Question 1

From an investor's point of view,corporate bonds offer less risk than government bonds.

Accepted Answer

A) True 
 B)False

Question 2

Security markets assist businesses in performing their ________ function.

Accepted Answer

A)  long-term investing
B)  long-term planning
C)  long-term financing
D)  concurrent controllingE) All of the above
F) None of the above

Question 3

A preferred stock's par value establishes the base used for calculating the preferred stockholders' dividend.

Accepted Answer

A) True 
 B)False

Question 4

An investment banking firm assists corporations in selling the new security issue.

Accepted Answer

A) True 
 B)False

Question 5

An investor who purchases stock in a company becomes a(n) :

Accepted Answer

A)  creditor.
B)  owner.
C)  blue chip master.
D)  speculator.E) B) and C)
F) None of the above

Question 6

Although companies that issue bonds are required to pay interest,companies issuing stock are not required to pay dividends.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following describes a mutual fund that charges no commission to buy or sell its shares?

Accepted Answer

A)  Open-end fund
B)  Closed-end fund
C)  No-load fund
D)  Front-load fundE) All of the above
F) A) and C)

Question 8

Investors in ________ preferred stock receive a guarantee that missed dividends will accumulate and potentially be paid later.

Accepted Answer

A)  participating
B)  superior
C)  convertible
D)  cumulativeE) A) and B)
F) B) and C)

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

Investment bankers ________ new issues of bonds or stocks by purchasing,at a discount,the entire stock or bond issue of a firm and selling the issue to interested investors at a higher price.

Accepted Answer

A)  syndicate
B)  underwrite
C)  guarantee
D)  sanctionE) A) and B)
F) B) and D)

Question 11

The ABC Corporation issues a $1,000 bond,with an interest rate of 10%,and a maturity date of 2015.This creates a liability for the ABC Corporation to pay the bondholder:

Accepted Answer

A)  $100 interest per year and $1,000 in the year 2015.
B)  10% of the selling price of the bond.
C)  an interest payment equal to the dividend payment distributed to the common stockholders.
D)  $1,100 annually until the year 2015.E) A) and B)
F) None of the above

Question 12

Diversification means buying several different types of investments with the funds you have available for investment.

Accepted Answer

A) True 
 B)False  True

Question 13

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  False

Question 14

Shareholder Jones sells 100 shares of Very Vegetarian Corporation stock to Investor Smith.This transaction takes place in the:

Accepted Answer

A)  primary market.
B)  secondary market.
C)  initial offerings market.
D)  security resale market.E) B) and D)
F) C) and D)

Question 15

Which of the following statements best describes the current legal interpretation of insider trading?

Accepted Answer

A)  Is only possible when you are a board member or a chief officer of a company.
B)  Can be any employee and relatives or friends of the employee.
C)  Would involve members of the SEC (Securities and Exchange Commission) and the investment banker who handles most of a firm's transactions.
D)  Anyone who has securities information about a particular firm that is not known by the general public.E) A) and B)
F) A) and C)

Question 16

Online investors expect more expert advice than investors using traditional brokerage firms.

Accepted Answer

A) True 
 B)False

Question 17

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.

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

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) A) and C)
F) A) and B)

Question 19

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.

Accepted Answer

A)  debenture
B)  secured
C)  trust
D)  conveyanceE) B) and C)
F) A) and D) A

Question 20

While common stockholders of corporations have voting rights,preferred stockholders generally do not.

Accepted Answer

A) True 
 B)False

Exam 19: Using Securities Markets for Financing and Investing Opportunities

From an investor's point of view,corporate bonds offer less risk than government bonds.

Correct AnswerverifiedShow Answer

Security markets assist businesses in performing their ________ function.

Correct AnswerverifiedShow Answer

A preferred stock's par value establishes the base used for calculating the preferred stockholders' dividend.

Correct AnswerverifiedShow Answer

An investment banking firm assists corporations in selling the new security issue.

Correct AnswerverifiedShow Answer

An investor who purchases stock in a company becomes a(n) :

Correct AnswerverifiedShow Answer

Although companies that issue bonds are required to pay interest,companies issuing stock are not required to pay dividends.

Correct AnswerverifiedShow Answer

Which of the following describes a mutual fund that charges no commission to buy or sell its shares?

Correct AnswerverifiedShow Answer

Investors in ________ preferred stock receive a guarantee that missed dividends will accumulate and potentially be paid later.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Investment bankers ________ new issues of bonds or stocks by purchasing,at a discount,the entire stock or bond issue of a firm and selling the issue to interested investors at a higher price.

Correct AnswerverifiedShow Answer

The ABC Corporation issues a $1,000 bond,with an interest rate of 10%,and a maturity date of 2015.This creates a liability for the ABC Corporation to pay the bondholder:

Correct AnswerverifiedShow Answer

Diversification means buying several different types of investments with the funds you have available for investment.

Correct AnswerverifiedTrue

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 AnswerverifiedFalse

Shareholder Jones sells 100 shares of Very Vegetarian Corporation stock to Investor Smith.This transaction takes place in the:

Correct AnswerverifiedShow Answer

Which of the following statements best describes the current legal interpretation of insider trading?

Correct AnswerverifiedShow Answer

Online investors expect more expert advice than investors using traditional brokerage firms.

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedA

While common stockholders of corporations have voting rights,preferred stockholders generally do not.

Correct AnswerverifiedShow Answer

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