Question 1

Having just returned from serving with the U.S.Marines in Afghanistan,Alejandro has managed to save most of his earnings.He has enrolled in the local community college and he is living in his parent's lower level while he assimilates back into U.S.life.As his business major friend,he has come to you for advice.He would like to see his $40,000 savings grow,yet he knows that he will need it in about five years when he and his girlfriend are out of school and make plans to get married.He also worries that his car may break down and he will need to invest in another used car.Which of the following would you suggest for Alejandro?

Accepted Answer

A)   In order for Alejandro to see growth,he will need to place the entire $40,000 in one stock offering.You suggest a biotech stock that promises growth.
B)   Alejandro is still young.He needs to consider high growth,higher risk stocks and corporate bonds.He is young enough to recoup his investment if it should experience a loss.
C)   Alejandro should determine what types of companies he is passionate about.Does he like socially conscious companies;does he want to show his appreciation to the defense industry for weaponry that brought him back safely? He should lead with his heart,but should be warned that some of those companies will produce better yields than others.
D)   Since liquidity is a concern,Alejandro would do best to diversify into four to eight different investments,and keep a reasonable amount in cash (a savings account) for emergencies.E) A) and D)
F) None of the above

Question 2

Bondholders can sell their bonds:

Accepted Answer

A)   on the secondary market prior to the maturity date.
B)   early if the bonds were issued with a callable option.
C)   after the bonds are converted into common stock.
D)   after receiving the written permission of other stakeholders.E) None of the above
F) All of the above

Question 3

According to the Securities Act of 1933 it is against the law for a firm that is publicly trading securities to deny an investor from knowing how the firm is doing financially.

Accepted Answer

A) True 
 B)False

Question 4

Erica invests $5,000 in five ABC Corporation bonds that mature in ten years.Unexpectedly just the week after she invests,she has the opportunity to work abroad,which she has always wanted to do,but she needs cash.Which of the following most likely applies to Erica?

Accepted Answer

A)   She can immediately sell the bonds for $5000 plus interest for the week.
B)   She is out of luck.She must keep the bonds for the full ten years.
C)   She may immediately sell the bonds but it is unclear how much money they will sell for.
D)   She will be able to sell them immediately on the primary market.E) B) and D)
F) All of the above

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Firms are at a disadvantage when issuing bonds because the interest rate that they must pay to bondholders is not tax deductible.

Accepted Answer

A) True 
 B)False

Question 7

Before issuing stock or bonds,corporations must meet the disclosure requirements of the Federal Trade Commission (FTC).

Accepted Answer

A) True 
 B)False

Question 8

Stocks that are not listed as trading on one of the national or international stock exchanges can be traded on the OTC,Over-The-Counter exchange.

Accepted Answer

A) True 
 B)False

Question 9

A bond offering description reads: "6s of 2015." This means the bond pays 3% interest semi-annually and matures in 2015.

Accepted Answer

A) True 
 B)False

Question 10

The Dow Jones Industrial Average utilizes the prices of the same 30 companies' stocks each year to ensure consistency.

Accepted Answer

A) True 
 B)False

Question 11

The primary market allows an investor to purchase financial securities from other investors.

Accepted Answer

A) True 
 B)False

Question 12

Securities and Exchange Commission (SEC)rules prohibit the listing of the stock of foreign firms on U.S.stock exchanges.

Accepted Answer

A) True 
 B)False

Question 13

Bonds perceived as high risk typically pay ________ interest rates.

Accepted Answer

A)   higher
B)   lower
C)   more volatile
D)   less volatileE) All of the above
F) C) and D)

Question 14

The maturity date represents the date on which a corporation must pay investors the principal (face value)of their bond.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following situations would be considered insider trading?

Accepted Answer

A)   You open the morning paper and read that Sun Microsystems has a new CEO,who plans to bring in his own team.You decide to call your broker and buy shares of Sun Microsystems.
B)   Your Uncle Jerry works for Microsoft and sends you a news release put out by the company that talks about the acquisition of a Chinese company.You believe this will significantly boost Microsoft revenues so you buy 200 shares through an online service.
C)   You call your stockbroker and ask him to buy 500 shares of your company,Best Dressed Computers,Inc. ,because you just heard from the CEO's administrative assistant that the CEO just got the boot! You figure that this emotional news has got to help the stock price.
D)   Your stockbroker calls and recommends that you diversify your portfolio with a few shares of SLB [Schlaumberger] because SLB's request through the FTC and several international trade commissions to finalize the purchase of two oil companies was successful.You act on this information.E) None of the above
F) A) and B)

Question 16

A mutual fund's purpose is rapid investment growth not to provide diversification for investors.

Accepted Answer

A) True 
 B)False

Question 17

The interest paid to bondholders represents the principal of the bond.

Accepted Answer

A) True 
 B)False

Question 18

Raul and his grandfather receive individualized investment advice from the same chartered financial analyst.When comparing their customized investment recommendations,it is likely that Raul's strategy targets lower risk investment options than the advice received by his grandfather.

Accepted Answer

A) True 
 B)False

Question 19

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

Accepted Answer

A)   SEC
B)   NASDAQ
C)   FCC
D)   ICCE) All of the above
F) A) and B)

Question 20

The market price and growth potential of a common stock depends heavily on the performance of the firm in meeting its objectives.

Accepted Answer

A) True 
 B)False

Exam 19: Using Securities Markets for Financing and Investing Opportunities

Firms are at a disadvantage when issuing bonds because the interest rate that they must pay to bondholders is not tax deductible.

Correct Answer
verified

Bonds perceived as high risk typically pay ________ interest rates.

Correct Answer
verified

The market price and growth potential of a common stock depends heavily on the performance of the firm in meeting its objectives.

Correct Answer
verified

Stocks that are not listed as trading on one of the national or international stock exchanges can be traded on the OTC,Over-The-Counter exchange.

Correct Answer
verified

A mutual fund's purpose is rapid investment growth not to provide diversification for investors.

Correct Answer
verified

The maturity date represents the date on which a corporation must pay investors the principal (face value)of their bond.

Correct Answer
verified

Correct Answer
verified

Erica invests $5,000 in five ABC Corporation bonds that mature in ten years.Unexpectedly just the week after she invests,she has the opportunity to work abroad,which she has always wanted to do,but she needs cash.Which of the following most likely applies to Erica?

Correct Answer
verified

Bondholders can sell their bonds:

Correct Answer
verified

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

Correct Answer
verified

Securities and Exchange Commission (SEC)rules prohibit the listing of the stock of foreign firms on U.S.stock exchanges.

Correct Answer
verified

According to the Securities Act of 1933 it is against the law for a firm that is publicly trading securities to deny an investor from knowing how the firm is doing financially.

Correct Answer
verified

The interest paid to bondholders represents the principal of the bond.

Correct Answer
verified

The primary market allows an investor to purchase financial securities from other investors.

Correct Answer
verified

Raul and his grandfather receive individualized investment advice from the same chartered financial analyst.When comparing their customized investment recommendations,it is likely that Raul's strategy targets lower risk investment options than the advice received by his grandfather.

Correct Answer
verified

Which of the following situations would be considered insider trading?

Correct Answer
verified

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

Correct Answer
verified

Before issuing stock or bonds,corporations must meet the disclosure requirements of the Federal Trade Commission (FTC).

Correct Answer
verified

A bond offering description reads: "6s of 2015." This means the bond pays 3% interest semi-annually and matures in 2015.

Correct Answer
verified

The Dow Jones Industrial Average utilizes the prices of the same 30 companies' stocks each year to ensure consistency.

Correct Answer
verified

Exam 19: Using Securities Markets for Financing and Investing Opportunities

Firms are at a disadvantage when issuing bonds because the interest rate that they must pay to bondholders is not tax deductible.

Correct AnswerverifiedShow Answer

Bonds perceived as high risk typically pay ________ interest rates.

Correct AnswerverifiedShow Answer

The market price and growth potential of a common stock depends heavily on the performance of the firm in meeting its objectives.

Correct AnswerverifiedShow Answer

Stocks that are not listed as trading on one of the national or international stock exchanges can be traded on the OTC,Over-The-Counter exchange.

Correct AnswerverifiedShow Answer

A mutual fund's purpose is rapid investment growth not to provide diversification for investors.

Correct AnswerverifiedShow Answer

The maturity date represents the date on which a corporation must pay investors the principal (face value)of their bond.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Erica invests $5,000 in five ABC Corporation bonds that mature in ten years.Unexpectedly just the week after she invests,she has the opportunity to work abroad,which she has always wanted to do,but she needs cash.Which of the following most likely applies to Erica?

Correct AnswerverifiedShow Answer

Bondholders can sell their bonds:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Securities and Exchange Commission (SEC)rules prohibit the listing of the stock of foreign firms on U.S.stock exchanges.

Correct AnswerverifiedShow Answer

According to the Securities Act of 1933 it is against the law for a firm that is publicly trading securities to deny an investor from knowing how the firm is doing financially.

Correct AnswerverifiedShow Answer

The interest paid to bondholders represents the principal of the bond.

Correct AnswerverifiedShow Answer

The primary market allows an investor to purchase financial securities from other investors.

Correct AnswerverifiedShow Answer

Raul and his grandfather receive individualized investment advice from the same chartered financial analyst.When comparing their customized investment recommendations,it is likely that Raul's strategy targets lower risk investment options than the advice received by his grandfather.

Correct AnswerverifiedShow Answer

Which of the following situations would be considered insider trading?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Before issuing stock or bonds,corporations must meet the disclosure requirements of the Federal Trade Commission (FTC).

Correct AnswerverifiedShow Answer

A bond offering description reads: "6s of 2015." This means the bond pays 3% interest semi-annually and matures in 2015.

Correct AnswerverifiedShow Answer

The Dow Jones Industrial Average utilizes the prices of the same 30 companies' stocks each year to ensure consistency.

Correct AnswerverifiedShow Answer

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