Question 1

Penny stocks represent a high-risk stock investment.

Accepted Answer

A) True 
 B)False

Question 2

How do investment bankers generate revenues for their firms?

Accepted Answer

A)  They invest their own funds, or the funds of others, in mutual funds and commodities. 
B)  They earn commissions by managing the investments of insurance companies and mutual funds. 
C)  They buy, at a discount, the entire issue of a new security and then sell the issue to investors at full price. 
D)  They receive consulting revenues from the advice they offer the Securities and Exchange Commission. 
A)  They invest their own funds, or the funds of others, in mutual funds and commodities. 
B)  They earn commissions by managing the investments of insurance companies and mutual funds. 
C)  They buy, at a discount, the entire issue of a new security and then sell the issue to investors at full price. 
D)  They receive consulting revenues from the advice they offer the Securities and Exchange Commission.

Question 3

Epic Electronics decides to pay off its bonds several years before the maturity date. Apparently, the bonds

Accepted Answer

A)  contain an early dismissal clause. 
B)  have an early retirement option. 
C)  are callable. 
D)  have discount authorization. 
A)  contain an early dismissal clause. 
B)  have an early retirement option. 
C)  are callable. 
D)  have discount authorization.

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

To reduce market volatility, ________ require that a key computer is turned off so that program trading is halted.

Accepted Answer

A)  ultra restraints 
B)  trading curbs 
C)  market stops 
D)  nutmeg halts 
A)  ultra restraints 
B)  trading curbs 
C)  market stops 
D)  nutmeg halts

Question 6

Buying several different investment alternatives to spread the risk helps an investor achieve

Accepted Answer

A)  lower rates of return. 
B)  lower commission fees. 
C)  isolation. 
D)  diversification. 
A)  lower rates of return. 
B)  lower commission fees. 
C)  isolation. 
D)  diversification.

Question 7

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 8

According to the Connecting Through Social Media box, which of the following is a way the SEC changes altered securities laws following the JOBS Act?

Accepted Answer

A)  No longer required crowdinvestors to disclose their financial information to the SEC. 
B)  Required small businesses to have at least 100 employees before allowing crowdinvestors to be pursued. 
C)  Allowed a maximum of 20 crowdinvesting groups to invest in projects. 
D)  Allows businesses to accept crowdinvestments from both accredited and unaccredited investors. 
A)  No longer required crowdinvestors to disclose their financial information to the SEC. 
B)  Required small businesses to have at least 100 employees before allowing crowdinvestors to be pursued. 
C)  Allowed a maximum of 20 crowdinvesting groups to invest in projects. 
D)  Allows businesses to accept crowdinvestments from both accredited and unaccredited investors.

Question 9

Insider trading laws prevent employees from buying or selling the securities of their employers.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

________ involve(s) computer instructions that automatically sell stocks whose value has dropped by a predetermined amount.

Accepted Answer

A)  Software action 
B)  Program trading 
C)  Curbs 
D)  Circuit breakers 
A)  Software action 
B)  Program trading 
C)  Curbs 
D)  Circuit breakers

Question 12

A blue chip stock represents a highly speculative stock investment.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following offers low risk, guaranteed income, backed by the full faith and credit of the federal government?

Accepted Answer

A)  municipal bonds 
B)  U.S. government preferred stocks 
C)  common stock in the U.S. postal service 
D)  U.S. government bonds 
A)  municipal bonds 
B)  U.S. government preferred stocks 
C)  common stock in the U.S. postal service 
D)  U.S. government bonds

Question 14

A penny stock generally sells for a low initial price, pays regular dividends, and provides consistent growth in the stock's value.

Accepted Answer

A) True 
 B)False

Question 15

Mutual fund investors will note that

Accepted Answer

A)  fund managers have not yet added foreign securities into their funds. 
B)  mutual funds cannot be purchased through a traditional brokerage house. 
C)  loads can vary from one mutual fund to another. The fund manager dictates the commissions and fees. 
D)  by law, mutual funds can no longer charge loads. 
A)  fund managers have not yet added foreign securities into their funds. 
B)  mutual funds cannot be purchased through a traditional brokerage house. 
C)  loads can vary from one mutual fund to another. The fund manager dictates the commissions and fees. 
D)  by law, mutual funds can no longer charge loads.

