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Exam 19: Using Securities Markets for Financing and Investing Opportunities

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Question 191

True/False

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The degree of risk in mutual fund investments remains nearly the same from one fund to the next.

A) True
B) False

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Question 192

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Junk bonds are offered at higher interest rates than government bonds or corporate bonds with good ratings.

A) True
B) False

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Question 193

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For the firm, the cost of paying dividends to common stockholders is higher than the cost of the same amount of interest paid to bondholders.

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.

The investor will receive the face value of the bond on the ________ date.

Issuing bonds is considered debt financing.

A corporate bond provides the owner with the right to sell the bond to other investors at any time during the life of the bond.

Laura read about Living Longer Biotechnology, Inc., and wants to buy 100 common shares at $45 per share. Unfortunately, she only has $3,000 available to invest. One risky strategy Laura could consider is:

Investment bankers assist in the issuing and selling of new securities.

The traditional market barometer used to measure the direction of the stock market is the:

An investment that pools together investors' money in order to buy securities in many different companies or governments is a ___________.

Suzanne wants to purchase stock in a company that is headquartered in Germany. Suzanne:

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

Realizing that Mississippi Industries stock currently sells for $35 a share, Juanita directed her broker to buy 100 shares if and when the price dropped to $33. Juanita placed a ________ order with her broker.

Which of the following describes the process where an investor borrows a percentage of the purchase price of stocks from the brokerage firm?

The trading of previously issued securities from one investor to another takes place in the:

Insider trading laws prevent employees from buying or selling the securities of their employers.

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 IPO (Initial Public Offering) , 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 ____________.

A share of preferred stock currently sells for $120. It offers the investor a dividend rate of 8%, on a par value of $100. If the investor owns 500 shares, her total annual dividend will equal:

The similarities between common stocks and bonds include a face or par value and a fixed rate of return for investors.