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Exam 19: Using Securities Markets for Financing and Investing Opportunities

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Question 191

Multiple Choice

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Investors trading online:

A) receive more advice than offered by traditional stockbrokers.
B) buy and sell securities without using a brokerage firm.
C) generally do their own research and make their own investment decisions.
D) generally were insured against the market downturn of the early and late 2000s.

E) All of the above
F) A) and B)

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Question 192

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Issuing new common stock usually expands ownership,giving all owners the right to vote for the firm's board of directors.

A) True
B) False

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Question 193

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Explain the differences between preferred stock and common stock.

Demonte owns 600 shares in the Kentucky Bluegrass Corporation and he just received notice that the firm declared a three-for-one stock split.After the split,Demonte will own _______ shares in the firm.

Corporations and brokers prefer to have stock purchases conducted in round lots of 100 shares.

Another name for the fixed rate of interest attached to a bond is the:

Dividends represent a portion of a firm's profits that are distributed to bondholders first then stockholders.

A sinking fund is a reserve account where the firm will periodically deposit funds in anticipation of repayment of a bond issue on the maturity date.

Wyoming Mining Corporation makes regular monetary deposits that will accumulate and provide for an orderly retirement of their bonds when they come due in 2015.Wyoming Mining appears to be utilizing a:

Some analysts refer to ___________ stocks as issues that sell for less than $2 others say: for less than $5) .

Monica met with a financial planner last week and he urged her to consider only government bonds and mutual funds in her portfolio.Since she is in her 20's,Monica believes she can tolerate a little more risk.You suggest that it is a better plan to follow the advice of the financial planner,rather than research her choices on her own.

Corporations sell a new issuance of securities in the Primary Market.

If an individual investor places a limit order at $38 and the stock currently sells for $41 per share,the broker will buy the stock for the investor.

An income stock offers investors a relatively high dividend yield on their investment.

The interest paid to bondholders represents the principal of the bond.

When investment bankers underwrite an issue,they buy at a discounted price,the entire stock issue of a firm and then sell the stock,at full price,to private investors.

Similar to bond investments,preferred shares can be _________,meaning the firm may buy them back.

With everything else constant,investors prefer a bond issued with a sinking fund compared to a bond without a sinking fund.

Trading curbs motivate traders to utilize their computerized programs to reduce market volatility.

Online investors expect more expert advice than investors using traditional brokerage firms.