Question 16

A ________ is a registered representative acting as an intermediary to buy and sell securities for clients.

Accepted Answer

A)  certified stock underwriter 
B)  stockbroker 
C)  securities banker 
D)  trading accountant 
A)  certified stock underwriter 
B)  stockbroker 
C)  securities banker 
D)  trading accountant

Question 17

Game Guys announced a 2-for-1 common stock split for investors on record. Which of the following will occur?

Accepted Answer

A)  The stock price will increase to reflect the value of two shares for every one share. 
B)  Each share will be worth ½ of its previous value, but shareholders' total value of Game Guys will remain the same. 
C)  The value of Game Guys common stock will remain the same, for a short period of time, and then experience a guaranteed growth spurt. 
D)  The shareholders will sell their shares immediately after the split and take their capital gains, as well as provide others an opportunity to invest in Game Guys. 
A)  The stock price will increase to reflect the value of two shares for every one share. 
B)  Each share will be worth ½ of its previous value, but shareholders' total value of Game Guys will remain the same. 
C)  The value of Game Guys common stock will remain the same, for a short period of time, and then experience a guaranteed growth spurt. 
D)  The shareholders will sell their shares immediately after the split and take their capital gains, as well as provide others an opportunity to invest in Game Guys.

Question 18

The initial cost of investing in mutual funds depends in part on

Accepted Answer

A)  whether the fund is a load or no-load fund. 
B)  the risk tolerance of the companies in the fund. 
C)  the tax rate on capital gains. 
D)  the imposition of government tariffs. 
A)  whether the fund is a load or no-load fund. 
B)  the risk tolerance of the companies in the fund. 
C)  the tax rate on capital gains. 
D)  the imposition of government tariffs.

Question 19

Though Miguel relies on his stockbroker to execute his buy and sell orders for shares of stock, he has found that the process of buying or selling a share of stock on a major stock exchange normally takes

Accepted Answer

A)  weeks. 
B)  seconds. 
C)  days. 
D)  months. 
A)  weeks. 
B)  seconds. 
C)  days. 
D)  months.

Question 20

Stocks of corporations with earnings expected to increase faster than other stocks are called ________ stocks.

Accepted Answer

A)  penny 
B)  growth 
C)  preferred 
D)  blue sky 
A)  penny 
B)  growth 
C)  preferred 
D)  blue sky

Exam 19: Using Securities Markets for Financing and Investing Opportunities

Penny stocks represent a high-risk stock investment.

How do investment bankers generate revenues for their firms?

Epic Electronics decides to pay off its bonds several years before the maturity date. Apparently, the bonds

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

To reduce market volatility, ________ require that a key computer is turned off so that program trading is halted.

Buying several different investment alternatives to spread the risk helps an investor achieve

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

According to the Connecting Through Social Media box, which of the following is a way the SEC changes altered securities laws following the JOBS Act?

Insider trading laws prevent employees from buying or selling the securities of their employers.

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

________ involve(s) computer instructions that automatically sell stocks whose value has dropped by a predetermined amount.

A blue chip stock represents a highly speculative stock investment.

Which of the following offers low risk, guaranteed income, backed by the full faith and credit of the federal government?

A penny stock generally sells for a low initial price, pays regular dividends, and provides consistent growth in the stock's value.

Mutual fund investors will note that

A ________ is a registered representative acting as an intermediary to buy and sell securities for clients.

Game Guys announced a 2-for-1 common stock split for investors on record. Which of the following will occur?

The initial cost of investing in mutual funds depends in part on

Though Miguel relies on his stockbroker to execute his buy and sell orders for shares of stock, he has found that the process of buying or selling a share of stock on a major stock exchange normally takes

Stocks of corporations with earnings expected to increase faster than other stocks are called ________ stocks.

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

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