1. All of the following statements concerning short sales are true, EXCEPT:
    1. Short selling must occur in a margin account.
    2. The short sale may be executed on a down tick.
    3. The potential loss on a short sale is unlimited.
    4. The maximum possible gain would occur if the share price fell to zero less any commissions paid on the transaction.
  2. Which of the following investments would be most suitable for a tax-advantaged account?
    1. Municipal bonds.
    2. Zero coupon bonds.
    3. Investment grade corporate bonds.
    4. Stocks listed in the pink sheets.
  3. The features of a dividend reinvestment plan (DRIP) that rebound to the benefit of the investor include all of the following, EXCEPT:
    1. Cost effective investing.
    2. Professional management.
    3. Ease of implementation.
    4. Opportunity to diversify.
  4. Advantages of leverage include which of the following:
    1. Magnification of potential loss.
    2. Increased gain with a lower outlay.
    3. Borrowing costs.
    4. Low risk strategy.
  5. One may best characterize passive investing as follows :
    1. It is a cost efficient means of adding alpha.
    2. It is inexpensive.
    3. Professional management benefits the investor.
    4. It can be easily replicated.


Review Questions 6 - 11

Related Articles
  1. Investing

    Why Short Sales Are Not For Sissies

    Short selling has a number of risks that make it highly unsuitable for the novice investor.
  2. Investing

    The Basics Of Short Selling

    Short sellers enable the markets to function smoothly by providing liquidity, and also serve as a restraining influence on investors’ over-exuberance.
  3. Investing

    The Perks Of Dividend Reinvestment Plans

    These plans offer shareholders a way to directly invest in some of the top companies without the commissions.
  4. Investing

    5 Reasons to Invest in Municipal Bonds When the Fed Hikes Rates

    Discover five reasons why investing in municipal bonds after the Fed hikes interest rates, and not before, can be a great way to boost investment income.
  5. Investing

    How To Short The U.S. Bond Market

    The U.S. bond market has enjoyed a strong bull run over the past few years as the Federal Reserve has lowered interest rates to historic low levels.
  6. Investing

    Top 4 Strategies For Managing A Bond Portfolio

    Find out how these strategies work and how you can put them to work for you.
Frequently Asked Questions
  1. What is the difference between a capital expenditure and a revenue expenditure?

    Capital expenditures represent major investments of capital that a company makes to expand its business and generate additional ...
  2. What is the difference between revenue and income?

    Revenue is simply the total amount of cash generated by the sale of products or services associated with the company's primary ...
  3. How can my stock's price change after hours, and what effect does this have on investors? Can I sell the stock at the after-hours price?

    When the regular market opens for the next day's trading, stocks may not necessarily open at the same price at which it traded ...
  4. What's the difference between a 401(k) and a Roth IRA?

    A 401(k) and a Roth IRA differ primarily on tax treatment, investment options, employer involvement, and limitations on contributions ...
Trading Center