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Exam 19: Using Securities Markets for Financing and Investing Opportunities

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Question 61

Multiple Choice

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Private investors benefit from securities markets primarily by:

A) having a place to buy and sell stocks and bonds.
B) obtaining the capital they need to finance their operations.
C) securing memberships on various stock exchanges.
D) participating in the primary markets of investment bankers.

E) None of the above
F) A) and C)

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Question 62

Multiple Choice

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.

A) dollar
B) growth
C) penny
D) discount

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

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Question 63

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The Federal Trade Commission (FTC)regulates the security markets in the United States.

A bond represents a contract of indebtedness issued by a corporation that promises payment of a principal amount plus interest at a specified future date.

As the chief financial officer (CFO) ,you identify that your firm needs to raise additional funds by selling new shares of stock.Which of the following refers to a specialist that assists corporations in the issue and sale of new securities?

Preferred stockholders possess the first right to purchase any new stock the company issues.

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

The secondary market is where investors (both individuals and companies)go to find someone who is interested in selling their investments to them.

The market price and growth potential of a common stock depends heavily on the performance of the firm in meeting its objectives.

Corporate bonds provide investors the option of reselling the bond back to the issuing corporation at any time during the life of the bond.

To reduce the risk of investing in an individual stock,an ownership position in many different companies can be achieved by purchasing shares in a(n) :

Before issuing stock or bonds,corporations must meet the disclosure requirements of the Federal Trade Commission (FTC).

__________ are collections of stocks that are traded on exchanges but are traded more like individual stocks than like mutual funds.

Issuing ________ increases a firm's debt and may adversely affect the financial community's perception of the firm.

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

When comparing the investments of different mutual funds,little variation in the risk level exists.

If you are willing to hold on to your growth stock long enough,at least five years or more,you will realize capital gains.

Trading in newly issued securities takes place in the:

Growth stocks are the stocks of corporations whose earnings are expected to grow faster than the overall economy.

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.