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Exam 19: Using Securities Markets for Financing and Investing Opportunities

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Question 151

Multiple Choice

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Norman wants to supplement his current investments with a high-risk, low-priced security. Which of these best fits his strategy of high risk, low price and a potentially high rate of return?

A) time deposits
B) penny stocks
C) blue chip stocks
D) split stocks

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

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Question 152

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Institutional investors include insurance companies, individual investors, and mutual funds.

A) True
B) False

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Question 153

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Stocks represent shares of ownership in a company.

When a corporation enjoys a profitable year, dividends must be paid.

________ represent the best way for investors to have their investments managed by a trained specialist for a fee.

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

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

With recent mergers of stock exchanges, beginning with the New York Stock Exchange merger with Archipelago, and subsequently with Euronext and eventually the Intercontinental Exchange (ICE) in Atlanta purchase of the NYSE Euronext for $8.2 billion. Most exchange floors are symbolic because trades today usually take place on computers.

Preferred stockholders receive dividend payments before common stockholders are paid any dividends.

A bond sold with a sinking fund provision requires the firm to allow a stockholder to exchange his/her bond for a specified number of shares of common stock.

By buying a ________ bond, investors will have an option to exchange their bond for shares of common stock in the company at a future date.

Investing online is usually ________ than trading through a traditional stock brokerage firm.

The corporate certificate issued to an investor that has loaned money to the corporation or government is called a

One funding source under consideration is the issuance of $150 million worth of corporate bonds. A financial advisor predicted that in order for the fast growing company to attract investors, it would have to put up collateral to back up the bond issue. The type of bond the financial advisor suggests is

According to the Connecting Through Social Media box, one goal of the JOBS Act of 2012 (Jumpstart Our Business Startups Act) is to make crowdinvesting more accessible to small businesses.

When Ira purchased 500 shares of preferred stock in the Fairlawn Corporation, his certificate indicated the stock had a par value of $50 per share. This means that Ira

Jason, a stockbroker at Securitas Financial Services, called you the other day asking if you would like to purchase an IPO. "The hot new company, Leafy Greens, is going public, and I thought you might want to get in on it," he exclaimed. If you agree to buy shares of this company, this trade will occur on the secondary market.

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

Issuing stock is considered equity financing.

Preemptive rights provide common stockholders the first right to purchase any new shares of common stock issued by the firm.