Personal Financial Planning 13th Edition By Lawrence J. Gitman – Test Bank

Chapter 11—Investment Planning

TRUE/FALSE

1. Investing is considered a short-term activity that involves the buying and selling of securities.

ANS: F PTS: 1 DIF: Easy OBJ: LO: 11-1
NAT: BUSPROG: Analytic skills STA: DISC: Investments
KEY: Bloom’s: Comprehension

2. Investing and speculating are two entirely different activities.

ANS: T PTS: 1 DIF: Easy OBJ: LO: 11-1
NAT: BUSPROG: Analytic skills STA: DISC: Investments
KEY: Bloom’s: Comprehension

3. Mutual funds provide professional management and diversification that individual investors – especially those with limited resources – can rarely obtain on their own.

ANS: T PTS: 1 DIF: Easy OBJ: LO: 11-1
NAT: BUSPROG: Analytic skills STA: DISC: Investments
KEY: Bloom’s: Comprehension

4. A systematic investment routine involves investing similar sums in regular intervals.

ANS: T PTS: 1 DIF: Moderate OBJ: LO: 11-1
NAT: BUSPROG: Analytic skills STA: DISC: Investments
KEY: Bloom’s: Knowledge

5. When completed, an investment plan is a way of translating an abstract investment target into a specific investment program.

ANS: T PTS: 1 DIF: Easy OBJ: LO: 11-1
NAT: BUSPROG: Analytic skills STA: DISC: Investments
KEY: Bloom’s: Comprehension

6. The term “investment’ refers to money placed in some medium where value and level of return are totally unpredictable.

ANS: F PTS: 1 DIF: Easy OBJ: LO: 11-1
NAT: BUSPROG: Analytic skills STA: DISC: Investments
KEY: Bloom’s: Comprehension

7. Two prerequisites to investing are above average risk and clear understanding of market direction.

ANS: F PTS: 1 DIF: Moderate OBJ: LO: 11-1
NAT: BUSPROG: Analytic skills STA: DISC: Investments
KEY: Bloom’s: Knowledge

8. A statement specifying how investment capital will be invested in order to reach targeted goals is called a marketing plan.

ANS: F PTS: 1 DIF: Easy OBJ: LO: 11-1
NAT: BUSPROG: Analytic skills STA: DISC: Investments
KEY: Bloom’s: Knowledge

9. Your goals tend to set the tone for your investment program, and they play a major role in determining how conservative or aggressive you’re likely to be in making investment decisions.

ANS: T PTS: 1 DIF: Easy OBJ: LO: 11-1
NAT: BUSPROG: Analytic skills STA: DISC: Investments
KEY: Bloom’s: Comprehension

10. The major reason most people invest is to shelter current income from taxes.

ANS: F PTS: 1 DIF: Easy OBJ: LO: 11-1
NAT: BUSPROG: Analytic skills STA: DISC: Investments
KEY: Bloom’s: Knowledge

11. Owning common stock represents a debt investment.

ANS: F PTS: 1 DIF: Moderate OBJ: LO: 11-1
NAT: BUSPROG: Analytic skills STA: DISC: Investments
KEY: Bloom’s: Comprehension