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Exam 19: Using Securities Markets for Financing and Investing Opportunities

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Question 201

Multiple Choice

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Some analysts refer to ___________ stocks as issues that sell for less than $2 (others say for less than $5) .

A) dollar
B) growth
C) penny
D) discount

E) A) and B)
F) A) and C)

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Question 202

Multiple Choice

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When retained earnings are not enough to meet their long-term funding needs, businesses may be able to raise funds by:

A) selling common stock.
B) petitioning the government for a loan.
C) purchasing additional assets.
D) decreasing their accounts payable.

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

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Question 203

Multiple Choice

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A ________ certificate provides evidence of ownership in a specific corporation.

A bear is an investor that expects stock prices to rise.

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 _____________.

If an investor owns a bond that pays a higher rate of interest than other bonds of similar risk, the investor should be able to sell the bond on the secondary market for more than its face value.

Bond classifications include, but are not limited to Corporate bonds, T-bills, Treasury bonds, Treasury notes, and Municipal bonds.

High-risk, high-interest bonds are called:

Corporations issuing ________ bonds pledge a tangible asset as collateral to reduce the risk incurred by a bondholder.

Investors in ________ preferred stock receive a guarantee that missed dividends will accumulate and potentially be paid later.

Investors trading online:

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. -Penny is impressed with contemporary high-tech companies that have listed their stock on an electronic telecommunications network of securities dealers who trade the stock. She is referring to firms such as Microsoft [MSFT], Google [GOOG], and Apple [AAPL]. Penny ideally would like her company's stock listed on the ____________.

Changes in investor trust and confidence strongly influence stock market prices.

The high start-up costs of web-based businesses cause online brokers to charge higher commissions than traditional brokerage firms.

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

Abraham found a $1,000 face value bond that belonged to his father. He checked The Wall Street Journal and found the bond was currently selling for $1,220. This bond sells at a:

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

Wyoming Mining Corporation makes regular monetary deposits that will accumulate and provide for an orderly retirement of their bonds when they come due in 2025. Wyoming Mining appears to be utilizing a:

By buying a ________ bond, investors will have an option to exchange their bond for shares of common stock in the company at a future date.

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