Exam 16: Managing Finances

With an unsecured loan,the borrower puts up collateral.

Although equity financing often has strong appeal,debt financing,looking inside the company for long-term funding,is sometimes preferable.

Describe the services provided by investment banks.

Mutual funds that stress preservation of capital and current income,but also seek some capital appreciation,are called balanced funds.

Book value reflects the amount that buyers are willing to pay for a share of the company's stock.

The Dow Jones Industrial Average (DJIA)measures the performance of the industrial sector of the U.S.stock markets by focusing on just 30 blue-chip,large-cap companies as reflectors of the economic health of the many similar U.S.firms.

The New York Stock Exchange was founded in ________.

Through ________,the risk of loss is reduced by spreading the total investment across more stocks.

The compounding of interest paid to the investor over given time periods is called time value of money.

Dividend payments are optional and variable - the corporation's CEO decides whether and when a dividend will be paid,as well as the amount that is best for the future of the company and its employees.

New stocks and bonds are sold in the ________.

The NYSE was founded in 1792 and is the model for exchanges worldwide. Only firms meeting certain minimum requirements are eligible for listing on the NYSE.These requirements include all of the following EXCEPT:

Short Case Scenario 16-1 Jessica is looking forward to a family reunion at the beach. She is the first in her family to have graduated from college. She started her studies at the local community college and transferred to a prestigious private college several hours from her family's home. Jessica's major in college was business administration with a concentration in finance. As she approaches the beach house where her family will be staying, Jessica is glad that her days of being quizzed and tested are over. She is looking forward to an opportunity to relax and to put her brain on "pause." However, Jessica's family has other plans for her. Almost before she emerges from her car, the questions begin. Jessica's great-aunt Irene is hoping for a little investment advice. Irene explains, "One of my CDs has recently matured and I'm hoping to roll it into an investment where I might make a little more interest. Your cousin Eddie has suggested that I invest in bonds, but I'm not sure what to think. You know, dear, Eddie's never been very bright and I'd be foolish to take his advice without a little more information. -Aunt Irene decides to explore online investing with Jessica's help.Aunt Irene insists that she wants her stock certificates,however.Will she get them?

Aggressive growth funds are designed for investors who can accept the risk of loss inherent in common stock investing with severe price fluctuations,but also the potential for superior returns over time.

A bond is said to be in default if the borrower fails to make payment when due to lenders.

What lead to the failure of Bernard Madoff's Ponzi scheme?

To protect investors from fraudulent issues,a prospectus enforces laws against insider trading.

Which of the following is NOT normally a function of an investment bank?

________ markets are periods of rising stock prices.

The amount of interest owed depends on an annual percentage rate (APR)that is agreed upon between the lender and borrower.