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Exam 19: Using Securities Markets for Financing and Investing Opportunities

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Question 181

Multiple Choice

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Realizing that Iron Age Metalworks stock currently sells for $37 a share, Alex directed her broker to buy 100 shares if and when the price dropped to $31. Alex placed a ________ order with her broker.

A) market
B) limit
C) margin
D) confirmation

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

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Question 182

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

A) True
B) False

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Question 183

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A sinking fund is a reserve account where the firm will periodically deposit funds in anticipation of repayment of a bond issue on the maturity date.

A well-diversified portfolio would consist of a variety of investments and even cash for emergencies. The important thing is that the choice of investments spreads the risk. Some investments may perform very well in any one year while others may lag. Those performing well will balance out those that are underperforming.

Callahan and Megan plan to invest in corporate securities. While Callahan plans to retire next year on his 65th birthday, Megan is celebrating her first job after college and her 22nd birthday. Which of the two investors would be well advised to choose a more conservative investment strategy?

If a stock's closing price for the day is 32.47, the stock's price in U.S. dollars would be

A mutual fund pools investors' money and then buys stocks and bonds in many companies in accordance with the purpose of the fund.

As creditors of a firm, bondholders enjoy voting privileges for the firm's board of directors' elections.

To reduce market volatility, ________ require that a key computer is turned off so that program trading is halted.

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

As a registered representative of a stock brokerage firm, a stockbroker works as an intermediary to buy and sell securities for clients.

The maturity date of a bond refers to the date on which the interest payment is due to be paid.

Most investment advisors put mutual funds high on the list of recommended investments for experienced investors, but consider them too risky for beginning investors.

Which of the following terms best describes the relationship between the New York Stock Exchange and the NASDAQ?

Raising long-term funds through the sale of bonds requires the firm to make debt repayment when and if the organization has sufficient cash flow.

The degree of risk in mutual fund investments remains nearly the same from one fund to the next.

Which of the following would be classified as an institutional investor?

Brad told his stockbroker to buy 100 shares of Mineral Mining common stock if and when the price falls to $18 per share. Brad placed a(n)

Many observers suggest that the stock market is dominated by the buying and selling activities of institutional investors.

Investors earn a capital gain when they sell a stock for more than they paid for it.