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Exam 19: Using Securities Markets for Financing and Investing Opportunities

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Question 71

Multiple Choice

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Yolanda has an ownership interest in many different companies,yet she owns the shares of stock of just one organization.Yolanda undoubtedly owns shares in a(n) :

A) investment trust.
B) security account.
C) options association.
D) mutual funD.A mutual fund is an investment group that buys stocks and bonds of many different organizations and then sells shares in the investment group to the public.

E) None of the above
F) B) and D)

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Question 72

Multiple Choice

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By buying a ________ bond,investors will have an option to exchange their bond for shares of common stock in the company at a future date.

A) discount
B) contingent
C) convertible
D) preferred

E) B) and C)
F) A) and B)

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Question 73

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Mutual funds offer small investors an opportunity to diversify their investments.

Individual investors must determine for themselves the risk level of corporate bonds.

The disadvantages of selling stock to obtain long-term financing include:

When corporations elect to issue two or more shares of stock to existing stockholders for each share they currently own,they have initiated a(n) _________.

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

When investors purchase ________ stock,they receive a priority claim in the payment of dividends,as well as assets,if the business is liquidated.However,these investors do not have voting rights.

Bonds that pay very high interest rates and typically have a higher risk of default are known as:

Ricardo owns 100 shares of stock in the ABC Corporation that currently sell for $100 per share.ABC just announced a two-for-one stock split for all current stockholders.Ricardo now owns $20,000 worth of stock in the ABC Corporation.

What agency sets the margin rates for purchasing stock in the U.S.?

Interest represents the payment to bondholders for the use of their money.

If a publicly traded corporation fails to maintain specific minimum requirements,the exchange can ________ the firm's securities.

Stocks of corporations with earnings expected to increase faster than other stocks are called ________ stocks.

With everything else constant,investors prefer a bond issued with a sinking fund compared to a bond without a sinking fund.

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

If investor Jones buys a share of stock in the ABC Corporation from investor Smith,the ABC Corporation automatically receives a fixed percentage of the selling price.

Ebony Enterprises decides to pay off its bonds several years before the maturity date.Apparently,the bonds ______________.

Growth stocks offer investors the attractive combination of low risk and high returns.

Two kinds of equity financing are: