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Exam 19: Using Securities Markets for Financing and Investing Opportunities

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Question 191

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The call provision set by a company on its bonds benefits the investor.

A) True
B) False

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Question 192

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Investors buying bonds and corporations issuing bonds (both) accept investment risk. Which of the following statements is most correct when it comes to the investment that one or the other party accepts?

A) If investor Joe is holding a bond that pays 5% and market interest rates on similar bonds go down, Joe must hold the bond until maturity because if he were to sell it today, he would have to sell it at a discount.
B) If investor Joe is holding a bond that pays 5% and market interest rates on similar bonds go down, Joe's bond is now worth more than its face value, and if he needed to sell it on the secondary market, he could probably sell it at a premium.
C) If investor Joe is holding a bond that pays 5% and interest rates on similar bonds go up, Joe stands to gain more than the face value of the bond if he were to sell it on the secondary market today.
D) If XYZ Corporation wants to issue bonds to pay for an expansion project, and analysts predict that interest rates are projected to climb

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

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Question 193

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By issuing bonds, a firm's debt level increases which may adversely affect the firm's image in the financial community.

According to the "Reaching Beyond Our Borders" box in Chapter 19, purchasing ADRs is one way that U.S. investors participate in the global securities market.

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

Stocks offering investors a high dividend yield are called:

According to the Thinking Green box, titled, "Invest with Integrity", socially responsible investment funds (SRIs) managed to prosper and grow through the recession and credit crisis of 2008.

From an investor's point of view, corporate bonds offer less risk than government bonds.

The interest paid to bondholders represents the principal of the bond.

When retained earnings are not enough to meet their long-term funding needs, businesses may be able to raise funds by:

The stocks of high quality companies such as Coca-Cola and Microsoft are called blue chip stocks.

When corporations elect to issue two or more shares of stock to existing stockholders for each share they currently own, they have initiated a(n) .

The NASDAQ is a floor-based exchange.

Index funds invest in one specific type of investment, for example, an index fund might only invest in income stocks, companies whose stocks pay dividends.

The Dow Jones Industrial Average reflects the average of the eleven largest corporations traded on the New York Stock Exchange as originally selected by Charles Dow.

Bonds offering a higher interest rate than other bonds of similar risk, will likely sell at a:

The threat of terrorist attacks tends to depress stock market prices.

Although the interest rate is fixed when the bond is issued, the interest rate that one firm must pay compared to another may vary depending upon risk factors such as the reputation of the firm.

Which of the following terms best describes the relationship between the New York Stock Exchange and the NASDAQ?

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