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Exam 19: Using Securities Markets for Financing and Investing Opportunities

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Question 101

Multiple Choice

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________ represents the most basic form of company ownership and includes voting rights and dividends, if and when the firm elects to pay dividends.

A) Capital stock
B) Common stock
C) Preferred stock
D) Carrier stock

E) B) and C)
F) C) and D)

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Question 102

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When investment bankers underwrite an issue, they buy at a discounted price the entire stock issue of a firm and then sell the stock, at full price, to private investors.

A) True
B) False

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Question 103

Multiple Choice

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________ have a set dollar goal the fund manager wants to manage. Once the fund has reached that goal, it does not accept new investors.

A recent publication referred to a series of bonds as "the 6s of 35." What does this mean?

Stock certificates identify per share dividends, expressed as a percentage of par value.

The proceeds from a secondary market sale of securities go to the corporation whose security is being traded.

The market price of a share of common stock depends heavily on

Bonds perceived as high risk typically pay ________ interest rates.

Maggie owns 10% or 50,000 common shares of a small biotech company. Although she has enjoyed a lot of control, Maggie realizes that in order for the firm to acquire the funds to grow in a recessionary economy, it will need to issue more stock. Unless she and others exercise preemptive rights,

Victoria places a limit order at $48 and the stock currently sells for $61 per share, the broker will buy the stock for her.

Marshall Manufacturing issues a $1,000 bond, with an interest rate of 10%, and a maturity date of 2025. This creates a liability for Marshall Manufacturing to pay the bondholder

Last week, Caitlin met with her financial planner, Derek. Derek urged Caitlin to consider only government bonds and mutual funds in her portfolio. Since she is in her 20s, Caitlin thinks she can accept a little more risk. You suggest that it is a better plan to follow Derek's advice, rather than research her choices on her own.

Applying what you have learned about investments as introduced to you in Chapter 19, put the following investments in order from least risky to riskiest. Which of following lists begin with the least risky investment and ends with the most risky? Least risky = 1; most risky = 5.

Bond classifications include, but are not limited to corporate bonds, treasury bonds, treasury notes, and municipal bonds.

The corporate certificate issued to an investor that has loaned money to the corporation or government is called a

In the Adapting to Change box, inaccuracies in robo-advisor algorithms have led more investors back to traditional financial advisors.

Game Guys, Inc. 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 $32/share. Game Guys will receive a smaller amount for each share that is sold.

The NASDAQ is a floor-based exchange.

The trading of previously issued securities from one investor to another takes place in the

Tressan wants to purchase stock in a company that is headquartered in Australia. Tressan