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Exam 19: Using Securities Markets for Financing and Investing Opportunities

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Question 181

True/False

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Ina Vestor inherited $75,000 when her grandfather died and decided to invest it in the Hottie Potatee company. As a student of business, you inform her that she can call a stockbroker who will help her purchase stock on the secondary market.

A) True
B) False

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Question 182

Multiple Choice

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When market interest rates increase, the selling price of existing bonds will:

A) increase.
B) decrease.
C) remain constant.
D) be less volatile.

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

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Question 183

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Investment bankers provide services by purchasing the entire new security issue from a corporation seeking to raise capital, and selling it to interested investors.

Wyoming Mining Corporation makes regular monetary deposits that will accumulate and provide for an orderly retirement of their bonds when they come due in 2015. Wyoming Mining appears to be utilizing a:

The first step in any investment program is to analyze factors such as desired income, cash requirements, and your tolerance for risk.

High-risk, high-interest bonds are called:

On a mutual fund quotation, the Net Asset Value (NAV) = the number of persons who are investing in the fund.

Cumulative preferred stockholders enjoy a promise that missed dividends will accumulate and be paid later, before any dividends are paid to common stockholders.

Using information not available to the public to unfairly benefit in the stock market represents:

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

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.

Many observers suggest that the stock market is dominated by the buying and selling activities of institutional investors.

An executive secretary at a major investment banking firm is asked to copy documents that detail a major merger that's going to be finalized in the next two weeks. This merger will be a positive outcome for one of the company's in this deal. The secretary is thrilled to read about the merger, plans to call her broker immediately and buy stock in the company, and suggests that you should also act on her stock tip. Since you are not employed at her firm your purchase is legal.

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

The ABC Corporation issues a $1,000 bond, with an interest rate of 10%, and a maturity date of 2015. This creates a liability for the ABC Corporation to pay the bondholder:

After buying 100 shares of common stock in the It's All Good Corporation for $20 per share, Popeye later sold the same shares for $25 per share. Popeye's capital gain on the total transaction is:

When brokers talk about trading round lots, they are referring to 50 shares of stock.

Private investors benefit from securities markets primarily by:

Trading curbs motivate traders to utilize their computerized programs to reduce market volatility.

Trading in newly issued securities takes place in the: