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Exam 19: Using Securities Markets for Financing and Investing Opportunities

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Question 161

Multiple Choice

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The Securities and Exchange Commission developed ________ to halt trading in the stock market for a short time when the market has experienced a dramatic decrease in prices.

A) program trading
B) on-line investing
C) circuit breakers
D) insider trading

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

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Question 162

True/False

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Both stocks and bonds represent temporary sources of funding for a firm.Eventually they must be repaid.

A) True
B) False

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Question 163

Multiple Choice

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As the chief financial officer CFO) ,you identify that your firm needs to raise additional funds by selling new shares of stock.Which of the following refers to a specialist that assists corporations in the issue and sale of new securities?

A convertible bond allows the bondholder to exchange the bond for:

Which of the following securities guarantees preferred stockholders payment of missed dividends before any dividends are paid to common stockholders?

A company's stock does not have to be listed on one of the major stock exchanges in order to trade.It can be traded on _____________.

Corporations that issue preferred stock incur a legal obligation to pay dividends to those stockholders.

An investor places a ________ order with a broker to sell a stock at the best price available at that time.

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.

Program trading refers to computer trading software that automatically sells stocks when their price dips to a predetermined level.

The advantage of using an online broker is that these services usually provide you with a wealth of information and help you allocate your assets.Sometimes they even help you create an investment plan for life!

After buying 100 shares of common stock in the It's All Good Corporation for $20 per share,Popeye later sold the same shares for $25 per share.Popeye's capital gain on the total transaction is:

Molly Manufacturing plans to issue $75 million of common stock.The firm will likely rely on the advice and assistance of an) :

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

Taking into account the risk/return tradeoff,it would stand to reason that a secured bond holds a lower interest rate than an unsecured bond.

Corporate bonds provide investors the option of reselling the bond back to the issuing corporation at any time during the life of the bond.

Tyler is looking for an investment that will pay a little better than what he can get from a government bond.You suggest that he consider a new issue of debenture bonds by Very Vegetarian that pay 8.5% annually.You explain that Very Vegetarian has operated for a long time,and the debenture feature makes these bonds more secure than others.

Paula's Pasta Paradise plans to offer their first stock sale to the general public.Prior to selling their stock,the firm must:

Buying a stock makes the investor an owner in the firm.

Juan recently invested in 15-year Bellandro Bay Brewery bonds paying 6% interest annually,with a maturity date of 2020.The bonds are callable in 2015.If interest rates go down to 4.5% in the year 2015,the brewery is likely to: