Question 1

Creating a portfolio by buying several different types of investments to spread the risk of investing is called ______________.

Accepted Answer

A)   modulation
B)   diversification
C)   re-allocation
D)   formula investingE) B) and C)
F) C) and D)

Question 2

As a new father,Dave plans to accumulate funds over the next eighteen years to help pay for his son's college education.Security markets provide Dave with:

Accepted Answer

A)   financing opportunities.
B)   investing opportunities.
C)   opportunities to reduce his taxes.
D)   borrowing opportunities.E) A) and D)
F) B) and D) B

Question 3

Bonds sold at a discount are sold for more than the bond's face value.

Accepted Answer

A) True 
 B)False

Question 4

A company with cash flow shortages must pay common stockholders their dividends before paying preferred stockholders their dividends.

Accepted Answer

A) True 
 B)False

Question 5

Investment bankers ________ new issues of bonds or stocks by purchasing,at a discount,the entire stock or bond issue of a firm and selling the issue to interested investors at a higher price.

Accepted Answer

A)   syndicate
B)   underwrite
C)   guarantee
D)   sanctionE) A) and D)
F) All of the above

Question 6

Stock market "circuit breakers" stop stock trading for a short time when the stock market experiences a significant drop in stock values.

Accepted Answer

A) True 
 B)False

Question 7

U.S.government bonds are considered a secure investment because:

Accepted Answer

A)   the interest rates are protected from inflation and tied to the consumer price index.
B)   they are backed by the full faith and credit of the federal government.
C)   the interest rates are higher than for corporate bonds of equal duration.
D)   if they are lost or stolen the federal government promises to replace them when the proof of purchase is provideD.E) All of the above
F) None of the above B

Question 8

Bond prices in the newspaper or online are quoted as a percentage of their face value of $1000.If the bond price is 103.25,this bond's value =

Accepted Answer

A)   $103.25.
B)   $1,032.50.
C)   $10,325.00.
D)   $10.33.E) A) and D)
F) C) and D)

Question 9

Seattle Music,Inc.recently offered bonds for sale to the public.The unsecured corporate bond paid interest of 9% to investors for the twenty-year life of the bonds.Seattle Music is obligated to:

Accepted Answer

A)   Represent each bondholder as an owner in the company.
B)   Pay interest semi-annually.
C)   Pay stockholders their dividends,before paying bondholders their interest.
D)   Pay each owner their principal if and when they want to cash-in their investment.E) B) and D)
F) C) and D)

Question 10

The similarities between common stocks and bonds include a face or par value and a fixed rate of return for investors.

Accepted Answer

A) True 
 B)False

Question 11

In the securities markets,capital gains take place when:

Accepted Answer

A)   the value of the Dow Jones Industrial Average appreciates.
B)   a security sells for more than the original purchase price.
C)   additional investors buy stock in an existing corporation.
D)   stockholders profit from the firm's use of leverage.E) A) and B)
F) B) and D) B

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

As the chief financial officer (CFO) ,you identify that your firm needs to raise additional funds by selling new shares of stock.Which of the following refers to a specialist that assists corporations in the issue and sale of new securities?

Accepted Answer

A)   An investment banker
B)   A commodities broker
C)   An officer of the Securities and Exchanges Commission (SE
C)  
D)   An institutional investor advisorE) C) and D)
F) A) and C)

Question 14

Describe four different types of common stock that an investor may consider,depending upon the investor's strategy and risk tolerance.

Accepted Answer

Blue Chip Stocks: These are the stocks o...

Question 15

Dividends represent a portion of a firm's profits that are distributed to bondholders first then stockholders.

Accepted Answer

A) True 
 B)False

Question 16

The interest rate on a AAA rated government treasury bond is 3.5%.A secured corporate bond is likely to pay:

Accepted Answer

A)   The same as the treasury bond.
B)   Less than the treasury bond.
C)   More than the treasury bond.
D)   The same as the treasury bond,but with a shorter maturity date.E) A) and C)
F) A) and B)

Question 17

For the firm,the cost of paying dividends to common stockholders is higher than the cost of the same amount of interest paid to bondholders.

