Exam 19: Using Securities Markets for Financing and Investing Opportunities

When investors purchase ________ stock, they receive a priority claim in the payment of dividends, as well as assets if the business is liquidated. However, these investors do not have voting rights.

Will just returned from Afghanistan and has $25,000 in his savings account. His girlfriend recommends he speak with a financial advisor and let his money "make more money." Will has his eye on a new truck, but knows that his old Jeep will most likely last another four years. By then, though, he will definitely need this money to buy something new. Not to mention, he also knows he will have other needs too. Will should buy high-growth stock with his funds because even though they are risky, they also have the greatest potential of bringing in a better return on his investment.

An investment banking firm assists corporations in selling the new security issue.

Anjali's stockbroker called to inform her of a margin call that requires that she pay $1,000. This indicates that the value of Anjali's stock has

Andrea invests $5,000 in five Epic Electronics bonds that mature in 10 years. Unexpectedly just the week after she invests, she has the opportunity to work abroad, which she has always wanted to do, but she needs cash. Which of the following most likely applies to Andrea?

Americans have invested over $15 trillion in mutual funds.

One of the criticisms of the Dow Jones Industrial Average is that it does not include enough stocks to provide a good representation of the entire stock market.

Which of the following legislative acts created the Securities and Exchange Commission?

The proceeds from a secondary market sale of securities go to the corporation whose security is being traded.

Melodic Music, Inc., recently offered bonds for sale to the public. The unsecured corporate bond paid interest of 8% to investors for the 20-year life of the bonds. Melodic Music is obligated to

Interest rates vary with changes in the state of the economy.

Corporations receive needed funds when they sell a new issuance of a security in the primary market.

The Securities and Exchange Commission (SEC) requires that all prospective investors receive a copy of a firm's prospectus prior to investing.

Another name for the fixed rate of interest attached to a bond is the

Each share of common stock provides the investor with a ________ right that offers the investor the first right to purchase any new shares of common stock the firm decides to issue. This allows common stockholders to maintain a proportional share of ownership in the company.

Every time someone sells a stock believing the price has reached its maximum, someone else buys it believing the price will go still higher.

Levi owns 100 shares of stock in Epic Electronics that currently sell for $100 per share. Epic just announced a two-for-one stock split for all current stockholders. Levi now owns $20,000 worth of stock in Epic Electronics.

Securities markets represent the financial marketplaces for stocks and bonds.

Securities markets provide private investors a place to buy and sell stocks, bonds, and mutual funds.

The primary market allows an investor to purchase financial securities from other investors.