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Exam 19: Using Securities Markets for Financing and Investing Opportunities

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Question 191

True/False

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Black Tuesday refers to the stock market crash that occurred in October 1987.

A) True
B) False

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Question 192

Multiple Choice

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Elisa has an ownership interest in many different companies, yet she owns the shares of stock of just one organization. Elisa undoubtedly owns shares in a(n)

A) investment trust.
B) security account.
C) options association.
D) mutual fund.

E) C) and D)
F) A) and D)

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Question 193

Multiple Choice

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When retained earnings are not enough to meet their long-term funding needs, businesses may be able to raise funds by

From an investor's viewpoint, bonds generally provide a safer investment option than does the stock of the same corporation.

When corporations elect to issue two or more shares of stock to existing stockholders for each share they currently own, they have initiated a(n)

A stock exchange provides a marketplace where the public can directly buy and sell securities without the need for a membership.

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

Which of the following securities provides the owner the right to vote for the corporate board of directors?

If stock is issued in Pirate Recording, analysts predict that the company has potential for strong growth. The prospects for dividend payments to stockholders, at least in the beginning, are not good. Pirate Recording will need to retain its earnings in order to grow rapidly. The firm's stock would most likely be classified as a(n)

Which of the following represents a disadvantage of issuing bonds?

A company often exercises the call provision of a bond if it's available when prevailing interest rates fall below the interest rate currently being paid to bondholders.

After buying 200 shares of common stock in Epic Electronics for $20 per share, Rashad later sold the same shares for $25 per share. Rashad's capital gain on the total transaction is:

Ryan owns 100 shares in Marshall Manufacturing, currently selling for $80 per share. His stock split yesterday 3-for-1. The number of shares that Ryan owns has tripled.

As interest rates increase, bond prices fall.

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

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

Investment bankers assist in the issuing and selling of new securities.

In a secondary market sale of stock, the proceeds go to the investor selling the stock, not to the corporation.

Explain the differences between preferred stock and common stock.

Your Uncle Mike is approaching retirement and 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