Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

One criticism of the Dow Jones Industrial Average suggests that it

Accepted Answer

A)   magnifies the fluctuations in the stock market.
B)   does not indicate the cause of changes in stock prices.
C)   is too small (too few companies)  to get a good statistical representation.
D)   is biased causing an overstatement of bond price increases and an understatement of stock price decreases.E) None of the above
F) B) and C)

Question 3

Lucas purchased 250 shares of Marshall Manufacturing last year but was not paid dividends. He now is going to hire an attorney to sue the company for failure to pay dividends. If he follows through with his plan, Lucas will probably win the lawsuit because companies are obligated to pay their stockholders dividends for owning and holding the firm's stock.

Accepted Answer

A) True 
 B)False

Question 4

Buying a stock makes the investor an owner in the firm.

Accepted Answer

A) True 
 B)False

Question 5

A mutual fund that carries a load will require the investor to pay a commission, only if the fund appreciates in price.

Accepted Answer

A) True 
 B)False

Question 6

Cumulative preferred stockholders enjoy a promise that missed dividends will accumulate and be paid later, before any dividends are paid to common stockholders.

Accepted Answer

A) True 
 B)False

Question 7

U.S. government bonds are considered safe investments. Therefore such government bonds usually have a lower interest rate than corporate bonds.

Accepted Answer

A) True 
 B)False

Question 8

Young investors place more importance on low-risk investments, while elderly investors prefer significant growth in the value of their investments.

Accepted Answer

A) True 
 B)False

Question 9

Bonds, like stocks, trade daily on major security exchanges.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

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 12

Julio and his grandfather receive individualized investment advice from the same chartered financial analyst. When comparing their customized investment recommendations, it is likely that Julio's strategy targets lower-risk investment options than the advice received by his grandfather.

Accepted Answer

A) True 
 B)False

Question 13

High-risk, high-interest bonds are called

Accepted Answer

A)   convertible bonds.
B)   preferred bonds.
C)   discount bonds.
D)   junk bonds.E) All of the above
F) A) and C)

Question 14

Bonds that pay very high interest rates and typically have a higher risk of default are known as

Accepted Answer

A)   zero-coupon bonds
B)   bearer bonds
C)   junk bonds
D)   volatile bondsE) C) and D)
F) B) and C)

Question 15

Which of the following securities guarantees preferred stockholders payment of missed dividends before any dividends are paid to common stockholders?

Accepted Answer

A)   call provision
B)   cumulative preferred
C)   participating preferred
D)   convertible preferredE) None of the above
F) B) and C)

Question 16

The dollar amount assigned to shares of stock by the corporation's charter represents the stock's

Accepted Answer

A)   net asset value.
B)   legal value.
C)   market value.
D)   par value.E) B) and D)
F) A) and B)

Question 17

If an investor owns a bond that pays a higher rate of interest than other bonds of similar risk, the investor should be able to sell the bond on the secondary market for more than its face value.

Accepted Answer

A) True 
 B)False

Exam 19: Using Securities Markets for Financing and Investing Opportunities

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

Correct Answer
verified

A mutual fund that carries a load will require the investor to pay a commission, only if the fund appreciates in price.

Correct Answer
verified

High-risk, high-interest bonds are called

Correct Answer
verified

The dollar amount assigned to shares of stock by the corporation's charter represents the stock's

Correct Answer
verified

Julio and his grandfather receive individualized investment advice from the same chartered financial analyst. When comparing their customized investment recommendations, it is likely that Julio's strategy targets lower-risk investment options than the advice received by his grandfather.

Correct Answer
verified

Correct Answer
verified

U.S. government bonds are considered safe investments. Therefore such government bonds usually have a lower interest rate than corporate bonds.

Correct Answer
verified

Bonds, like stocks, trade daily on major security exchanges.

Correct Answer
verified

Bonds that pay very high interest rates and typically have a higher risk of default are known as

Correct Answer
verified

Buying a stock makes the investor an owner in the firm.

Correct Answer
verified

Which of the following securities guarantees preferred stockholders payment of missed dividends before any dividends are paid to common stockholders?

Correct Answer
verified

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

Correct Answer
verified

If an investor owns a bond that pays a higher rate of interest than other bonds of similar risk, the investor should be able to sell the bond on the secondary market for more than its face value.

Correct Answer
verified

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

Correct Answer
verified

Young investors place more importance on low-risk investments, while elderly investors prefer significant growth in the value of their investments.

Correct Answer
verified

Cumulative preferred stockholders enjoy a promise that missed dividends will accumulate and be paid later, before any dividends are paid to common stockholders.

Correct Answer
verified

One criticism of the Dow Jones Industrial Average suggests that it

Correct Answer
verified

Exam 19: Using Securities Markets for Financing and Investing Opportunities

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

Correct AnswerverifiedShow Answer

A mutual fund that carries a load will require the investor to pay a commission, only if the fund appreciates in price.

Correct AnswerverifiedShow Answer

High-risk, high-interest bonds are called

Correct AnswerverifiedShow Answer

The dollar amount assigned to shares of stock by the corporation's charter represents the stock's

Correct AnswerverifiedShow Answer

Julio and his grandfather receive individualized investment advice from the same chartered financial analyst. When comparing their customized investment recommendations, it is likely that Julio's strategy targets lower-risk investment options than the advice received by his grandfather.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

U.S. government bonds are considered safe investments. Therefore such government bonds usually have a lower interest rate than corporate bonds.

Correct AnswerverifiedShow Answer

Bonds, like stocks, trade daily on major security exchanges.

Correct AnswerverifiedShow Answer

Bonds that pay very high interest rates and typically have a higher risk of default are known as

Correct AnswerverifiedShow Answer

Buying a stock makes the investor an owner in the firm.

Correct AnswerverifiedShow Answer

Which of the following securities guarantees preferred stockholders payment of missed dividends before any dividends are paid to common stockholders?

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

If an investor owns a bond that pays a higher rate of interest than other bonds of similar risk, the investor should be able to sell the bond on the secondary market for more than its face value.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Young investors place more importance on low-risk investments, while elderly investors prefer significant growth in the value of their investments.

Correct AnswerverifiedShow Answer

Cumulative preferred stockholders enjoy a promise that missed dividends will accumulate and be paid later, before any dividends are paid to common stockholders.

Correct AnswerverifiedShow Answer

One criticism of the Dow Jones Industrial Average suggests that it

Correct AnswerverifiedShow Answer

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