Question 1

In the language of bonds, the terms "principal" and "face value" are synonymous.

Accepted Answer

A) True 
 B)False

Question 2

In the Legal Briefcase box in Chapter 19, the securitization of subprime loans is explained as one of the causes of the economic recession of 2008-2009.

Accepted Answer

A) True 
 B)False

Question 3

Issuing increases a firm's debt and may adversely affect the financial community's perception of the firm.

Accepted Answer

A)  common stock
B)  bonds
C)  preferred stock
D)  retained earningsE) A) and C)
F) None of the above

Question 4

Corporations receive needed funds when they sell a new issuance of a security in the primary market.

Accepted Answer

A) True 
 B)False

Question 5

For investors who desire the least possible risk, a share of stock in an established corporation provides the safest investment.

Accepted Answer

A) True 
 B)False

Question 6

If a stock's closing price for the day is 32.47, the stock's price in U.S. dollars would be:

Accepted Answer

A)  $32 plus a $.47 commission.
B)  $32.47.
C)  in between a low of $32 and a high of $47.
D)  $3,247.E) A) and B)
F) None of the above

Question 7

A margin call requires an investor to repay money borrowed from the broker used to purchase the stock.

Accepted Answer

A) True 
 B)False

Question 8

Stocks of corporations with earnings expected to increase faster than other stocks are called stocks.

Accepted Answer

A)  penny
B)  growth
C)  preferred
D)  blue skyE) None of the above
F) B) and D)

Question 9

Yesterday, Alberto purchased on margin 100 shares of stock in the ABC Corporation for $40 per share. Today, the price of the shares dropped by $10 per share. Alberto expects his broker to issue a margin call.

Accepted Answer

A) True 
 B)False

Question 10

Lamont bought a share of stock in the ABC Corporation for $50. When he sold the stock later that year, he received $70. The par value of the stock is $5. Lamont's capital gain is $25.

Accepted Answer

A) True 
 B)False

Question 11

Alejandro relies on his stockbroker to execute his buy and sell orders for shares of stock in different companies. He has found that the process of buying or selling a share of stock on a major stock exchange normally takes:

Accepted Answer

A)  weeks.
B)  seconds.
C)  days.
D)  months.E) B) and C)
F) All of the above

Question 12

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

Accepted Answer

A)  The stock price will increase to reflect the value of 2 shares for every one share.
B)  Each share will be worth ½ of its previous value, but shareholders total value of Idle Time Gaming will remain the same.
C)  The value of Idle Time common stock will remain the same, for a short period of time, and then experience a guaranteed growth spurt.
D)  The shareholders will immediately sell their shares immediately after the split and take their capital gains, as well as provide others anE) A) and B)
F) C) and D)

Question 13

The Dow Jones Industrial Average represents the average price of industrial stocks.

Accepted Answer

A)  11
B)  30
C)  500
D)  all theE) A) and B)
F) A) and C)

Question 14

The New York Stock Exchange will underwrite new issues of stocks or bonds.

Accepted Answer

A) True 
 B)False

Question 15

Once a stock exchange agrees to list a company, the firm can be assured that it will always be listed by that exchange.

Accepted Answer

A) True 
 B)False

Question 16

Greg purchased 2000 shares of common stock of the Rite Track Corporation last year. He learned several months later that the stock does not pay a dividend. Greg should proceed to:

Accepted Answer

A)  Hire an attorney and file a lawsuit.
B)  Hire an attorney and go after the registered representative that brokered the trade.
C)  Do the proper research before he invests.
D)  Immediately proceed to sell the shares.E) All of the above
F) None of the above

Question 17

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) C) and D)
F) A) and B)

Question 18

Bonds perceived as high risk typically pay interest rates.

Accepted Answer

A)  higher
B)  lower
C)  more volatile
D)  less volatileE) A) and B)
F) None of the above

Question 19

The first step in establishing an investment strategy is the:

Accepted Answer

A)  determination of the investor's objectives.
B)  selection of the type of security.
C)  selection of a stock broker.
D)  timing of the market's fluctuations.E) A) and B)
F) A) and C)

Question 20

Similar to bond investments, preferred shares can be , meaning the firm may buy them back.

Accepted Answer

A)  cumulative
B)  callable
C)  responsive
D)  retroactiveE) A) and B)
F) C) and D)

Exam 19: Using Securities Markets for Financing and Investing Opportunities

Yesterday, Alberto purchased on margin 100 shares of stock in the ABC Corporation for $40 per share. Today, the price of the shares dropped by $10 per share. Alberto expects his broker to issue a margin call.

Correct AnswerverifiedShow Answer

Greg purchased 2000 shares of common stock of the Rite Track Corporation last year. He learned several months later that the stock does not pay a dividend. Greg should proceed to:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Bonds perceived as high risk typically pay interest rates.

Correct AnswerverifiedShow Answer

For investors who desire the least possible risk, a share of stock in an established corporation provides the safest investment.

Correct AnswerverifiedShow Answer

The Dow Jones Industrial Average represents the average price of industrial stocks.

Correct AnswerverifiedShow Answer

The first step in establishing an investment strategy is the:

Correct AnswerverifiedShow Answer

Once a stock exchange agrees to list a company, the firm can be assured that it will always be listed by that exchange.

Correct AnswerverifiedShow Answer

Similar to bond investments, preferred shares can be , meaning the firm may buy them back.

Correct AnswerverifiedShow Answer

Alejandro relies on his stockbroker to execute his buy and sell orders for shares of stock in different companies. He has found that the process of buying or selling a share of stock on a major stock exchange normally takes:

Correct AnswerverifiedShow Answer

In the language of bonds, the terms "principal" and "face value" are synonymous.

Correct AnswerverifiedShow Answer

Stocks of corporations with earnings expected to increase faster than other stocks are called stocks.

Correct AnswerverifiedShow Answer

Lamont bought a share of stock in the ABC Corporation for $50. When he sold the stock later that year, he received $70. The par value of the stock is $5. Lamont's capital gain is $25.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In the Legal Briefcase box in Chapter 19, the securitization of subprime loans is explained as one of the causes of the economic recession of 2008-2009.

Correct AnswerverifiedShow Answer

A margin call requires an investor to repay money borrowed from the broker used to purchase the stock.

Correct AnswerverifiedShow Answer

The New York Stock Exchange will underwrite new issues of stocks or bonds.

Correct AnswerverifiedShow Answer

Corporations receive needed funds when they sell a new issuance of a security in the primary market.

Correct AnswerverifiedShow Answer

Issuing increases a firm's debt and may adversely affect the financial community's perception of the firm.

Correct AnswerverifiedShow Answer

If a stock's closing price for the day is 32.47, the stock's price in U.S. dollars would be:

Correct AnswerverifiedShow Answer

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