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Exam 19: Using Securities Markets for Financing and Investing Opportunities

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Question 141

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Junk bonds are offered at higher interest rates than government bonds or corporate bonds with good ratings.

A) True
B) False

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Question 142

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Preferred stockholders have voting rights privileges not shared by common stockholders.

A) True
B) False

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Question 143

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Bonds,like stocks,trade daily on major security exchanges.

Most investment advisors put mutual funds high on the list of recommended investments for experienced investors,but consider them too risky for beginning investors.

Having just returned from serving with the U.S.Marines in Afghanistan,Alejandro has managed to save most of his earnings.He has enrolled in the local community college and he is living in his parent's lower level while he assimilates back into U.S.life.As his business major friend,he has come to you for advice.He would like to see his $40,000 savings grow,yet he knows that he will need it in about five years when he and his girlfriend are out of school and make plans to get married.He also worries that his car may break down and he will need to invest in another used car.Which of the following would you suggest for Alejandro?

A stock split immediately increases the value of an investor's holdings.

Before a corporation's stock can be sold on a major stock exchange,the firm must provide detailed financial information to the Securities and Exchange Commission.

A no-load mutual fund charges no commission fees to buy or sell its shares.

Corporate management decisions are influenced by the desire to keep stockholders happy.

Which of the following offers low risk,guaranteed income,backed by the full faith and credit of the federal government?

Although companies that issue bonds are required to pay interest,companies issuing stock are not required to pay dividends.

If a company announces a stock split,the investor may receive two or more shares of the company stock,for every one share that he/she holds.

Insider trading involves the sale of stock to employees at discounted prices.

A ________ certificate provides evidence of ownership in a specific corporation.

Ina Vestor inherited $75,000 when her grandfather died and decided to invest it in the Hottie Potatee company.As a student of business,you inform her that she can call a stockbroker who will help her purchase stock on the secondary market.

Insider trading laws prevent employees from buying or selling the securities of their employers.

Portland Power and Light recently issued bonds that offered no collateral except the reputation and established name of the Portland Power and Light Company.These represent ________ bonds.

Which of the following measures how quickly an investor has access to his/her invested funds,if they are needed?

Firms are at a disadvantage when issuing bonds because the interest rate that they must pay to bondholders is not tax deductible.

Discuss the role of investment bankers in the securities markets.