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Exam 19: Using Securities Markets for Financing and Investing Opportunities

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Question 41

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________ represent a powerful force in the buying and selling of corporate securities.

A) Individual investors
B) Mutual banks
C) Institutional investors
D) Investment banks

E) C) and D)
F) A) and D)

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Question 42

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Bonds represent a major source of long-term financing. What is a bond? Explain the major elements that must be in a bond issue.

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A bond is a corporate certificate indica...

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Question 43

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The cost of a firm borrowing money is called the

A mutual fund that carries a load will require the investor to pay a commission, only if the fund appreciates in price.

Exchange traded funds (ETFs) are like mutual funds because these funds permit the investor to buy shares of a collection of several stocks or shares of a collection of stocks and bonds, but, unlike mutual funds, they are traded during the day on the exchanges.

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

Mini-Case Penny Stock is the chairperson of Pirate Recording Company Inc. She is the person responsible for the tremendous growth this company has enjoyed over the past three years. It was Penny's intuition and clever negotiating that enabled the company to sign two very hot recording artists: Half a Dollar and N'elli. These groups have generated profits of over $25 million. The future looks even brighter at the firm because several current and aspiring entertainers have indicated an interest in signing on with Pirate Recording. This incredible growth has delighted everyone at the company, but it has also created a major problem for Penny. Pirate Recording has never been a major player in the recording industry, primarily because of limited capital. In order to take the company to the next level Penny realizes that she will need to expand the firm's personnel and equipment. The amount of new funds required to finance this needed expansion is $150 million. Penny has started to consult with others about how to finance this major expansion of the company. -If Pirate Recording elects to offer an Initial Public Offering (IPO) , it will involve preparing full financial disclosure with the ________. The firm is advised to solicit the services of an investment banker/underwriter, who will analyze the market and determine the best price for the new issue of Pirate Recording stock. The offering will then be sold on the ________.

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

A stock split immediately increases the value of an investor's holdings.

A bond's face value is the same as its

Another term for portfolio strategy is

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

Lucas purchased 250 shares of Marshall Manufacturing last year but was not paid dividends. He now is going to hire an attorney to sue the company for failure to pay dividends. If he follows through with his plan, Lucas will probably win the lawsuit because companies are obligated to pay their stockholders dividends for owning and holding the firm's stock.

Debenture bonds represent bonds that are not secured by collateral.

Investors in ________ preferred stock receive a guarantee that missed dividends will accumulate and potentially be paid later.

Investors trading online

Jacob impresses his friends by stating that he just cast four votes in the election of the board of directors of Epic Electronics, indicating that Jacob owns ________ stock in Epic Electronics.

Issuing new common stock usually expands ownership, giving all owners the right to vote for the firm's board of directors.

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

Security markets assist businesses in performing their ________ function.