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Exam 19: Using Securities Markets for Financing and Investing Opportunities

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Question 171

True/False

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The bond was held in his brokerage account electronically, so he did not think about it on a daily basis. On 2012, he thought about selling the bond on the secondary market to help pay for his school tuition. At that time, interest rates had climbed to 6.5%. This was great news for Andrew because now he could sell his bond for more than the principal amount he would receive in 2020.

A) True
B) False

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Question 172

Multiple Choice

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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,

A) the company will surely begin to pay dividends.
B) the new issue will dilute her ownership.
C) the new issue will decrease the market price of the stock.
D) The new issue will be traded on the secondary market.

E) B) and D)
F) All of the above

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Question 173

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The Dow Jones Industrial Average reflects the daily average price of all the stocks traded on the New York Stock Exchange.

Every time someone sells a stock believing the price has reached its maximum, someone else buys it believing the price will go still higher.

According to the "Reaching Beyond Our Borders" box in Chapter 19, one way to reduce the risk of investing in the global financial market is to:

Stock quotations are now available online. Which of the following pieces of information is not likely to be on the stock quotation?

While common stockholders of corporations have voting rights, preferred stockholders generally do not.

A no-load mutual fund charges no commission fees to buy or sell its shares.

Georgia Corporation, known for its very generous dividend policy, easily attracts investors. These dividend payments basically represent:

Which of the following is not an important criterion to consider before investing?

Before a corporation's stock can be sold on a major stock exchange, the firm must provide detailed financial information to the Securities and Exchange Commission.

An income stock offers investors a relatively high dividend yield on their investment.

Which of the following organizations provides an assessment of the relative level of risk of a particular firm's bond issue?

Preferred stock may include callable and convertible provisions.

In 2005, the New York Stock Exchange made a smart move to increase its competitive position, it merged with a firm that owned state of the art electronic trading technology.

A penny stock generally sells for a low initial price, pays regular dividends and provides consistent growth in the stock's value.

Young investors place more importance on low risk investments, while elderly investors prefer significant growth in the value of their investments.

U.S. government bonds are considered safe investments. Therefore such Government bonds usually have a lower interest rate than corporate bonds.

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

Bonds sold at a discount are sold for more than the bond's face value.