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Exam 19: Using Securities Markets for Financing and Investing Opportunities

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Question 221

True/False

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A mutual fund that carries a load will require the investor to pay a commission,only if the fund appreciates in price.

A) True
B) False

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Question 222

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Corporations receive the proceeds for the sale of their stock in:

A) the primary market.
B) the secondary market.
C) both primary and secondary markets.
D) venture capital markets.

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

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Question 223

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In an effort to profit from stock market trading,Chad landed a job with the ABC Corporation.Chad intends to use his position to obtain privileged information about his new employer that would not be available to the public.While Chad realizes that he may be benefiting unfairly,as an employee he is not acting illegally.

Government bonds can vary in denomination,but most corporate bonds are issued in ____________.

Investment bankers assist in the issuing and selling of new securities.

Cumulative preferred stock guarantees an investor that if preferred dividends are not paid,then all unpaid dividends will accumulate and be paid in full before any interest is paid to bondholders or common stockholders.

Which of the following federal government agencies has responsibility for regulating the various stock exchanges in the U.S.?

The stock of companies that fail to meet a stock exchange's minimum requirements can be delisted.

Idle Time Gaming announced a 2 for 1 common stock split for investors on record.Which of the following will occur?

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

Investment bankers are in the business of underwriting securities.They profit from purchasing the new stock offering of a corporation at a discount,and then selling those shares of stock to the public at the market price.

Which of the following accurately describes an advantage of selling bonds to raise long-term capital?

When a corporation enjoys a profitable year,dividends must be paid.

Most mutual funds provide investors an opportunity to buy shares directly without using a stockbroker.

In the Making Ethical Decisions box in Chapter 19,the CEO of the pet food company had a personal dilemma: benefit a lot at the expense of others in the company,or benefit a little,and make certain that others with a stake in the business,benefit too.

Bonds represent a major source of long-term financing.What is a bond? Explain the major elements that must be in a bond issue.

The corporate certificate issued to an investor that has loaned money to the corporation or government is called a:

CEOs often receive additional compensation if the firm's stock price appreciates.The Making Ethical Decisions box,titled,"Wagging the Dog",provides the student with a view of the kinds of ethical decisions that CEOs face.CEOs are often asked to consider the best interest of the firm and its employees,before their own self-interest.

Realizing that Mississippi Industries stock currently sells for $35 a share,Juanita directed her broker to buy 100 shares if and when the price dropped to $33.Juanita placed a ________ order with her broker.

Mini-Case Penny Stock is the chairperson of Pirate Recording Company Inc.She is the person responsible for the tremendous growth this company has enjoyed over the past three years.It was Penny's intuition and clever negotiating that enabled the company to sign two very hot recording artists: Half a Dollar and N'elli.These groups have generated profits of over $25 million. The future looks even brighter at the firm because several current and aspiring entertainers have indicated an interest in signing on with Pirate Recording.This incredible growth has delighted everyone at the company,but it has also created a major problem for Penny.Pirate Recording has never been a major player in the recording industry,primarily because of limited capital.In order to take the company to the next level Penny realizes that she will need to expand the firm's personnel and equipment.The amount of new funds required to finance this needed expansion is $150 million.Penny has started to consult with others about how to finance this major expansion of the company. -If stock is issued in Pirate Recording,analysts predict that the company has potential for strong growth.The prospects for dividend payments to stockholders,at least in the beginning,are not good.Pirate Recording will need to retain its earnings in order to grow rapidly.The firm's stock would most likely be classified as a(n) :