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Buying stock on margin lowers the overall risk for the investor.

A) True
B) False

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Insider trading refers to someone who benefits unfairly from information about a security not available to the general public.

A) True
B) False

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Shareholder Jones sells 100 shares of Very Vegetarian Corporation stock to Investor Smith.This transaction takes place in the:


A) primary market.
B) secondary market.
C) initial offerings market.
D) security resale market.

E) B) and D)
F) B) and C)

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While common stockholders of corporations have voting rights,preferred stockholders generally do not.

A) True
B) False

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Buying on margin means you are borrowing part of the value of the stock purchase from the brokerage firm.

A) True
B) False

Correct Answer

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Private investors benefit from securities markets primarily by:


A) having a place to buy and sell stocks and bonds.
B) obtaining the capital they need to finance their operations.
C) securing memberships on various stock exchanges.
D) participating in the primary markets of investment bankers.

E) All of the above
F) None of the above

Correct Answer

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Daily reporting of the Dow Jones Industrial Average serves to:


A) show the direction of the market over time.
B) distort short-term fluctuations for the financial community.
C) identify the beginning of a recession in the economy.
D) disclose the average price of a share of stock on the major exchanges.

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

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Preferred stockholders receive dividend payments before common stockholders are paid any dividends.

A) True
B) False

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Corporations receive needed funds when they sell a new issuance of a security in the primary market.

A) True
B) False

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Investment bankers ________ new issues of bonds or stocks by purchasing,at a discount,the entire stock or bond issue of a firm and selling the issue to interested investors at a higher price.


A) syndicate
B) underwrite
C) guarantee
D) sanction

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

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When a corporation enjoys a profitable year,dividends must be paid.

A) True
B) False

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One criticism of the Dow Jones Industrial Average suggests that it:


A) magnifies the fluctuations in the stock market.
B) does not indicate the cause of changes in stock prices.
C) is too small too few companies) to get a good statistical representation.
D) is biased causing an overstatement of bond price increases and an understatement of stock price decreases.

E) C) and D)
F) B) and C)

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A share of preferred stock currently sells for $120.It offers the investor a dividend rate of 8%,with a par value of $100.If the company is able to pay dividends,preferred stockholders would receive a dividend of $9.60 per share.

A) True
B) False

Correct Answer

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Bondholders can sell their bonds:


A) on the secondary market prior to the maturity date.
B) early if the bonds were issued with a callable option.
C) after the bonds are converted into common stock.
D) after receiving the written permission of other stakeholders.

E) B) and D)
F) C) and D)

Correct Answer

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Issuing new stock increases the firm's outstanding debt on their balance sheet.

A) True
B) False

Correct Answer

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The similarities between common stocks and bonds include a face or par value and a fixed rate of return for investors.

A) True
B) False

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Idle Time Gaming announced a 2 for 1 common stock split for investors on record.Which of the following will occur?


A) The stock price will increase to reflect the value of 2 shares for every one share.
B) Each share will be worth ½ of its previous value,but shareholders total value of Idle Time Gaming will remain the same.
C) The value of Idle Time common stock will remain the same,for a short period of time,and then experience a guaranteed growth spurt.
D) The shareholders will sell their shares immediately after the split and take their capital gains,as well as provide others an opportunity to invest in Idle Time Gaming.

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

Correct Answer

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Alejandro relies on his stockbroker to execute his buy and sell orders for shares of stock in different companies.He has found that the process of buying or selling a share of stock on a major stock exchange normally takes:


A) weeks.
B) seconds.
C) days.
D) months.

E) None of the above
F) B) and D)

Correct Answer

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Jason instructed his stockbroker to buy 100 shares of Utah Industries common stock if and when the price falls to $25 per share.Jason placed an) :


A) market order.
B) odd-lot order.
C) limit order.
D) contingent order.

E) A) and D)
F) A) and B)

Correct Answer

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High-risk,high-interest bonds are called:


A) convertible bonds.
B) preferred bonds.
C) discount bonds.
D) junk bonds.

E) A) and B)
F) A) and C)

Correct Answer

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