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Exam 19: Using Securities Markets for Financing and Investing Opportunities

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Question 111

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The owner of a convertible bond can exchange the bond for a specified number of shares of common stock in the same corporation.

A) True
B) False

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Question 112

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Monica met with a financial planner last week and he urged her to consider only government bonds and mutual funds in her portfolio.Since she is in her 20's,Monica believes she can tolerate a little more risk.You suggest that it is a better plan to follow the advice of the financial planner,rather than research her choices on her own.

A) True
B) False

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Question 113

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When given a choice,businesses prefer to obtain long-term financing through retained earnings or by borrowing from a lending institution such as a bank.

A U.S.government bond paying 3.25% interest annually is a lower risk than a Bellandro Bay Brewery bond paying 6%.

Dividends represent a portion of a firm's profits that are distributed to bondholders first then stockholders.

A convertible bond allows the bondholder to exchange the bond for:

Government employees,public school system employees,and even employees of some large companies pay a percentage of their monthly earnings into pension funds.These funds collect a large pool of money that they invest in securities.Pension funds,insurance companies and mutual fund companies - who collect large sums of money and then invest these funds into stocks,bonds or other securities are called institutional investors.

Raising long-term funds through the sale of bonds requires the firm to make debt repayment when and if the organization has sufficient cash flow.

Idle Time Gaming,Inc. ,has reached a point in its life where it needs several million dollars in order to expand and become the international company that it says it wants to be in its strategic plan.After consulting with an investment banker who is willing to underwrite the issue,it learned that investors will purchase the stock for $22/share.Idle time will receive a smaller amount for each share that is sold.

Penny stocks represent a high-risk stock investment.

Hottie Potatee,Inc.wants to raise an undisclosed amount of funds in order to expand the company-owned potato bar stores overseas.The CFO (Chief Financial Officer)of the company will negotiate with an expert at the FTC (Federal Trade Commission)who will underwrite the issue of stock that Hottie Potatee plans to offer.

In 2008,the NYSE and Euronext acquired the ________,the second largest U.S.Stock Exchange.

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

Investors buying bonds and corporations issuing bonds (both) accept investment risk.Which of the following statements is most correct when it comes to the investment that one or the other party accepts?

Bonds offering a higher interest rate than other bonds of similar risk,will likely sell at a:

According to the Securities Act of 1933 it is against the law for a firm that is publicly trading securities to deny an investor from knowing how the firm is doing financially.

In 2005,the New York Stock Exchange made a smart move to increase its competitive position,it merged with ___________ a firm that owned state of the art electronic trading technology.

After owning a Cordero Company bond for five years,Gabrielle exercised an option that allowed her to exchange her bond for 20 shares of the company stock.Gabrielle owned a:

The threat of terrorist attacks tends to depress stock market prices.

Many foreign firms are listed on the NYSE Euronext.