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Question 1. Question : (TCO 1) (TCO 1) When ranking security returns from highest return to lowest return, the data shows that the annualized returns are as follows:

Large stocks, small stocks, long-term corporate bonds, long-term government bonds, and treasury bills.

Treasury bills, long-term government bonds, long-term corporate bonds, large stocks, small stocks

Large stocks, small stocks, long-term government bonds, long-term corporate bonds, and treasury bills.

Small stocks, large stocks, long-term corporate bonds, long-term government bonds, and treasury bills.

Question 2. Question : (TCO 1) A direct equity claim arises through investment in __.

bonds and other debt instruments

common stocks, warrants, and options

preferred stock and commodity futures

mutual funds


Question 3. Question : (TCO 1) What factors must be considered in choosing between investment alternatives?

Risk and liquidity

Interest or dividends versus capital gains

Timeframe for managing funds and evaluating performance and tax effects

All of the above

Question 4. Question : (TCO 1) Which of the following is NOT a characteristic of an organized exchange?

An organized exchange functions as a primary market.

Securities are bought and sold in an auction market by brokers acting as agents for buyers and sellers in a central location.

An organized exchange may be either national or regional.

An organized exchange has a central location where all trading takes place.

Question 5. Question : (TCO 1) Secondary markets provide _____.




All of the above

Question 6. Question : (TCO 1) The process of selling a new issue of securities so that the price is guaranteed to the selling firm is referred to as _____.


best efforts

direct by issuer

shelf registration


Question 7. Question : (TCO 1) The first exchange to become a publicly traded company was the _____.

New York Stock Exchange

Chicago Board of Trade

NASDAQ Stock Market

Chicago Mercantile Exchange


Question 8. Question : (TCO 1) The _____ is the tax rate that applies to each new dollar of income.

average tax rate

short-term capital gains tax rate

long-term capital gains tax rate

marginal tax rate


Question 9. Question : (TCO 1) The index which gives equal weight to every company included, and is therefore not dominated by any single company, is the _____.

Dow Jones Composite Average

Standard & Poor’s 400 Index

Value Line Average

American Stock Exchange Index


Question 10. Question : (TCO 1) The success of a short investment position depends on _____.

a level stock price

a declining stock market

an increasing stock price

declining interest rates


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