Question 1

The owner of a convertible bond can exchange the bond for a specified number of shares of common stock in the same corporation.

Accepted Answer

A) True 
 B)False

Question 2

A stock exchange provides a marketplace where the public can directly buy and sell securities without the help of intermediaries.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is not an odd lot of stock?

Accepted Answer

A)  10 shares
B)  20 shares
C)  3000 shares
D)  78 sharesE) None of the above
F) B) and C)

Question 4

A mutual fund pools investors' money and then buys stocks and bonds in many companies in accordance with the purpose of the fund.

Accepted Answer

A) True 
 B)False

Question 5

As market interest rates increase,the selling price for existing bonds also increases.

Accepted Answer

A) True 
 B)False

Question 6

As your elderly Uncle Bill approaches retirement,he asks for your advice for a safe place to invest several thousand dollars.He wants to receive some kind of payment each year for investing his money without a great deal of risk.You explain:

Accepted Answer

A)  Yankee bonds are certain not to default.
B)  common stock always pays quarterly dividends.
C)  junk bonds do not pay annual interest.
D)  treasury and top-grade corporate bonds pay interest two times each year.E) A) and B)
F) C) and D)

Question 7

The market price of a share of common stock depends heavily on:

Accepted Answer

A)  the number of stocks traded on the New York Stock Exchange.
B)  the default rate on U.S.government bonds.
C)  the overall performance of the company.
D)  the relative value of the U.S.dollar compared to the euro.E) A) and D)
F) A) and C)

Question 8

By issuing bonds with a ________,the corporation retains the right to pay off the bond prior to the maturity date.

Accepted Answer

A)  redemption feature
B)  discount clause
C)  retirement privilege
D)  call provisionE) A) and B)
F) A) and C)

Question 9

Diversification means:

Accepted Answer

A)  allocating all your investment funds into one type of investment.
B)  buying investments on margin.
C)  being knowledgeable about the various types of investment opportunities.
D)  allocating your investment funds to several types of investments.E) A) and B)
F) A) and C)

Question 10

The Dow Jones Industrial Average reflects the average of the eleven largest corporations traded on the New York Stock Exchange as originally selected by Charles Dow.

Accepted Answer

A) True 
 B)False

Question 11

An) ________ refers to the first public offering of a corporation's stock.

Accepted Answer

A)  primary market offer PMO) 
B)  initial securities proposal ISP) 
C)  initial public offering IPO) 
D)  primary public sale PPS) E) B) and D)
F) A) and D)

Question 12

Buying several different investment alternatives to spread the risk helps an investor achieve:

Accepted Answer

A)  lower rates of return.
B)  lower commission fees.
C)  isolation.
D)  diversification.E) None of the above
F) All of the above

Question 13

Applying what you have learned about investments introduced to you in Chapter 19,put the following investments in order from riskiest to least risky.Which of following lists begin with the least risky investment and ends with the most risky? Least risky = 1;most risky = 5

Accepted Answer

A)  1) Bonds;2) Mutual Funds;3) ETFs;4) Preferred Stock;5) Common Stock
B)  1) Preferred Stock;2) Common Stock;3) Mutual Funds;4) ETFs;5) Bonds
C)  1) Common Stock;2) Bonds;3) Mutual Funds;4) ETFs;5) Preferred Stock
D)  1) Bonds;2) Common Stock 3) Mutual Funds 4) ETFs 5) Preferred StockE) B) and D)
F) All of the above

Question 14

A mutual fund's purpose is rapid investment growth not to provide diversification for investors.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following securities provides the owner the right to vote for the corporate board of directors?

Accepted Answer

A)  Common stock
B)  Bonds
C)  Preferred stock
D)  Callable bondsE) C) and D)
F) B) and D)

Question 16

Government bonds can vary in denomination,but most corporate bonds are issued in ____________.

Accepted Answer

A)  Discounted denominations
B)  $1000 denominations
C)  $100 denominations
D)  $5,000 denominationsE) None of the above
F) A) and B)

Question 17

The purpose of the SEC's circuit breakers rule is to:

Accepted Answer

A)  prevent market disruption caused by a communication malfunction.
B)  halt trading for a short time following a dramatic drop in stock prices.
C)  allow floor traders to specialize in trading the securities of specific industries.
D)  prevent individuals from profiting from information not available to the general public.E) All of the above
F) B) and C)

Question 18

The corporate certificate issued to an investor that has loaned money to the corporation or government is called a:

Accepted Answer

A)  common stock.
B)  preferred stock.
C)  bond.
D)  debt document.E) A) and C)
F) C) and D)

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

The risk associated with Firm A's bond is greater than the risk of Firm B's bond.All other things being equal,investors would be willing to pay ________ for Firm B's bond.

Accepted Answer

A)  less
B)  more
C)  the same
D)  a premiumE) A) and B)
F) A) and C)

Exam 19: Using Securities Markets for Financing and Investing Opportunities

Diversification means:

Correct AnswerverifiedShow Answer

The owner of a convertible bond can exchange the bond for a specified number of shares of common stock in the same corporation.

Correct AnswerverifiedShow Answer

The risk associated with Firm A's bond is greater than the risk of Firm B's bond.All other things being equal,investors would be willing to pay ________ for Firm B's bond.

Correct AnswerverifiedShow Answer

Government bonds can vary in denomination,but most corporate bonds are issued in ____________.

Correct AnswerverifiedShow Answer

The purpose of the SEC's circuit breakers rule is to:

Correct AnswerverifiedShow Answer

An) ________ refers to the first public offering of a corporation's stock.

Correct AnswerverifiedShow Answer

Which of the following securities provides the owner the right to vote for the corporate board of directors?

Correct AnswerverifiedShow Answer

Which of the following is not an odd lot of stock?

Correct AnswerverifiedShow Answer

Applying what you have learned about investments introduced to you in Chapter 19,put the following investments in order from riskiest to least risky.Which of following lists begin with the least risky investment and ends with the most risky? Least risky = 1;most risky = 5

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A stock exchange provides a marketplace where the public can directly buy and sell securities without the help of intermediaries.

Correct AnswerverifiedShow Answer

The market price of a share of common stock depends heavily on:

Correct AnswerverifiedShow Answer

The Dow Jones Industrial Average reflects the average of the eleven largest corporations traded on the New York Stock Exchange as originally selected by Charles Dow.

Correct AnswerverifiedShow Answer

A mutual fund's purpose is rapid investment growth not to provide diversification for investors.

Correct AnswerverifiedShow Answer

A mutual fund pools investors' money and then buys stocks and bonds in many companies in accordance with the purpose of the fund.

Correct AnswerverifiedShow Answer

As market interest rates increase,the selling price for existing bonds also increases.

Correct AnswerverifiedShow Answer

As your elderly Uncle Bill approaches retirement,he asks for your advice for a safe place to invest several thousand dollars.He wants to receive some kind of payment each year for investing his money without a great deal of risk.You explain:

Correct AnswerverifiedShow Answer

By issuing bonds with a ________,the corporation retains the right to pay off the bond prior to the maturity date.

Correct AnswerverifiedShow Answer

Buying several different investment alternatives to spread the risk helps an investor achieve:

Correct AnswerverifiedShow Answer

The corporate certificate issued to an investor that has loaned money to the corporation or government is called a:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified