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Exam 19: Using Securities Markets for Financing and Investing Opportunities

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Question 61

Multiple Choice

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Last week, Danielle purchased 200 shares of High Tech Heaven, Inc on margin for $50 per share. This week, the price High Tech Heaven's shares dropped by $10 per share due to a poor profit outlook. Danielle should anticipate:

A) A stabilization of the stock price and graduate increase.
B) A margin call from her broker.
C) An offer by the broker to cover the short-fall with additional funding.
D) A suggestion by the broker that she participate in a "short sale".

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

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Question 62

Multiple Choice

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

A) re-list
B) transfer ownership of
C) delist
D) provide preemptive rights to

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

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Question 63

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Corporations and brokers prefer to have stock purchases conducted in round lots of 100 shares.

Investment bankers are in the business of underwriting securities. They profit from purchasing the new stock offering of a corporation at a discount, and then selling those shares of stock to the public at the market price.

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

Tyler is looking for an investment that will pay a little better than what he can get from a government bond. You suggest that he consider a new issue of debenture bonds by Very Vegetarian that pay 8.5% annually. You explain that Very Vegetarian has operated for a long time, and the debenture feature makes these bonds more secure than others.

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.

An investor places a order with a broker to sell a stock at the best price available at that time.

Which of the following describes a benefit enjoyed by investors in mutual funds?

Government employees, public school system employees, and even employees of some large companies pay a percentage of their monthly earnings into pension funds. These funds collect a large pool of money that they invest in securities. Pension funds, insurance companies and mutual fund companies - who collect large sums of money and then invest these funds into stocks, bonds or other securities are called institutional investors.

The NASDAQ reports its own average that investors follow to observe trends in the market.

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 a(n) :

Creating a portfolio by buying several different types of investments to spread the risk of investing is called .

Stock exchanges exist all over the world, allowing investors to buy securities in companies almost anywhere in the world.

Molly Manufacturing plans to issue $75 million of common stock. The firm will likely rely on the advice and assistance of a(n) :

Unlike stocks, for selling purposes, bond prices remain stable over the life of the bond.

Investors who trade securities, buy securities they are interested in holding or sell securities to make a profit or cut losses by trading in the secondary market.

As indicated in the Thinking Green box in Chapter 19, investors interested in sustainability and the betterment of the natural environment, and the concept of "going green", can invest in:

Portland Power and Light recently issued bonds that offered no collateral except the reputation and established name of the Portland Power and Light Company. These represent bonds.

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.