Exam 19: Using Securities Markets for Financing and Investing Opportunities

Gregory bought a share of stock in the Marshall Manufacturing for $70. When he sold the stock later that year, he received $90. The par value of the stock is $5. Gregory capital gain is $25.

Which of the following describes a benefit enjoyed by investors in mutual funds?

Jason, a stockbroker at Securitas Financial Services, called you the other day asking if you would like to purchase an IPO. "The hot new company, Leafy Greens, is going public, and I thought you might want to get in on it," he exclaimed. If you agree to buy shares of this company, this trade will occur on the secondary market.

Americans have invested over $15 trillion in mutual funds.

Examples of institutional investors are pension funds, mutual funds, and insurance companies.

If an investor owns a bond that pays a higher rate of interest than other bonds of similar risk, the investor should be able to sell the bond on the secondary market for more than its face value.

Dividends represent a portion of a firm's profits that are distributed to bondholders first then stockholders.

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.

Junk bonds are offered at higher interest rates than government bonds or corporate bonds with good ratings.

Avery, an executive assistant at the Newport Group, photocopied documents detailing a major merger that will be finalized in two weeks. Avery 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.

Corporate management decisions are influenced by the desire to keep stockholders happy.

Which of the following describes a mutual fund that charges no commission to buy or sell its shares?

According to the Securities Act of 1933 it is against the law for a firm that is publicly trading securities to deny an investor from knowing how the firm is doing financially.

Investing online is usually ________ than trading through a traditional stock brokerage firm.

Dividends on preferred stock are

When you place a limit order, it means you are willing to buy or sell the stock at the best price available.

Bonds that pay very high interest rates and typically have a higher risk of default are known as

Corporations benefit from securities markets primarily by

________ are the firm's after tax profits that are distributed to stockholders.

Most mutual funds provide investors an opportunity to buy shares directly without using a stockbroker.