Question 1

Trading in newly issued securities takes place in the:

Accepted Answer

A)   primary market.
B)   secondary market.
C)   initial offerings market.
D)   corporate trading market.E) C) and D)
F) B) and D)

Question 2

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

Accepted Answer

A)   Cooperative
B)   Dependent
C)   Competitive
D)   DisastrousE) A) and D)
F) All of the above

Question 3

Stock exchanges compete with each other for the listing of a corporation's stock.

Accepted Answer

A) True 
 B)False

Question 4

____________ 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) C) and D)
F) All of the above

Question 5

Normally, the higher the risk associated with a bond issue, the higher the interest rate the organization must offer potential investors.

Accepted Answer

A) True 
 B)False

Question 6

U.S. government bonds are considered a secure investment because:

Accepted Answer

A)   the interest rates are protected from inflation and tied to the consumer price index.
B)   they are backed by the full faith and credit of the federal government.
C)   the interest rates are higher than for corporate bonds of equal duration.
D)   if they are lost or stolen the federal government promises to replace them when the proof of purchase is provided.E) A) and B)
F) A) and D)

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

A sinking fund provision decreases the risk of repayment in the minds of the investors.

Accepted Answer

A) True 
 B)False

Question 9

Two kinds of equity financing are:

Accepted Answer

A)   common and preferred stock.
B)   convertible and superior stock.
C)   fixed and variable stock.
D)   common and superior stock.E) A) and B)
F) A) and C)

Question 10

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 11

To reduce market volatility, ________ require that a key computer is turned off so that program trading must be done "by hand" rather than automatically by computer.

Accepted Answer

A)   ultra restraints
B)   trading curbs
C)   market stops
D)   nutmeg haltsE) B) and C)
F) C) and D)

Question 12

A margin call requires an investor to repay money borrowed from the broker used to purchase the stock.

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

The stock of companies that fail to meet a stock exchange's minimum requirements can be delisted.

Accepted Answer

A) True 
 B)False

Question 15

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.

Accepted Answer

A) True 
 B)False

Question 16

Another term for portfolio strategy is:

Accepted Answer

A)   modulation model
B)   formula model
C)   allocation model
D)   equity modelE) B) and D)
F) B) and C)

Question 17

Online trading services target those investors who:

Accepted Answer

A)   require the research and advice of a licensed stockbroker.
B)   are interested in purchasing government bonds.
C)   are willing to do their own research.
D)   trade the securities of foreign firms.E) C) and D)
F) None of the above

Question 18

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) :

Accepted Answer

A)   indexed security.
B)   mutual fund.
C)   diversification bond.
D)   stock cooperative.E) B) and C)
F) A) and D)

Question 19

An initial public offering (IPO) represents the first time a corporation's stock is offered and sold to persons outside of the company.

Accepted Answer

A) True 
 B)False

Question 20

Demetrius recently bought a bond with face value of $1,000. He paid $1,150 for the bond. Demetrius's bond investment undoubtedly pays a higher interest rate than the going rate for similar bonds currently out on the market.

Accepted Answer

A) True 
 B)False

Exam 19: Using Securities Markets for Financing and Investing Opportunities

Demetrius recently bought a bond with face value of $1,000. He paid $1,150 for the bond. Demetrius's bond investment undoubtedly pays a higher interest rate than the going rate for similar bonds currently out on the market.

Correct AnswerverifiedShow Answer

An initial public offering (IPO) represents the first time a corporation's stock is offered and sold to persons outside of the company.

Correct AnswerverifiedShow Answer

Stock exchanges compete with each other for the listing of a corporation's stock.

Correct AnswerverifiedShow Answer

U.S. government bonds are considered a secure investment because:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

Two kinds of equity financing are:

Correct AnswerverifiedShow Answer

A margin call requires an investor to repay money borrowed from the broker used to purchase the stock.

Correct AnswerverifiedShow Answer

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

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

The stock of companies that fail to meet a stock exchange's minimum requirements can be delisted.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A sinking fund provision decreases the risk of repayment in the minds of the investors.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Trading in newly issued securities takes place in the:

Correct AnswerverifiedShow Answer

To reduce market volatility, ________ require that a key computer is turned off so that program trading must be done "by hand" rather than automatically by computer.

Correct AnswerverifiedShow Answer

Normally, the higher the risk associated with a bond issue, the higher the interest rate the organization must offer potential investors.

Correct AnswerverifiedShow Answer

Another term for portfolio strategy is:

Correct AnswerverifiedShow Answer

Online trading services target those investors who:

Correct AnswerverifiedShow Answer

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) :

Correct AnswerverifiedShow Answer

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Investment risk.
The chance that an inve...
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