Question 1

If an investor's strategy is: "buy low, and sell high," we could conclude that his optimism regarding future stock price increases indicates that he is

Accepted Answer

A)   bullish.
B)   bearish.
C)   only marginally confident about the stock market.
D)   lionish.E) All of the above
F) None of the above

Question 2

Buying on margin means you are borrowing part of the value of the stock purchase from the brokerage firm.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following represents a disadvantage of issuing bonds?

Accepted Answer

A)   Bonds are permanent debt on the firm's balance sheet.
B)   Dividends are legally required.
C)   Bonds increase the firm's debt.
D)   Bondholders receive voting rights.E) B) and D)
F) A) and B)

Question 4

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

Accepted Answer

A)   margin call
B)   futures trading
C)   buying on margin
D)   dealer's account tradingE) A) and C)
F) None of the above

Question 5

Christopher, a Leafy Greens shareholder, sells 100 shares of Leafy Greens stock to Martin. This transaction takes place in the

Accepted Answer

A)   primary market.
B)   secondary market.
C)   initial offerings market.
D)   security resale market.E) All of the above
F) A) and B)

Question 6

Bonds represent a permanent source of funding for companies. The money firms acquire by issuing bonds does not need to be repaid.

Accepted Answer

A) True 
 B)False

Question 7

An unsecured bond, backed only by the well-respected name of the organization, is called a ________ bond.

Accepted Answer

A)   mortgage
B)   leveraged
C)   debenture
D)   convertibleE) B) and C)
F) None of the above

Question 8

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

Accepted Answer

A)   REITs
B)   ETFs
C)   LOCs
D)   SRTsE) B) and D)
F) A) and B)

Question 9

The risk/return trade-off is inherent in any investment strategy. What are the five key criteria investors should consider when selecting investment options?

Accepted Answer

Investment risk: The chance that an inve...

Question 10

As a legal contract, bonds issued by different companies carry the same level of risk.

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

A)   Individual stocks
B)   Mutual funds
C)   Corporate bonds
D)   Government bondsE) None of the above
F) A) and D)

Question 12

Stocks that are not listed as trading on one of the national or international stock exchanges can be traded on the OTC, over-the-counter exchange.

Accepted Answer

A) True 
 B)False

Question 13

New investors may want to consider ________ funds, which are mutual funds that invest in one particular kind of stock or a particular kind of bond, or even stocks that are representative of the entire market.

Accepted Answer

A)   international
B)   index
C)   global
D)   reliefE) All of the above
F) C) and D)

Question 14

Investors earn a capital gain when they sell a stock for more than they paid for it.

Accepted Answer

A) True 
 B)False

Question 15

Corporations receive the proceeds for the sale of their stock in

Accepted Answer

A)   the primary market.
B)   the secondary market.
C)   both primary and secondary markets.
D)   venture capital markets.E) All of the above
F) A) and C)

Question 16

A company often exercises the call provision of a bond if it's available when prevailing interest rates fall below the interest rate currently being paid to bondholders.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following statements best describes the current legal interpretation of insider trading?

Accepted Answer

A)   Is only possible when you are a board member or a chief officer of a company.
B)   Can be any employee and relatives or friends of the employee.
C)   Would involve members of the SEC (Securities and Exchange Commission)  and the investment banker who handles most of a firm's transactions.
D)   Anyone who has securities information about a particular firm that is not known by the general public.E) None of the above
F) A) and D)

Question 18

Dividends are paid out of a corporation's

Accepted Answer

A)   profit, before taxes.
B)   profit, after taxes.
C)   sales revenue.
D)   capital contributed by bondholders.E) All of the above
F) B) and D)

Question 19

Marshall Manufacturing plans to issue $100 million of common stock. The firm will likely rely on the advice and assistance of a(n)

Accepted Answer

A)   Federal Reserve bank.
B)   commercial bank.
C)   mutual fund.
D)   investment banker.E) A) and B)
F) C) and D)

Question 20

Diversification means buying several different types of investments with the funds you have available for investment.

Accepted Answer

A) True 
 B)False

Exam 19: Using Securities Markets for Financing and Investing Opportunities

Stocks that are not listed as trading on one of the national or international stock exchanges can be traded on the OTC, over-the-counter exchange.

Correct AnswerverifiedShow Answer

As a legal contract, bonds issued by different companies carry the same level of risk.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The risk/return trade-off is inherent in any investment strategy. What are the five key criteria investors should consider when selecting investment options?

Correct AnswerverifiedInvestment risk: The chance that an inve...View AnswerShow Answer

A company often exercises the call provision of a bond if it's available when prevailing interest rates fall below the interest rate currently being paid to bondholders.

Correct AnswerverifiedShow Answer

New investors may want to consider ________ funds, which are mutual funds that invest in one particular kind of stock or a particular kind of bond, or even stocks that are representative of the entire market.

Correct AnswerverifiedShow Answer

Which of the following statements best describes the current legal interpretation of insider trading?

Correct AnswerverifiedShow Answer

Corporations receive the proceeds for the sale of their stock in

Correct AnswerverifiedShow Answer

Bonds represent a permanent source of funding for companies. The money firms acquire by issuing bonds does not need to be repaid.

Correct AnswerverifiedShow Answer

Dividends are paid out of a corporation's

Correct AnswerverifiedShow Answer

Marshall Manufacturing plans to issue $100 million of common stock. The firm will likely rely on the advice and assistance of a(n)

Correct AnswerverifiedShow Answer

If an investor's strategy is: "buy low, and sell high," we could conclude that his optimism regarding future stock price increases indicates that he is

Correct AnswerverifiedShow Answer

Which of the following represents a disadvantage of issuing bonds?

Correct AnswerverifiedShow Answer

Investors earn a capital gain when they sell a stock for more than they paid for it.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Diversification means buying several different types of investments with the funds you have available for investment.

Correct AnswerverifiedShow Answer

Buying on margin means you are borrowing part of the value of the stock purchase from the brokerage firm.

Correct AnswerverifiedShow Answer

An unsecured bond, backed only by the well-respected name of the organization, is called a ________ bond.

Correct AnswerverifiedShow Answer

Christopher, a Leafy Greens shareholder, sells 100 shares of Leafy Greens stock to Martin. This transaction takes place in the

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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Investment risk: The chance that an inve...
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