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Exam 19: Using Securities Markets for Financing and Investing Opportunities

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Question 91

Multiple Choice

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Stocks offering investors a high dividend yield are called:

A) growth stocks.
B) blue chip stocks.
C) income stocks.
D) penny stocks.

E) B) and C)
F) All of the above

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Question 92

Multiple Choice

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Which of the following legislative acts created the Securities and Exchange Commission?

A) Dealers Trust and Assistance Act of 1933
B) Federal Trade Commission Act of 1933
C) Securities and Exchange Act of 1934
D) Bond Trading Act of 1934

E) B) and D)
F) C) and D)

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Question 93

Multiple Choice

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Investors in the stock market can lose money if:

A blue chip stock represents a highly speculative stock investment.

The degree of risk in mutual fund investments remains nearly the same from one fund to the next.

Which of the following securities would investors consider the most risky?

Taking into account the risk/return tradeoff,it would stand to reason that a secured bond holds a lower interest rate than an unsecured bond.

According to the Reaching Beyond Our Borders box in Chapter 19,one way to reduce the risk of investing in the global financial market is to:

Stock certificates identify per share dividends,expressed as a percentage of par value.

As creditors of a firm,bondholders enjoy voting privileges for the firm's board of directors' elections.

A share of preferred stock currently sells for $120.It offers the investor a dividend rate of 8%,on a par value of $100.If the investor owns 500 shares,her total annual dividend will equal:

A stock exchange provides a marketplace where the public can directly buy and sell securities without the help of intermediaries.

A bond offering description reads: "6s of 2015." This means the bond pays 3% interest semi-annually and matures in 2015.

The trading of previously issued securities from one investor to another takes place in the:

Which of the following would be classified as an institutional investor?

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

Ina Vestor inherited $75,000 when her grandfather died and decided to invest it in the Hottie Potatee company.As a student of business,you inform her that she can call a stockbroker who will help her purchase stock on the secondary market.

Investing in common stock can give an individual the opportunity to participate in the success or failure of a corporation.

Zach purchased 200 shares of Fast Track Corporation last year.This year,he plans to hire an attorney to go after the company for failure to pay dividends.If Zach follows through with his plan,he will probably win the lawsuit because companies are obligated to pay their stockholders dividends for owning and holding the firm's stock.

Explain the major advantages and disadvantages of issuing stock as a source of long-term financing.