Question 1

Corporations issuing ________ bonds pledge a tangible asset as collateral to reduce the risk incurred by a bondholder.

Accepted Answer

A)  secured 
B)  endorsement 
C)  escrow 
D)  replacement 
A)  secured 
B)  endorsement 
C)  escrow 
D)  replacement

Question 2

Most businesses prefer to meet their long-term financial needs through

Accepted Answer

A)  debt financing. 
B)  capital from the sale of stock. 
C)  retained earnings. 
D)  capital from the sale of bonds. 
A)  debt financing. 
B)  capital from the sale of stock. 
C)  retained earnings. 
D)  capital from the sale of bonds.

Question 3

An investor placing a market order with a broker agrees to buy or sell a stock immediately at the best price available.

Accepted Answer

A) True 
 B)False

Question 4

When stock prices decline steadily, investors refer to the market as a ________ market.

Accepted Answer

A)  bear 
B)  bull 
C)  dog 
D)  lion 
A)  bear 
B)  bull 
C)  dog 
D)  lion

Question 5

Bill is reviewing the firms whose stocks have comprised the Dow Jones Industrial Average over the years. He discovers

Accepted Answer

A)  the same 30 stocks have been used since the inception of the indicator. 
B)  different companies are used each year. 
C)  these stocks change periodically as deemed appropriate. 
D)  there is an even mix between big and small companies. 
A)  the same 30 stocks have been used since the inception of the indicator. 
B)  different companies are used each year. 
C)  these stocks change periodically as deemed appropriate. 
D)  there is an even mix between big and small companies.

Question 6

When investing in mutual funds, the investor will buy shares of a fund that consists of stocks or bonds; the fund will hold shares of many companies.

Accepted Answer

A) True 
 B)False

Question 7

When given a choice, businesses prefer to obtain long-term financing through retained earnings or by borrowing from a lending institution such as a bank instead of issuing stock.

Accepted Answer

A) True 
 B)False

Question 8

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 9

When issuing stock to obtain long-term funding, dividend payments are

Accepted Answer

A)  tax deductible. 
B)  legally required. 
C)  intended to discourage firms from issuing an excessive number of shares. 
D)  not tax deductible. 
A)  tax deductible. 
B)  legally required. 
C)  intended to discourage firms from issuing an excessive number of shares. 
D)  not tax deductible.

Question 10

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 11

John invested in a new issue corporate bond on the primary market for $1,000, with a coupon rate of 7%, and a maturity date of 2025. The bond was held in his brokerage account electronically, so he did not think about it on a daily basis. In 2020, he thought about selling the bond on the secondary market to help pay for his school tuition. At that time, interest rates had climbed to 8.5%. This was great news for John because now he could sell his bond for more than the principal amount he would receive in 2025.

Accepted Answer

A) True 
 B)False

Question 12

Natalie landed her first job after from college. The same year, she also started her first investment account. Having met with several brokers before choosing someone to work with, Natalie wanted to make certain that her investment choices would provide for long-term growth, yet satisfy her concern for diversification. The person who won her business prepared an asset allocation plan that would start her account by investing in several index funds. Her advisor has offered her a sound way to combine the concern for diversification since index funds are a sensible way for Natalie to start.

Accepted Answer

A) True 
 B)False

Question 13

The interest earned on municipal bonds is often tax-free at the state level.

Accepted Answer

A) True 
 B)False

Question 14

A stock split refers to buying a share of stock at a discounted price if full payment is made at the time of purchase.

Accepted Answer

A) True 
 B)False

Question 15

If an investor, Cora, buys a share of stock in Epic Electronics from another investor, Nathan, Epic Electronics automatically receives a fixed percentage of the selling price.

Accepted Answer

A) True 
 B)False

Question 16

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 17

Explain the major advantages and disadvantages of issuing stock as a source of long-term financing.

Accepted Answer

Raising long-term capital through equity

Question 18

A(n) ________ represents a condensed version of the registration statement that enables prospective investors to evaluate a stock for possible purchase.

Accepted Answer

A)  insider report 
B)  securities disclosure 
C)  evaluative report 
D)  prospectus 
A)  insider report 
B)  securities disclosure 
C)  evaluative report 
D)  prospectus

Question 19

Debenture bonds represent bonds that are not secured by collateral.

Accepted Answer

A) True 
 B)False

Question 20

A convertible bond allows the bondholder to exchange the bond for

Accepted Answer

A)  preferred stock. 
B)  common stock. 
C)  collateral. 
D)  debt holder privileges. 
A)  preferred stock. 
B)  common stock. 
C)  collateral. 
D)  debt holder privileges.

Exam 19: Using Securities Markets for Financing and Investing Opportunities

Corporations issuing ________ bonds pledge a tangible asset as collateral to reduce the risk incurred by a bondholder.

Most businesses prefer to meet their long-term financial needs through

An investor placing a market order with a broker agrees to buy or sell a stock immediately at the best price available.

When stock prices decline steadily, investors refer to the market as a ________ market.

Bill is reviewing the firms whose stocks have comprised the Dow Jones Industrial Average over the years. He discovers

When investing in mutual funds, the investor will buy shares of a fund that consists of stocks or bonds; the fund will hold shares of many companies.

When given a choice, businesses prefer to obtain long-term financing through retained earnings or by borrowing from a lending institution such as a bank instead of issuing stock.

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

When issuing stock to obtain long-term funding, dividend payments are

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

The interest earned on municipal bonds is often tax-free at the state level.

A stock split refers to buying a share of stock at a discounted price if full payment is made at the time of purchase.

If an investor, Cora, buys a share of stock in Epic Electronics from another investor, Nathan, Epic Electronics automatically receives a fixed percentage of the selling price.

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

Explain the major advantages and disadvantages of issuing stock as a source of long-term financing.

A(n) ________ represents a condensed version of the registration statement that enables prospective investors to evaluate a stock for possible purchase.

Debenture bonds represent bonds that are not secured by collateral.

A convertible bond allows the bondholder to exchange the bond for

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

Appendix: Working Within the Legal Environment

Appendix: Using Technology to Manage Information

Appendix: Managing Risk

Appendix: Managing Personal Finances

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