Question 1

Debenture bonds represent bonds that are not secured by collateral.

Accepted Answer

A) True 
 B)False

Question 2

Lupe's stockbroker called to inform Lupe of a margin call that requires that she pay $1,000. This indicates that the value of Lupe's stock has:

Accepted Answer

A)   just split.
B)   decreased.
C)   increased.
D)   changed causing the Federal Reserve to increase the margin rate.E) A) and B)
F) All of the above

Question 3

When Tong Su purchased 500 shares of preferred stock in the Vibrates Corporation, his certificate indicated the stock had a par value of $50 per share. This means that Tong Su:

Accepted Answer

A)   will never get less than $50 per share when selling his stock.
B)   has shares that are currently worth $50 per share.
C)   may receive dividends based on this value per share.
D)   must receive a $5 dividend each and every year.E) B) and D)
F) C) and D)

Question 4

A round lot refers to the purchase of 100 shares of stock in the same company in a single transaction.

Accepted Answer

A) True 
 B)False  True

Question 5

________ involve(s)  computer instructions that automatically sell stocks whose value has dropped by a predetermined amount.

Accepted Answer

A)   Software action
B)   Program trading
C)   Curbs
D)   Circuit breakersE) None of the above
F) B) and C)

Question 6

Ellie owns stock in Rotary Technologies. Her stock provides a priority claim on dividend payments and on the firm's assets in the event of liquidation. However, her ________ stock ownership does not offer her voting rights.

Accepted Answer

A)   common
B)   preferred
C)   superior
D)   callableE) B) and C)
F) A) and B)

Question 7

Lamont bought a share of stock in the ABC Corporation for $50. When he sold the stock later that year, he received $70. The par value of the stock is $5. Lamont's capital gain is $25.

Accepted Answer

A) True 
 B)False

Question 8

When an investor purchases a security, the investor does so with the expectation of:

Accepted Answer

A)   maintaining his or her capital position.
B)   minimizing risk.
C)   making a profit.
D)   providing commissions.E) A) and B)
F) A) and C) C

Question 9

Which of the following represents a disadvantage of issuing bonds?

Accepted Answer

A)   Bonds are permanent debt on the firm's balance sheet.
B)   Dividends are legally required.
C)   Bonds increase the firm's debt.
D)   Bondholders receive voting rights.E) None of the above
F) A) and D)

Question 10

The advantage of using an online broker is that these services usually provide you with a wealth of information and help you allocate your assets. Sometimes they even help you create an investment plan for life!

Accepted Answer

A) True 
 B)False

Question 11

If a stock's closing price for the day is 32.47, the stock's price in U.S. dollars would be:

Accepted Answer

A)   $32 plus a $.47 commission.
B)   $32.47.
C)   in between a low of $32 and a high of $47.
D)   $3,247.E) A) and D)
F) B) and C)

Question 12

Trading curbs motivate traders to utilize their computerized programs to reduce market volatility.

Accepted Answer

A) True 
 B)False  False

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

Stock certificates represent evidence of ownership in an organization. A stock certificate contains which of the following?

Accepted Answer

A)   Current market value of the stock
B)   The total number of shares issued by the company
C)   The type of stock the investor is buying
D)   The stock symbol and trading exchange of the companyE) B) and C)
F) A) and D)

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

A bond's face value is the same as its:

Accepted Answer

A)   risk rating.
B)   principal.
C)   coupon value.
D)   yield.E) A) and B)
F) A) and C)

Question 17

Which of the following would be classified as an institutional investor?

Accepted Answer

A)   Pension funds
B)   Federal Reserve banks
C)   Stock exchanges
D)   Commodity brokersE) A) and C)
F) A) and D)

Question 18

By issuing bonds, a firm's debt level increases, which may adversely affect the firm's image in the financial community.

Accepted Answer

A) True 
 B)False

Question 19

Many observers suggest that the stock market is dominated by the buying and selling activities of institutional investors.

Accepted Answer

A) True 
 B)False

Question 20

The Securities and Exchange Commission requires that all prospective investors receive a copy of a firm's prospectus prior to investing.

Accepted Answer

A) True 
 B)False

Exam 19: Using Securities Markets for Financing and Investing Opportunities

Debenture bonds represent bonds that are not secured by collateral.

Correct AnswerverifiedShow Answer

Lupe's stockbroker called to inform Lupe of a margin call that requires that she pay $1,000. This indicates that the value of Lupe's stock has:

Correct AnswerverifiedShow Answer

When Tong Su purchased 500 shares of preferred stock in the Vibrates Corporation, his certificate indicated the stock had a par value of $50 per share. This means that Tong Su:

Correct AnswerverifiedShow Answer

A round lot refers to the purchase of 100 shares of stock in the same company in a single transaction.

Correct AnswerverifiedTrue

________ involve(s) computer instructions that automatically sell stocks whose value has dropped by a predetermined amount.

Correct AnswerverifiedShow Answer

Ellie owns stock in Rotary Technologies. Her stock provides a priority claim on dividend payments and on the firm's assets in the event of liquidation. However, her ________ stock ownership does not offer her voting rights.

Correct AnswerverifiedShow Answer

Lamont bought a share of stock in the ABC Corporation for $50. When he sold the stock later that year, he received $70. The par value of the stock is $5. Lamont's capital gain is $25.

Correct AnswerverifiedShow Answer

When an investor purchases a security, the investor does so with the expectation of:

Correct AnswerverifiedC

Which of the following represents a disadvantage of issuing bonds?

Correct AnswerverifiedShow Answer

The advantage of using an online broker is that these services usually provide you with a wealth of information and help you allocate your assets. Sometimes they even help you create an investment plan for life!

Correct AnswerverifiedShow Answer

If a stock's closing price for the day is 32.47, the stock's price in U.S. dollars would be:

Correct AnswerverifiedShow Answer

Trading curbs motivate traders to utilize their computerized programs to reduce market volatility.

Correct AnswerverifiedFalse

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

Correct AnswerverifiedShow Answer

Stock certificates represent evidence of ownership in an organization. A stock certificate contains which of the following?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A bond's face value is the same as its:

Correct AnswerverifiedShow Answer

Which of the following would be classified as an institutional investor?

Correct AnswerverifiedShow Answer

By issuing bonds, a firm's debt level increases, which may adversely affect the firm's image in the financial community.

Correct AnswerverifiedShow Answer

Many observers suggest that the stock market is dominated by the buying and selling activities of institutional investors.

Correct AnswerverifiedShow Answer

The Securities and Exchange Commission requires that all prospective investors receive a copy of a firm's prospectus prior to investing.

Correct AnswerverifiedShow Answer

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True

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C

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False

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