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Exam 19: Using Securities Markets for Financing and Investing Opportunities

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Question 1

True/False

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In a secondary market sale of stock,the proceeds go to the investor selling the stock,not to the corporation.

A) True
B) False

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Question 2

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Issuing bonds to obtain long-term funds legally compels a firm to pay regular ________ payments and repay the ________ at the maturity date.

A) dividend;par value
B) interest;bond premium
C) dividend;maturity value
D) interest;principal

E) B) and D)
F) A) and B)

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Question 3

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The secondary market is where investors both individuals and companies)go to find someone who is interested in selling their investments to them.

Maplewood Toy Company hopes to raise long-term capital by promising in writing to repay the principal provided by potential creditors in ten years.Additionally,the certificate issued by Maplewood promises to pay 5% interest annually for the ten year life of the security.Maplewood intends to issue:

The higher the risk associated with a bond issue,the ________ the interest rate the organization must offer investors.

Growth stocks are the stocks of corporations whose earnings are expected to grow faster than the overall economy.

The dollar amount assigned to shares of stock by the corporation's charter represents the stock's:

Andrew invested in a new issue corporate bond on the primary market for $1,000,with a coupon rate of 5%,and a maturity date of 2020.The bond was held in his brokerage account electronically,so he did not think about it on a daily basis.On 2012,he thought about selling the bond on the secondary market to help pay for his school tuition.At that time,interest rates had climbed to 6.5%.This was great news for Andrew because now he could sell his bond for more than the principal amount he would receive in 2020.

Stock certificates represent evidence of ownership in an organization.A stock certificate contains which of the following?

__________ are collections of stocks that are traded on exchanges but are traded more like individual stocks than like mutual funds.

Examples of institutional investors are pension funds,mutual funds,and insurance companies.

The over-the-counter market utilizes an electronic securities trading system.

The Dow Jones Industrial Average represents the average price of ________ industrial stocks.

Which of these represents a special feature included with some bond issues?

Bonds sold at a ________,sell for less than face value.

In the language of bonds,the terms "principal" and "face value" are synonymous.

Stocks represent shares of ownership in a company.

An investor who purchases stock in a company becomes an) :

Bonds offering a higher interest rate than other bonds of similar risk,will likely sell at a:

Greg purchased 2000 shares of common stock of the Rite Track Corporation last year.He learned several months later that the stock does not pay a dividend.Greg should proceed to: