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Exam 19: Using Securities Markets for Financing and Investing Opportunities

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Question 81

True/False

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Stock market "circuit breakers" stop stock trading for a short time when the stock market experiences a significant drop in stock values.

A) True
B) False

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Question 82

True/False

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Investors and corporations are on the opposite sides of the interest rate risk scenario. If interest rates go up to 7%, the bondholder holding a bond with a 6% interest rate knows that he could do better. If he is forced to sell his bond on the secondary market before it matures, he will receive less than the face value.

A) True
B) False

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Question 83

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Mark impresses his friends by stating that he just cast four votes in the election of the board of directors of Microsoft, indicating that Mark owns stock in Microsoft.

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.

For starters, investors should consider the return on investment, the liquidity and riskiness of an investment.

In the securities markets, capital gains take place when:

Although you were not fortunate enough to get Chipper's Golf Resort stock [ticker symbol: CHPR] as an IPO, you are still thinking about trying to add some to your portfolio. Last week when you mentioned it to your broker, he said that there are plenty of shares trading on , but, he wanted to send you the company's financial disclosures provided in the before you finalize your decision.

A sinking fund provision decreases the risk of repayment in the minds of the investors.

Insider trading involves the sale of stock to employees at discounted prices.

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

Buying stock on margin allows an investor to borrow funds from the brokerage company as part of the transaction. This the potential return to the investor and the risk.

Corporations issuing bonds pledge a tangible asset as collateral to reduce the risk incurred by a bondholder.

Most businesses prefer to meet their long-term financial needs through:

Which of the following describes a mutual fund that charges no commission to buy or sell its shares?

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.

Which of the following offers low risk, guaranteed income, backed by the full faith and credit of the federal government?

A stock split refers to buying a share of stock at a discounted price if full payment is made at the time of purchase.

In 2008, the NYSE Euronext purchased AMEX, creating the world's largest exchange.

Corporations receive the proceeds for the sale of their stock in:

Prior to declaring a 4-for-1 stock split, Carbello Enterprises' stock sold for $44 a share. Immediately after the stock split, the value of a share of Carbello's stock should be per share.