Question 1

An organization whose members can buy and sell securities for companies and investors is known as a:

Accepted Answer

A)   public securities dealer.
B)   securities facilitator.
C)   transfer medium.
D)   stock exchange.E) None of the above
F) B) and C)

Question 2

Mark impresses his friends by stating that he just cast four votes in the election of the board of directors of Microsoft, indicating that Mark owns __________ stock in Microsoft.

Accepted Answer

A)   preferred
B)   cumulative preferred
C)   registered
D)   commonE) B) and D)
F) B) and C)

Question 3

According to the Standard & Poor's Investor Services ratings, which of these ratings indicates a highly speculative bond?

Accepted Answer

A)   AA
B)   B
C)   C
D)   BBBE) C) and D)
F) A) and B)

Question 4

__________ represents the most basic form of company ownership and includes voting rights and dividends, if and when the firm elects to pay dividends.

Accepted Answer

A)   Capital stock
B)   Common stock
C)   Preferred stock
D)   Carrier stockE) A) and D)
F) All of the above

Question 5

Explain the differences between preferred stock and common stock.

Accepted Answer

Preferred stock gives owners preference ...

Question 6

A stock split refers to buying a share of stock at a discounted price if full payment is made at the time of purchase.

Accepted Answer

A) True 
 B)False

Question 7

If investor Jones buys a share of stock in the ABC Corporation from investor Smith, the ABC Corporation automatically receives a fixed percentage of the selling price.

Accepted Answer

A) True 
 B)False

Question 8

Issuing bonds to obtain long-term funds legally compels a firm to pay regular ________ payments and repay the ________ at the maturity date.

Accepted Answer

A)   dividend; par value
B)   interest; bond premium
C)   dividend; maturity value
D)   interest; principalE) C) and D)
F) All of the above

Question 9

When comparing the investments of different mutual funds, little variation in the risk level exists.

Accepted Answer

A) True 
 B)False

Question 10

Bonds sold at a ________ sell for less than face value.

Accepted Answer

A)   secondary market
B)   discount
C)   premium
D)   date before the maturity dateE) B) and C)
F) A) and B)

Question 11

When brokers talk about trading round lots, they are referring to 50 shares of stock.

Accepted Answer

A) True 
 B)False

Question 12

Using information not available to the public to unfairly benefit in the stock market represents:

Accepted Answer

A)   security fraud.
B)   an unethical, but a legal activity.
C)   blue-sky violations.
D)   insider trading.E) All of the above
F) C) and D)

Question 13

Roberto directed his broker to buy 75 shares of New Mexico Technologies at the best possible price available that day. These directions indicate that Roberto placed a ________ order with his broker.

Accepted Answer

A)   market
B)   limit
C)   margin
D)   splitE) None of the above
F) A) and B)

Question 14

The interest earned on municipal bonds is often tax-free at the state level.

Accepted Answer

A) True 
 B)False

Question 15

If the firm should find itself in bankruptcy, preferred stockholders would have claim to the value of any remaining assets before common stockholders.

Accepted Answer

A) True 
 B)False

Question 16

The market price and growth potential of a common stock depends heavily on the performance of the firm in meeting its objectives.

Accepted Answer

A) True 
 B)False

Question 17

When stock prices decline steadily, investors refer to the market as a ________ market.

Accepted Answer

A)   bear
B)   bull
C)   dog
D)   lionE) B) and D)
F) A) and D)

Question 18

As your elderly Uncle Bill approaches retirement, he asks for your advice for a safe place to invest several thousand dollars. He wants to receive some kind of payment each year for investing his money without a great deal of risk. You explain:

Accepted Answer

A)   Yankee bonds are certain not to default.
B)   common stock always pays quarterly dividends.
C)   junk bonds do not pay annual interest.
D)   treasury and top-grade corporate bonds pay interest two times each year.E) All of the above
F) None of the above

Question 19

Gerald, a recent graduate of a community college, is about to make his first investment in the stock market. Which of the following would be a cautious way for Gerald to start investing?

Accepted Answer

A)   Future contracts in oil
B)   Index funds
C)   Short-selling technology stocks
D)   Commodity market transactions in precious metalsE) A) and B)
F) A) and D)

Question 20

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.

Accepted Answer

A) True 
 B)False

Exam 19: Using Securities Markets for Financing and Investing Opportunities

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.

Correct AnswerverifiedShow Answer

Issuing bonds to obtain long-term funds legally compels a firm to pay regular ________ payments and repay the ________ at the maturity date.

Correct AnswerverifiedShow Answer

When comparing the investments of different mutual funds, little variation in the risk level exists.

Correct AnswerverifiedShow Answer

If the firm should find itself in bankruptcy, preferred stockholders would have claim to the value of any remaining assets before common stockholders.

Correct AnswerverifiedShow Answer

Explain the differences between preferred stock and common stock.

Correct AnswerverifiedPreferred stock gives owners preference ...View AnswerShow Answer

The market price and growth potential of a common stock depends heavily on the performance of the firm in meeting its objectives.

Correct AnswerverifiedShow Answer

Bonds sold at a ________ sell for less than face value.

Correct AnswerverifiedShow Answer

As your elderly Uncle Bill approaches retirement, he asks for your advice for a safe place to invest several thousand dollars. He wants to receive some kind of payment each year for investing his money without a great deal of risk. You explain:

Correct AnswerverifiedShow Answer

__________ represents the most basic form of company ownership and includes voting rights and dividends, if and when the firm elects to pay dividends.

Correct AnswerverifiedShow Answer

Using information not available to the public to unfairly benefit in the stock market represents:

Correct AnswerverifiedShow Answer

A stock split refers to buying a share of stock at a discounted price if full payment is made at the time of purchase.

Correct AnswerverifiedShow Answer

Gerald, a recent graduate of a community college, is about to make his first investment in the stock market. Which of the following would be a cautious way for Gerald to start investing?

Correct AnswerverifiedShow Answer

Roberto directed his broker to buy 75 shares of New Mexico Technologies at the best possible price available that day. These directions indicate that Roberto placed a ________ order with his broker.

Correct AnswerverifiedShow Answer

If investor Jones buys a share of stock in the ABC Corporation from investor Smith, the ABC Corporation automatically receives a fixed percentage of the selling price.

Correct AnswerverifiedShow Answer

According to the Standard & Poor's Investor Services ratings, which of these ratings indicates a highly speculative bond?

Correct AnswerverifiedShow Answer

The interest earned on municipal bonds is often tax-free at the state level.

Correct AnswerverifiedShow Answer

When stock prices decline steadily, investors refer to the market as a ________ market.

Correct AnswerverifiedShow Answer

When brokers talk about trading round lots, they are referring to 50 shares of stock.

Correct AnswerverifiedShow Answer

Mark impresses his friends by stating that he just cast four votes in the election of the board of directors of Microsoft, indicating that Mark owns __________ stock in Microsoft.

Correct AnswerverifiedShow Answer

An organization whose members can buy and sell securities for companies and investors is known as a:

Correct AnswerverifiedShow Answer

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Issuing bonds to obtain long-term funds legally compels a firm to pay regular payments and repay the at the maturity date.

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Preferred stock gives owners preference ...
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