Question 1

The investor will receive the face value of the bond on the ________ date.

Accepted Answer

A)  purchase anniversary
B)  declaration
C)  maturity
D)  annual interestE) A) and B)
F) A) and C)

Question 2

Reviewing the stock market performance between 2000 and 2002 reveals a:

Accepted Answer

A)  tremendous increase in value.
B)  relatively stable time period.
C)  significant decrease in value.
D)  period of ups and downs.E) A) and D)
F) B) and C)

Question 3

Stock certificates identify per share dividends,expressed as a percentage of par value.

Accepted Answer

A) True 
 B)False

Question 4

If you buy 100 shares of IBM for $120/share,and the margin on your account is 50%,the broker will float you an interest free loan of $6,000,until the price of IBM sufficiently rises to the point where you are willing to sell.You pay the broker back its $6,000,and you enjoy the capital gain.

Accepted Answer

A) True 
 B)False

Question 5

Buying on margin is a relatively risk-free way of investing in the stock market.

Accepted Answer

A) True 
 B)False

Question 6

Penny is concerned about the interest rate risk if the company decides to issue bonds.Penny would like protection from interest rate fluctuation.Therefore,the bond issue's features should include an) :

Accepted Answer

A)  equity proposition.
B)  call provision.
C)  convertibility clause.
D)  collateral agreement.E) All of the above
F) C) and D)

Question 7

Stocks offering investors a high dividend yield are called:

Accepted Answer

A)  growth stocks.
B)  blue chip stocks.
C)  income stocks.
D)  penny stocks.E) None of the above
F) B) and C)

Question 8

The U.S.government just announced an increase in the interest rate paid on U.S.government bonds.This will likely cause a decrease in the interest rates paid on corporate bonds.

Accepted Answer

A) True 
 B)False

Question 9

For the firm,the cost of paying dividends to common stockholders is higher than the cost of the same amount of interest paid to bondholders.

Accepted Answer

A) True 
 B)False

Question 10

The initial cost of investing in mutual funds depends in part on:

Accepted Answer

A)  whether the fund is a load or no-load fund.
B)  the risk tolerance of the companies in the fund.
C)  the tax rate on capital gains.
D)  the imposition of government tariffs.E) A) and D)
F) B) and C)

Question 11

Your privately held firm needs additional funding for a planned expansion.Having never issued stock to the public,your firm is well advised to seek the assistance of an investment banker prior to an initial public offering of stock.

Accepted Answer

A) True 
 B)False

Question 12

Samad wants to supplement his current investments with a high risk,low priced security.Which of these best fits his strategy of high risk,low price and a potentially high rate of return?

Accepted Answer

A)  Time deposits
B)  Penny stocks
C)  Blue chip stocks
D)  Split stocksE) A) and C)
F) B) and D)

Question 13

Two kinds of equity financing are:

Accepted Answer

A)  common and preferred stock.
B)  convertible and superior stock.
C)  fixed and variable stock.
D)  common and superior stock.E) A) and B)
F) B) and D)

Question 14

The primary market allows an investor to purchase financial securities from other investors.

Accepted Answer

A) True 
 B)False

Question 15

U.S.government bonds are considered a secure investment because:

Accepted Answer

A)  the interest rates are protected from inflation and tied to the consumer price index.
B)  they are backed by the full faith and credit of the federal government.
C)  the interest rates are higher than for corporate bonds of equal duration.
D)  if they are lost or stolen the federal government promises to replace them when the proof of purchase is provided.E) All of the above
F) A) and B)

Question 16

Mark impresses his friends by stating that he just cast four votes in the election of the board of directors of Microsoft,indicating that Mark owns __________ stock in Microsoft.

Accepted Answer

A)  preferred
B)  cumulative preferred
C)  registered
D)  commonE) C) and D)
F) B) and C)

Question 17

Each share of common stock provides the investor with a ________ right that offers the investor the first right to purchase any new shares of common stock the firm decides to issue.This allows common stockholders to maintain a proportional share of ownership in the company.

Accepted Answer

A)  participating
B)  preemptive
C)  cumulative
D)  convertibleE) A) and B)
F) A) and D)

Question 18

Buying stock on margin allows investors to increase the potential rate of return made on a stock investment.

Accepted Answer

A) True 
 B)False

Question 19

The market price and growth potential of a common stock depends heavily on the performance of the firm in meeting its objectives.

Accepted Answer

A) True 
 B)False

Question 20

If a publicly traded corporation fails to maintain specific minimum requirements,the exchange can ________ the firm's securities.

Accepted Answer

A)  re-list
B)  transfer ownership of
C)  delist
D)  provide preemptive rights toE) A) and C)
F) B) and D)

Exam 19: Using Securities Markets for Financing and Investing Opportunities

The primary market allows an investor to purchase financial securities from other investors.

Correct AnswerverifiedShow Answer

Your privately held firm needs additional funding for a planned expansion.Having never issued stock to the public,your firm is well advised to seek the assistance of an investment banker prior to an initial public offering of stock.

Correct AnswerverifiedShow Answer

Reviewing the stock market performance between 2000 and 2002 reveals a:

Correct AnswerverifiedShow Answer

Buying stock on margin allows investors to increase the potential rate of return made on a stock investment.

Correct AnswerverifiedShow Answer

U.S.government bonds are considered a secure investment because:

Correct AnswerverifiedShow Answer

Two kinds of equity financing are:

Correct AnswerverifiedShow Answer

If a publicly traded corporation fails to maintain specific minimum requirements,the exchange can ________ the firm's securities.

Correct AnswerverifiedShow Answer

The investor will receive the face value of the bond on the ________ date.

Correct AnswerverifiedShow Answer

Samad wants to supplement his current investments with a high risk,low priced security.Which of these best fits his strategy of high risk,low price and a potentially high rate of return?

Correct AnswerverifiedShow Answer

The U.S.government just announced an increase in the interest rate paid on U.S.government bonds.This will likely cause a decrease in the interest rates paid on corporate bonds.

Correct AnswerverifiedShow Answer

Buying on margin is a relatively risk-free way of investing in the stock market.

Correct AnswerverifiedShow Answer

The initial cost of investing in mutual funds depends in part on:

Correct AnswerverifiedShow Answer

Stock certificates identify per share dividends,expressed as a percentage of par value.

Correct AnswerverifiedShow Answer

Each share of common stock provides the investor with a ________ right that offers the investor the first right to purchase any new shares of common stock the firm decides to issue.This allows common stockholders to maintain a proportional share of ownership in the company.

Correct AnswerverifiedShow Answer

Stocks offering investors a high dividend yield are called:

Correct AnswerverifiedShow Answer

If you buy 100 shares of IBM for $120/share,and the margin on your account is 50%,the broker will float you an interest free loan of $6,000,until the price of IBM sufficiently rises to the point where you are willing to sell.You pay the broker back its $6,000,and you enjoy the capital gain.

Correct AnswerverifiedShow Answer

The market price and growth potential of a common stock depends heavily on the performance of the firm in meeting its objectives.

Correct AnswerverifiedShow Answer

Mark impresses his friends by stating that he just cast four votes in the election of the board of directors of Microsoft,indicating that Mark owns __________ stock in Microsoft.

Correct AnswerverifiedShow Answer

Penny is concerned about the interest rate risk if the company decides to issue bonds.Penny would like protection from interest rate fluctuation.Therefore,the bond issue's features should include an) :

Correct AnswerverifiedShow Answer

For the firm,the cost of paying dividends to common stockholders is higher than the cost of the same amount of interest paid to bondholders.

Correct AnswerverifiedShow Answer

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