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Exam 19: Using Securities Markets for Financing and Investing Opportunities

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Question 81

Multiple Choice

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Abraham found a $1000 face value bond that belonged to his father.He checked the Wall Street Journal and found the bond was currently selling for $1220.This bond sells at a:

A) discount.
B) premium.
C) price that is overvalued.
D) primary market.

E) A) and C)
F) A) and D)

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Question 82

True/False

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Growth stocks are the stocks of corporations whose earnings are expected to grow faster than the overall economy.

A) True
B) False

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Question 83

Multiple Choice

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The risk associated with Firm A's bond is greater than the risk of Firm B's bond.All other things being equal,investors would be willing to pay ________ for Firm B's bond.

Bonds sold at a _______,sell for less than face value.

The new potato-bar restaurant chain,Hottie Potatee wants to raise an undisclosed amount of funds in order to expand the company-owned potato bar stores,internationally.This move will require the CFO (Chief Financial Officer) to:

Normally,the higher the risk associated with a bond issue,the higher the interest rate the organization must offer potential investors.

Insider trading refers to someone who benefits unfairly from information about a security not available to the general public.

A blue chip stock represents a highly speculative stock investment.

_________ represent a powerful force in the buying and selling of corporate securities.

The interest rate paid to bondholders is sometimes called the coupon rate.

The interest earned on municipal bonds is often tax-free at the state level.

Idle Time Gaming,Inc. ,has reached a point in its life where it needs several million dollars in order to expand and become the international company that it says it wants to be in its strategic plan.After consulting with an investment banker who is willing to underwrite the issue,it learned that investors will purchase the stock for $22/share.Idle time will receive a smaller amount for each share that is sold.

After operating for years as a privately held corporation,MidAtlantic Ironworks plans to publicly trade its stock.As a midsized firm,MidAtlantic wants to avoid excessive paperwork,and the fear of being delisted in the future.The ________ provides the best fit for MidAtlantic's plans.

Every time someone sells a stock believing the price has reached its maximum,someone else buys it believing the price will go still higher.

Brokers prefer trading shares of a firm's stock in multiples of 100,known as:

Andrew invested in a new issue corporate bond on the primary market for $1,000,with a coupon rate of 5%,and a maturity date of 2020.The bond was held in his brokerage account electronically,so he did not think about it on a daily basis.On 2012,he thought about selling the bond on the secondary market to help pay for his school tuition.At that time,interest rates had climbed to 6.5%.This was great news for Andrew because now he could sell his bond for more than the principal amount he would receive in 2020.

Investment bankers provide ________ services by purchasing the entire new security issue from a corporation seeking to raise capital,and selling it to interested investors.

The purpose of the SEC's circuit breakers rule is to:

Although the interest rate is fixed when the bond is issued,the interest rate that one firm must pay compared to another may vary depending upon risk factors such as the reputation of the firm.

A mutual fund company buys securities from corporations and governments,and packages them together into a "mutual fund".It then _______________.