Chapter 3 Investment Information and Securities Transactions

Question 1

Descriptive Information

Answer 1

Presents factual data on the past behavior of the economy, the market, the industry the company, or a given investment.

Question 2

Analytical Information

Answer 2

presents projections and recommendations about potential investments based on available current data.

Question 3

Fair Disclosure Rule

Answer 3

a rule requiring senior executives to disclose material information such as earnings forecasts and news of mergers and new products simultaneously to investment professionals and the public via press releases or SEC filings.

Question 4

Stockholder’s (Annual) Report

Answer 4

published yearly by publicly held corporations containing wide range of information, including financial statements, along with summarized statements for several prior years.

Question 5

Standard and Poor’s Corporations

Answer 5

offers a large number of different financial reports and services.

Question 6

The Value Line Investment Survey

Answer 6

one of the most popular subscription services used by individual investors.

Question 7

Quotations

Answer 7

include current price data and statistics on recent price behavior.

Question 8

Financial Portals

Answer 8

are supersites that bring together a wide range of investing features, such as real time quotes, stock and mutual fund screens, portfolio trackers, news, research, and transaction capabilties, along with other personal finance features.

Question 9

Averages

Answer 9

Reflect the arithmetic average price behavior of a representative group of stocks at a given point in time.

Question 10

Indexes

Answer 10

measure the current price behavior of a representative group of stocks in relation to a base value set at an earlier point in time.

Question 11

Dow Jones Industrial Average

Answer 11

made up of 30 stocks selected for total market value and broad public ownership.

Question 12

Standard and Poor’s Indexes

Answer 12

calculated each business day by dividing the sum of the market values of all stocks included in the index market value of the stocks in the base period and then multiplying the resulting quotient by the base value for the respective S&P indexes.

Question 13

Value Line Composite Index

Answer 13

includes the about 1700 stocks in the value line investment survey that are traded on the NYSE, NYSE Amex, and OTC markets.

Question 14

Bond Yield

Answer 14

the return an investor would receive on a bond if it were purchased and held to maturity.

Question 15

Dow Jones Corporate Bond Index

Answer 15

include 96 bonds, 32 industrial, 32 financial, and 32 utility/ telecom bonds.

Question 16

Stockbrokers

Answer 16

account executives, investment executives, and financial consultants- act as intermediaries between buyers and sellers of securities.

Question 17

Full Service Broker

Answer 17

offers investors a full array of brokerage services: providing investment advice and information, holding securities in street name, offering online brokerage services, and extending margin loss.

Question 18

Premium Discount Brokers

Answer 18

focus primarily on making transactions for customers and charge low commissions and provide limited free research information and investment advice.

Question 19

Basic Discount Brokers

Answer 19

online brokers or electronic brokers, are typically deep-discount brokers through which investors can execute trades electronically online vis a commercial service, on the internet, or by phone.

Question 20

Churning

Answer 20

causing excessive trading of their clients’ accounts to increase commissions

Question 21

Custodial Account

Answer 21

parent or guardian must be part of all transactions.

Question 22

Cash Account

Answer 22

the customer can make only cash transactions.

Question 23

Margin Account

Answer 23

an account in which the brokerage firm extends borrowing privileges to a creditworthy customer.

Question 24

Wrap Account

Answer 24

allows brokerage customers with large portfolios to shift stock selection decisions conveniently to a professional money manager, either in house or independent,

Question 25

Round Lost

Answer 25

a 100 share unit.

Question 26

Market Order

Answer 26

an order to buy or sell stock at the best price available at the time the investor places the order

Question 27

Limit Order

Answer 27

an order to buy at or below a specified price.

Question 28

Stop Order

Answer 28

broker tells the market maker to sell a stock when its market price reaches or drops below a specified level.

Question 29

Day Traders

Answer 29

buy and sell stocks quickly throughout the day, focused on making quick profits.

Question 30

Mediation

Answer 30

an informal, voluntary approach in which you and the broker agree to a mediator, who facilitates negotiations between the two of you to resolve the case.

Question 31

Street Name

Answer 31

Brokerage house issues the securities in its own name and holds them in trust for the client.

Question 32

Form 10-K

Answer 32

a statement that firms with securities listed on a securities exchange or traded in the OTC market must file annually with the SEC.