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Exam 19: Using Securities Markets for Financing and Investing Opportunities

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Question 201

True/False

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Bond classifications include, but are not limited to Corporate bonds,T-bills, Treasury bonds, Treasury notes, and Municipal bonds.

A) True
B) False

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Question 202

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Raising long-term funds through the sale of bonds requires the firm to make debt repayment when and if the organization has sufficient cash flow.

A) True
B) False

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Question 203

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are collections of stocks that are traded on exchanges but are traded more like individual stocks than like mutual funds.

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

A blue chip stock represents a highly speculative stock investment.

Rob Laws worked for several years for an aerospace manufacturer. For years he had purchased stock through his company's 401-K retirement fund. Now, upon retirement he was ready to transfer his retirement account to a financial services company and diversify the "nest egg" that currently totaled about $600,000 into more conservative investments. As a long time advocate of all things "green", he cautiously scrutinized every mutual fund that his broker suggested to make certain that it did not contain companies that left too large a carbon footprint. According to the Thinking Green box in Chapter 19, Rob is like a growing number of investors who may prefer SRIs (Socially Responsible Investments).

Penny stocks represent a high-risk stock investment.

Stock exchanges compete with each other for the listing of a corporation's stock.

Stocks represent shares of ownership in a company.

Which of the following measures how quickly an investor has access to his/her invested funds, if they are needed?

Before issuing stock or bonds, corporations must meet the disclosure requirements of the Federal Trade Commission (FTC).

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

Idle Time Gaming, Inc., has reached a point in its life where it needs several million dollars in order to expand and become the international company that it says it wants to be in its strategic plan. After consulting with an investment banker who is willing to underwrite the issue, it learned that investors will purchase the stock for $22/share. Idle time will receive a smaller amount for each share that is sold.

The trading of previously issued securities from one investor to another takes place in the:

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

The Securities and Exchange Commission has accused Martha of benefiting unfairly from information secured from a corporate officer of Stewart Engineering. Because Martha used that information to profit in the stock market, she faces charges.

Last year Alexis landed her first professional job after graduating from college. She also started her first investment account. Having met with several brokers before choosing someone to work with, Alexis wanted to make certain that her investment choices would provide for long-term growth, yet satisfy her concern for diversification. The person who won her business prepared an asset allocation plan that would start her account by investing in several index funds. Her adviser has offered her a sound way to combine the concern for diversification since index funds are a sensible way for Alexis to start.

Garrett's grandmother died and left him $100,000. He will invest the funds, but wants to make enough money to pay for his monthly car payment of $300/month. One suggestion might be an income stock that pays a 4% dividend.

When an investor places a buy order with a stockbroker, the broker contacts a(n) to complete the transaction.

If paid, dividends come from any profits remaining after the firm has paid taxes. The company cannot deduct dividends as an expense of doing business.