Question 1

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. 
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.

Question 2

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 3

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 trading 
A)  margin call 
B)  futures trading 
C)  buying on margin 
D)  dealer's account trading

Question 4

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. 
A)  bullish. 
B)  bearish. 
C)  only marginally confident about the stock market. 
D)  lionish.

Question 5

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)  convertible 
A)  mortgage 
B)  leveraged 
C)  debenture 
D)  convertible

Question 6

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. 
A)  the primary market. 
B)  the secondary market. 
C)  both primary and secondary markets. 
D)  venture capital markets.

Question 7

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

Question 8

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 9

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

Accepted Answer

A) True 
 B)False

Question 10

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 11

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. 
A)  profit, before taxes. 
B)  profit, after taxes. 
C)  sales revenue. 
D)  capital contributed by bondholders.

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

________ 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)  SRTs 
A)  REITs 
B)  ETFs 
C)  LOCs 
D)  SRTs

Question 15

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 16

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. 
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.

Question 17

________ 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 bonds 
A)  Individual stocks 
B)  Mutual funds 
C)  Corporate bonds 
D)  Government bonds

Question 18

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 19

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)  relief 
A)  international 
B)  index 
C)  global 
D)  relief

Question 20

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. 
A)  primary market. 
B)  secondary market. 
C)  initial offerings market. 
D)  security resale market.

Exam 19: Using Securities Markets for Financing and Investing Opportunities

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

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

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

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

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

Corporations receive the proceeds for the sale of their stock in

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

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.

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

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

Dividends are paid out of a corporation's

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

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

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

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.

Which of the following represents a disadvantage of issuing bonds?

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

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

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.

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

Taking Risks and Making Profits Within the Dynamic Business Environment

Understanding Economics and How It Affects Business

Doing Business in Global Markets

Demanding Ethical and Socially Responsible Behavior

How to Form a Business

Entrepreneurship and Starting a Small Business

Management and Leadership

Structuring Organizations for Todays Challenges

Production and Operations Management

Motivating Employees

Human Resource Management: Finding and Keeping the Best Employees

Dealing With Employeemanagement Issues

Marketing: Helping Buyers Buy

Developing and Pricing Goods and Services

Distributing Products

Using Effective Promotions

Understanding Accounting and Financial Information

Financial Management

Money, Financial Institutions, and the Federal Reserve

Working Within the Legal Environment

Using Technology to Manage Information

Managing Risk

Managing Personal Finances

Filters