $0.47 a share.What is the total amount she received in her dividend check for this quarter?

The federal government requires corporations selling new issues of securities to disclose information about itself in a prospectus.Which of the following must be disclosed?

Which one of the following statements is true?

If the board of directors approves a two-for-one stock split,an investor who owns 150 shares before the split will own ____________ shares after the split.

ABC Corporation holds its annual meeting in April.Maxine Star,who owns stock in the company,cannot attend the meeting.She can vote by:

Common stock dividends are paid out of profits and:

James Green just bought a security which he expects will provide him with a quarterly cash payment,although that payment is not guaranteed.In fact,he expects the amount of the payment to vary over time.What type of payment is he expecting to receive?

Gaby Williams is thinking about buying some stock but wants some protection should the issuer miss paying a dividend payment.Which one of the following features would help provide this protection?

Sean Rouse owns shares of common stock in Stowaway Transportation Company.The company is getting ready to pay a dividend.Sean knows he must be registered on the corporation's books on the date in order to receive the dividend.

Valerie Kilmer owns stock in the Williams Widget Company.She was just advised that in the near future she will be receiving two shares for every one share she owns today.What has the company declared that will cause this change to her shares?

Jo Bower purchased 150 shares of stock for $24 a share and sold it for $30 a share.The commissions required to buy and sell her stock totaled $120.Assuming she received no dividends during the time she owned the stock,what is her total return on this investment?

Which one of the following statements is true?

Lindsey Holt owns stock in the Galloway Gems Company.She knows she will receive a $1.50 dividend each quarter.Given this,you know for sure that she purchased which type of stock?