Question 1

The number of U.S. companies that are listed on foreign stock exchanges is declining.

Accepted Answer

A) True 
 B)False

Question 2

The prospectus is summarization of the results of detailed financial documents that a firm files with the SEC prior to being given approval to issue securities.

Accepted Answer

A) True 
 B)False

Question 3

Corporate management decisions are influenced by the desire to keep stockholders happy.

Accepted Answer

A) True 
 B)False

Question 4

Bondholders represent creditors of a firm.

Accepted Answer

A) True 
 B)False

Question 5

The investor will receive the face value of the bond on the ________ date.

Accepted Answer

A)   purchase anniversary
B)   declaration
C)   maturity
D)   annual interestE) B) and D)
F) B) and C)

Question 6

Index funds invest in one specific type of investment; for example, an index fund might only invest in income stocks, companies whose stocks pay dividends.

Accepted Answer

A) True 
 B)False

Question 7

Which of these represents a special feature included with some bond issues?

Accepted Answer

A)   no repayment of par value
B)   no obligation to pay dividends
C)   no increase in the firm's debt level
D)   convertibility of a debt security (bond)  into an equity security (stock) E) A) and D)
F) A) and B)

Question 8

The initial cost of investing in mutual funds depends in part on

Accepted Answer

A)   whether the fund is a load or no-load fund.
B)   the risk tolerance of the companies in the fund.
C)   the tax rate on capital gains.
D)   the imposition of government tariffs.E) All of the above
F) B) and D)

Question 9

________ stocks represent investments in emerging fields that have the potential to realize better than average increases in the stock's prices.

Accepted Answer

A)   Blue chip
B)   Penny
C)   Growth
D)   IncomeE) B) and C)
F) A) and D)

Question 10

Your company is privately held but needs additional funding for a planned expansion. Having never issued stock to the public, your firm is well advised to seek the assistance of an investment banker prior to an initial public offering of stock.

Accepted Answer

A) True 
 B)False

Question 11

Maggie owns 10% or 50,000 common shares of a small biotech company. Although she has enjoyed a lot of control, Maggie realizes that in order for the firm to acquire the funds to grow in a recessionary economy, it will need to issue more stock. Unless she and others exercise preemptive rights,

Accepted Answer

A)   the company will surely begin to pay dividends.
B)   the new issue will dilute her ownership.
C)   the new issue will decrease the market price of the stock.
D)   The new issue will be traded on the secondary market.E) All of the above
F) B) and C)

Question 12

Par value reflects the current market price for a stock.

Accepted Answer

A) True 
 B)False

Question 13

Recently, Josiah bought a bond with face value of $1,000. He paid $1,150 for the bond. His bond investment undoubtedly pays a higher interest rate than the going rate for similar bonds currently out on the market.

Accepted Answer

A) True 
 B)False

Question 14

Investors trading online

Accepted Answer

A)   receive more advice than offered by traditional stockbrokers.
B)   buy and sell securities without using a brokerage firm.
C)   generally do their own research and make their own investment decisions.
D)   generally were insured against the market downturn of the early and late 2000s.E) A) and B)
F) C) and D)

Question 15

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 16

Firms establish a ________ so that sufficient funds are available to repay bondholders on the maturity date.

Accepted Answer

A)   mutual fund
B)   sinking fund
C)   retirement account
D)   encumbered accountE) A) and B)
F) B) and C)

Question 17

Dividends are paid out of a corporation's

Accepted Answer

A)   profit, before taxes.
B)   profit, after taxes.
C)   sales revenue.
D)   capital contributed by bondholders.E) B) and C)
F) None of the above

Question 18

Buying on margin means you are borrowing part of the value of the stock purchase from the brokerage firm.

Accepted Answer

A) True 
 B)False

Question 19

The Federal Trade Commission (FTC) regulates the security markets in the United States.

Accepted Answer

A) True 
 B)False

Question 20

Penny stocks represent a high-risk stock investment.

Accepted Answer

A) True 
 B)False

Exam 19: Using Securities Markets for Financing and Investing Opportunities

Recently, Josiah bought a bond with face value of $1,000. He paid $1,150 for the bond. His bond investment undoubtedly pays a higher interest rate than the going rate for similar bonds currently out on the market.

Correct AnswerverifiedShow Answer

Your company is privately held but needs additional funding for a planned expansion. Having never issued stock to the public, your firm is well advised to seek the assistance of an investment banker prior to an initial public offering of stock.

Correct AnswerverifiedShow Answer

________ stocks represent investments in emerging fields that have the potential to realize better than average increases in the stock's prices.

Correct AnswerverifiedShow Answer

Par value reflects the current market price for a stock.

Correct AnswerverifiedShow Answer

Which of these represents a special feature included with some bond issues?

Correct AnswerverifiedShow Answer

Dividends are paid out of a corporation's

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

The prospectus is summarization of the results of detailed financial documents that a firm files with the SEC prior to being given approval to issue securities.

Correct AnswerverifiedShow Answer

Index funds invest in one specific type of investment; for example, an index fund might only invest in income stocks, companies whose stocks pay dividends.

Correct AnswerverifiedShow Answer

Buying on margin means you are borrowing part of the value of the stock purchase from the brokerage firm.

Correct AnswerverifiedShow Answer

The initial cost of investing in mutual funds depends in part on

Correct AnswerverifiedShow Answer

Investors trading online

Correct AnswerverifiedShow Answer

Corporate management decisions are influenced by the desire to keep stockholders happy.

Correct AnswerverifiedShow Answer

Penny stocks represent a high-risk stock investment.

Correct AnswerverifiedShow Answer

Maggie owns 10% or 50,000 common shares of a small biotech company. Although she has enjoyed a lot of control, Maggie realizes that in order for the firm to acquire the funds to grow in a recessionary economy, it will need to issue more stock. Unless she and others exercise preemptive rights,

Correct AnswerverifiedShow Answer

Bondholders represent creditors of a firm.

Correct AnswerverifiedShow Answer

Firms establish a ________ so that sufficient funds are available to repay bondholders on the maturity date.

Correct AnswerverifiedShow Answer

The number of U.S. companies that are listed on foreign stock exchanges is declining.

Correct AnswerverifiedShow Answer

The investor will receive the face value of the bond on the ________ date.

Correct AnswerverifiedShow Answer

The Federal Trade Commission (FTC) regulates the security markets in the United States.

Correct AnswerverifiedShow Answer

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