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Exam 19: Using Securities Markets for Financing and Investing Opportunities

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Question 141

True/False

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Only those individuals and/or companies with a membership on a stock exchange can buy and sell securities on that stock exchange.

A) True
B) False

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Question 142

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Last year Alexis landed her first professional job after graduating from college.She also started her first investment account.Having met with several brokers before choosing someone to work with,Alexis wanted to make certain that her investment choices would provide for long-term growth,yet satisfy her concern for diversification.The person who won her business prepared an asset allocation plan that would start her account by investing in several index funds.Her adviser has offered her a sound way to combine the concern for diversification since index funds are a sensible way for Alexis to start.

A) True
B) False

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Question 143

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_____________ have a set dollar goal the fund manager wants to manage.Once the fund has reached that goal,it does not accept new investors.

If an investor's strategy is: "buy low,and sell high." We could conclude that his optimism regarding future stock price increases indicates that he is:

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

Cynthia plans to buy 100 shares of common stock in the Idaho Spud Corporation.She willingly accepts the risk of this investment because she:

Junk bonds are offered at higher interest rates than government bonds or corporate bonds with good ratings.

Bonds that pay very high interest rates and typically have a higher risk of default are known as:

Having just returned from the Iraq war,David,a young soldier has $25,000 in his savings account.His girlfriend suggested that he talk with an investment advisor and let his money "make more money".David has his eye on a new Ford truck,but he knows that his old Jeep Cherokee will probably last another four years,at which time he will definitely need this money as a down payment or purchase of something new.David should buy high growth stock with his funds because even though they are risky,they also have the greatest potential of bringing in the better return on his investment.

Which of the following trades corporate stocks not listed on the national securities exchanges?

Stock certificates represent evidence of ownership in an organization.A stock certificate contains which of the following?

Growth stocks offer investors the attractive combination of low risk and high returns.

Insider trading laws prevent employees from buying or selling the securities of their employers.

Lupe's stockbroker called to inform Lupe of a margin call that requires that she pay $1,000.This indicates that the value of Lupe's stock has:

Sam Schiester,a stockbroker at Schemes Financial Services Company called you the other day asking if you would like to purchase an IPO."The hot new company,Hottie Potatee is going public,and I thought you might want to get in on it," he exclaimed.If you agree to buy shares of this company,this trade will occur on the secondary market.

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

Which of the following represents a disadvantage of issuing bonds?

Before a corporation's stock can be sold on a major stock exchange,the firm must provide detailed financial information to the Securities and Exchange Commission.

A company often exercises the call provision of a bond if it's available when prevailing interest rates fall below the interest rate currently being paid to bondholders.

Reviewing the stock market performance between 2000 and 2002 reveals a: