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Exam 19: Using Securities Markets for Financing and Investing Opportunities

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Question 71

Multiple Choice

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________ involve(s) computer instructions that automatically sell stocks whose value has dropped by a predetermined amount.

A) Software action
B) Program trading
C) Curbs
D) Circuit-breakers

E) A) and C)
F) A) and D)

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Question 72

True/False

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Preferred stockholders have voting rights privileges not shared by common stockholders.

A) True
B) False

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Question 73

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If a company announces a stock split,the investor may receive two or more shares of the company stock,for every one share that he/she holds.

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?

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

Ellie owns stock in Rotary Technologies.Her stock provides a priority claim on dividend payments and on the firm's assets in the event of liquidation.However,her ________ stock ownership does not offer her voting rights.

Buying stock on margin allows an investor to borrow funds from the brokerage company as part of the transaction.This __________ the potential return to the investor and ___________ the risk.

Exchange traded funds are like mutual funds because these funds permit the investor to buy shares of a collection of several stocks or shares of a collection of stocks and bonds,but,unlike mutual funds,they are traded during the day on the exchanges.

An investor placing a market order with a broker agrees to buy or sell a stock immediately at the best price available.

With recent mergers of stock exchanges,beginning with the New York Stock Exchange merger with Archipilago,and subsequently with Euronext and then Deutsche Borse,most exchange floors are symbolic because trades usually take place via computers.

The maturity date of a bond refers to the date on which the interest payment is due to be paid.

Corporations that issue preferred stock incur a legal obligation to pay dividends to those stockholders.

A company's stock does not have to be listed on one of the major stock exchanges in order to trade.It can be traded on ____________.

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

"Black Tuesday" refers to the stock market crash that occurred in October 1987.

Trading in newly issued securities takes place in the:

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.

With everything else constant,investors prefer a bond issued with a sinking fund compared to a bond without a sinking fund.

Many stock market analysts suggest that program trading was a big cause of the stock market crash of 1987.

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