Question 1

Which of these represents a special feature included with some bond issues?

Accepted Answer

A)   no repayment of par value
B)   no obligation to pay dividends
C)   no increase in the firm's debt level
D)   convertibility of a debt security (bond)  into an equity security (stock) E) A) and B)
F) A) and C)

Question 2

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

Accepted Answer

A)   will never get less than $50 per share when selling his stock.
B)   has shares that are currently worth $50 per share.
C)   may receive dividends based on this value per share.
D)   must receive a $5 dividend each and every year.E) None of the above
F) C) and D)

Question 3

Ernesto told his broker to buy 75 shares of PharmaONE at the best possible price available that day. These directions indicate that Ernesto placed a ________ order with his broker.

Accepted Answer

A)   market
B)   limit
C)   margin
D)   splitE) B) and D)
F) A) and B)

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

If a company announces a stock split, the investor may receive two or more shares of the company stock, for every one share that he/she holds.

Accepted Answer

A) True 
 B)False

Question 7

Samantha has a brokerage account with a large investment firm. This morning her broker called asking if she is interested in participating in an IPO. He went on to say that he could get her 300 shares for $33/share. If Samantha agrees to buy the IPO, the trade will take place in the

Accepted Answer

A)   fair trade market.
B)   outer market.
C)   primary market.
D)   secondary market.E) None of the above
F) All of the above

Question 8

Like many stock analysts, Layla believes that program trading greatly decreases the volatility of stock market prices.

Accepted Answer

A) True 
 B)False

Question 9

A stock exchange provides a marketplace where the public can directly buy and sell securities without the need for a membership.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

Investing in common stock can give an individual the opportunity to participate in the success or failure of a corporation.

Accepted Answer

A) True 
 B)False

Question 12

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 (SEC).

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

A)   Value Line Composite (VL
C)  .
B)   Moody's Investment Index (MII) .
C)   Dow Jones Industrial Average (the Dow) .
D)   Fitch's Industrial Index (FI
A)  .E) A) and B)
F) B) and C)

Question 14

________ means that the mutual fund company does not show a fee or commission for investing in the fund.

Accepted Answer

A)   Front load
B)   Back load
C)   Double load
D)   No loadE) None of the above
F) A) and D)

Question 15

Buying stock on margin lowers the overall risk for the investor.

Accepted Answer

A) True 
 B)False

Question 16

Brad told his stockbroker to buy 100 shares of Mineral Mining common stock if and when the price falls to $18 per share. Brad placed a(n)

Accepted Answer

A)   market order.
B)   odd-lot order.
C)   limit order.
D)   contingent order.E) B) and C)
F) A) and D)

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

Issuing bonds is considered debt financing.

Accepted Answer

A) True 
 B)False

Question 19

Greg purchased 2,000 shares of common stock of the Rite Track Corporation last year. He learned several months later that the stock does not pay a dividend. Greg should proceed to

Accepted Answer

A)   hire an attorney and file a lawsuit.
B)   hire an attorney and go after the registered representative that brokered the trade.
C)   do the proper research before he invests.
D)   immediately proceed to sell the shares.E) B) and C)
F) A) and D)

Question 20

Which of the following securities guarantees preferred stockholders payment of missed dividends before any dividends are paid to common stockholders?

Accepted Answer

A)   call provision
B)   cumulative preferred
C)   participating preferred
D)   convertible preferredE) B) and D)
F) A) and D)

Exam 19: Using Securities Markets for Financing and Investing Opportunities

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 (SEC).

Correct AnswerverifiedShow Answer

Issuing bonds is considered debt financing.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Brad told his stockbroker to buy 100 shares of Mineral Mining common stock if and when the price falls to $18 per share. Brad placed a(n)

Correct AnswerverifiedShow Answer

Samantha has a brokerage account with a large investment firm. This morning her broker called asking if she is interested in participating in an IPO. He went on to say that he could get her 300 shares for $33/share. If Samantha agrees to buy the IPO, the trade will take place in the

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Greg purchased 2,000 shares of common stock of the Rite Track Corporation last year. He learned several months later that the stock does not pay a dividend. Greg should proceed to

Correct AnswerverifiedShow Answer

Which of the following securities guarantees preferred stockholders payment of missed dividends before any dividends are paid to common stockholders?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

________ means that the mutual fund company does not show a fee or commission for investing in the fund.

Correct AnswerverifiedShow Answer

A stock exchange provides a marketplace where the public can directly buy and sell securities without the need for a membership.

Correct AnswerverifiedShow Answer

Like many stock analysts, Layla believes that program trading greatly decreases the volatility of stock market prices.

Correct AnswerverifiedShow Answer

Ernesto told his broker to buy 75 shares of PharmaONE at the best possible price available that day. These directions indicate that Ernesto placed a ________ order with his broker.

Correct AnswerverifiedShow Answer

If a company announces a stock split, the investor may receive two or more shares of the company stock, for every one share that he/she holds.

Correct AnswerverifiedShow Answer

Buying stock on margin lowers the overall risk for the investor.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Investing in common stock can give an individual the opportunity to participate in the success or failure of a corporation.

Correct AnswerverifiedShow Answer

Which of these represents a special feature included with some bond issues?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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