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47) Day traders always trade
A) in the primary market.
B) in either the primary or secondary markets.
C) with an objective of buying and selling within two hours.
D) using margin funding.
Answer: B
Diff: 1
Question Status: New
48) Which of the following is an accurate statement?
A) Owning common stock is less risky than owning real estate.
B) In times of rising inflation, it is safer to own bonds than common stock.
C) Owning common stock provides the investor with a share of the firm's earnings and potential
dividends.
D) Owning preferred stock is more risky than owning common stock since the investor has
voting rights with common stock and it stands before preferred stock in the event of bankruptcy.
Answer: C
Diff: 2
Question Status: New
49) Describe common stock.
Answer: Common stock has no guaranteed value and may not even pay dividends. If dividends
are paid, the amount can change from one distribution to the next. Common stockholders have
the lowest priority of claims to the assets and profits of a corporation. The one thing common
stockholders have are voting rights on certain key issues. Common stockholders also get to share
in the eventual profits of a corporation. Since these profits may increase over time, the value of
the common stock can increase substantially.
Diff: 2
Question Status: Revised
50) You have been given an overview of stocks, bonds, and mutual funds. Give one advantage
and one disadvantage of investing in each of these.
Answer: Stocks—advantage: You may get a dividend and also capital appreciation if you pick a
good stock. Disadvantage of stock is that its price may decline. If you have all of your
investment in one company you would lose everything.
Bonds—advantage: You have a predictable return that is lower risk with a highly rated bond.
Disadvantage is that the bond price may actually drop before you want to sell it.
Mutual funds—advantage is that you have a diversified investment with professional
management. Disadvantage is that you have no personal control of your investment.
Diff: 2
Question Status: Revised