Accepted Answer

A) True 
 B)False

Question 18

After buying 100 shares of common stock in the It's All Good Corporation for $20 per share,Popeye later sold the same shares for $25 per share.Popeye's capital gain on the total transaction is:

Accepted Answer

A)   $5.
B)   $50.
C)   $500.
D)   $2,500.E) None of the above
F) C) and D)

Question 19

Jennifer prefers corporate bonds as an investment option because investors always receive the face value of the bond whenever it is sold.

Accepted Answer

A) True 
 B)False

Question 20

A Bond's face value is the same as its:

Accepted Answer

A)   risk rating.
B)   principal.
C)   coupon value.
D)   yielD.E) All of the above
F) C) and D)

Exam 19: Using Securities Markets for Financing and Investing Opportunities

Creating a portfolio by buying several different types of investments to spread the risk of investing is called ______________.

Correct AnswerverifiedShow Answer

As a new father,Dave plans to accumulate funds over the next eighteen years to help pay for his son's college education.Security markets provide Dave with:

Correct AnswerverifiedB

Bonds sold at a discount are sold for more than the bond's face value.

Correct AnswerverifiedShow Answer

A company with cash flow shortages must pay common stockholders their dividends before paying preferred stockholders their dividends.

Correct AnswerverifiedShow Answer

Investment bankers ________ new issues of bonds or stocks by purchasing,at a discount,the entire stock or bond issue of a firm and selling the issue to interested investors at a higher price.

Correct AnswerverifiedShow Answer

Stock market "circuit breakers" stop stock trading for a short time when the stock market experiences a significant drop in stock values.

Correct AnswerverifiedShow Answer

U.S.government bonds are considered a secure investment because:

Correct AnswerverifiedB

Bond prices in the newspaper or online are quoted as a percentage of their face value of $1000.If the bond price is 103.25,this bond's value =

Correct AnswerverifiedShow Answer

Seattle Music,Inc.recently offered bonds for sale to the public.The unsecured corporate bond paid interest of 9% to investors for the twenty-year life of the bonds.Seattle Music is obligated to:

Correct AnswerverifiedShow Answer

The similarities between common stocks and bonds include a face or par value and a fixed rate of return for investors.

Correct AnswerverifiedShow Answer

In the securities markets,capital gains take place when:

Correct AnswerverifiedB

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

Correct AnswerverifiedShow Answer

As the chief financial officer (CFO) ,you identify that your firm needs to raise additional funds by selling new shares of stock.Which of the following refers to a specialist that assists corporations in the issue and sale of new securities?

Correct AnswerverifiedShow Answer

Describe four different types of common stock that an investor may consider,depending upon the investor's strategy and risk tolerance.

Correct AnswerverifiedBlue Chip Stocks: These are the stocks o...View AnswerShow Answer

Dividends represent a portion of a firm's profits that are distributed to bondholders first then stockholders.

Correct AnswerverifiedShow Answer

The interest rate on a AAA rated government treasury bond is 3.5%.A secured corporate bond is likely to pay:

Correct AnswerverifiedShow Answer

For the firm,the cost of paying dividends to common stockholders is higher than the cost of the same amount of interest paid to bondholders.

Correct AnswerverifiedShow Answer

After buying 100 shares of common stock in the It's All Good Corporation for $20 per share,Popeye later sold the same shares for $25 per share.Popeye's capital gain on the total transaction is:

Correct AnswerverifiedShow Answer

Jennifer prefers corporate bonds as an investment option because investors always receive the face value of the bond whenever it is sold.

Correct AnswerverifiedShow Answer

A Bond's face value is the same as its:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
B

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
B

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
B

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Blue Chip Stocks: These are the stocks o...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified