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Exam 19: Using Securities Markets for Financing and Investing Opportunities

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Question 31

Multiple Choice

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On-line trading services target those investors who:

A) require the research and advice of a licensed stockbroker.
B) are interested in purchasing government bonds.
C) are willing to do their own research.
D) trade the securities of foreign firms.

E) A) and C)
F) None of the above

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Question 32

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Preferred stock may include callable and convertible provisions.

A) True
B) False

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Question 33

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Stock market "circuit breakers" stop stock trading for a short time when the stock market experiences a significant drop in stock values.

A mutual fund that carries a load will require the investor to pay a commission,only if the fund appreciates in price.

For starters,investors should consider the return on investment,the liquidity and riskiness of an investment.

Interest rates vary with changes in the state of the economy.

Chipper's Golf Resort has learned that Tiger Woods is interested in putting his name on golf course designs;however,in order for any golf course to be acceptable to him,it will cost a minimum of $20 million to build.Chipper's owners want an international presence,and they believe that,"just the way golf club companies became publicly traded corporations,it may be time for golf courses to do the same." The plan is to begin to purchase real estate for four new golf resorts.Proceeding with their venture,the owners have calculated that they will need approximately $100 million.But putting together an IPO is another matter.After meeting with their investment banker,they believe that investors will be willing to pay $16/share for the IPO.As the ___________ for this issue,the investment bank requires 3% of the revenues generated by the sale.Chipper's will need to issue _______ shares in order to have the $100 million they need to proceed with their plan.

The largest one-day drop in the stock market occurred in 1987 - a 22% drop.

Cynthia plans to buy 100 shares of common stock in the Idaho Spud Corporation.She willingly accepts the risk of this investment because she:

________ represent the best way for investors to have their investments managed by a trained specialist for a fee.

For investors who desire the least possible risk,a share of stock in an established corporation provides the safest investment.

Exchange traded funds are like mutual funds because these funds permit the investor to buy shares of a collection of several stocks or shares of a collection of stocks and bonds,but,unlike mutual funds,they are traded during the day on the exchanges.

Having just returned from the Iraq war,David,a young soldier has $25,000 in his savings account.His girlfriend suggested that he talk with an investment advisor and let his money "make more money".David has his eye on a new Ford truck,but he knows that his old Jeep Cherokee will probably last another four years,at which time he will definitely need this money as a down payment or purchase of something new.David should buy high growth stock with his funds because even though they are risky,they also have the greatest potential of bringing in the better return on his investment.

As a registered representative of a stock brokerage firm,a stockbroker works as an intermediary to buy and sell securities for clients.

Which of the following terms best describes the relationship between the New York Stock Exchange and the NASDAQ?

A sinking fund provision decreases the risk of repayment in the minds of the investors.

After many years as a privately held corporation,Connecticut Industries decided to offer stock to the general public.Connecticut may discover that stockholders:

According to the Securities Act of 1933 it is against the law for a firm that is publicly trading securities to deny an investor from knowing how the firm is doing financially.

Mutual funds offer small investors an opportunity to diversify their investments.

It is easier for a small business to raise funds through a stock issuance than for a large,well-known company.