Question 1

An income stock offers investors a relatively high dividend yield on their investment.

Accepted Answer

A) True 
 B)False

Question 2

The owner of a convertible bond can exchange the bond for a specified number of shares of common stock in the same corporation.

Accepted Answer

A) True 
 B)False

Question 3

The new issue $1,000 face value bonds due in 2030 issued by Bathtub Brewing Company are seen by investors as less attractive than other bonds offered by other businesses at the same time. The coupon rate attached to these bonds will need to be ________ than other corporate bond issues in order to attract investors.

Accepted Answer

A)  the same 
B)  lower 
C)  higher 
D)  not important because it is a new issue 
A)  the same 
B)  lower 
C)  higher 
D)  not important because it is a new issue

Question 4

Standard and Poor's and Fitch Ratings are well-known companies that rate bonds.

Accepted Answer

A) True 
 B)False

Question 5

Before the announcement of a three-for-one stock split, the selling price for a share of stock in Fossil Oil Refineries was $150 per share. Immediately after the stock split, the probable price per share is

Accepted Answer

A)  $450. 
B)  $ 50. 
C)  $350. 
D)  $150. 
A)  $450. 
B)  $ 50. 
C)  $350. 
D)  $150.

Question 6

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 7

After operating for years as a privately held corporation, Iron Age Metalworks plans to publicly trade its stock. As a midsized firm, Iron Age wants to avoid excessive paperwork, and the fear of being delisted in the future. The ________ provides the best fit for Iron Age's plans.

Accepted Answer

A)  over-the-counter market 
B)  New York Stock Exchange 
C)  American Stock Exchange 
D)  secondary market 
A)  over-the-counter market 
B)  New York Stock Exchange 
C)  American Stock Exchange 
D)  secondary market

Question 8

The stocks of high-quality companies such as Coca-Cola and IBM are called blue chip stocks.

Accepted Answer

A) True 
 B)False

Question 9

Program trading refers to computer trading software that automatically sells stocks when their price dips to a predetermined level.

Accepted Answer

A) True 
 B)False

Question 10

Preferred stockholders possess the first right to purchase any new stock the company issues.

Accepted Answer

A) True 
 B)False

Question 11

Issuing bonds to obtain long-term funds legally compels a firm to pay regular ________ payments and repay the ________ at the maturity date.

Accepted Answer

A)  dividend; par value 
B)  interest; bond premium 
C)  dividend; maturity value 
D)  interest; principal 
A)  dividend; par value 
B)  interest; bond premium 
C)  dividend; maturity value 
D)  interest; principal

Question 12

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

Question 13

Bond prices in the newspaper or online are quoted as a percentage of their face value of $1,000. If the bond price is 103.25, this bond's value is equal to

Accepted Answer

A)  $103.25 
B)  $1,032.50 
C)  $10,325.00 
D)  $10.33 
A)  $103.25 
B)  $1,032.50 
C)  $10,325.00 
D)  $10.33

Question 14

The trading of previously issued securities from one investor to another takes place in the

Accepted Answer

A)  primary market. 
B)  secondary market. 
C)  initial offerings market. 
D)  corporate trading market. 
A)  primary market. 
B)  secondary market. 
C)  initial offerings market. 
D)  corporate trading market.

Question 15

Online trading services target those investors who

Accepted Answer

A)  require the research and advice of a licensed stockbroker. 
B)  are interested in purchasing government bonds. 
C)  are willing to do their own research. 
D)  trade the securities of foreign firms. 
A)  require the research and advice of a licensed stockbroker. 
B)  are interested in purchasing government bonds. 
C)  are willing to do their own research. 
D)  trade the securities of foreign firms.

Question 16

As a new father, Dan plans to accumulate funds over the next 18 years to help pay for his son's college education. Security markets provide Dan with

Accepted Answer

A)  financing opportunities. 
B)  investing opportunities. 
C)  opportunities to reduce his taxes. 
D)  borrowing opportunities. 
A)  financing opportunities. 
B)  investing opportunities. 
C)  opportunities to reduce his taxes. 
D)  borrowing opportunities.

Question 17

If a company announces a stock split, the investor may receive two or more shares of the company stock, for every one share that he/she holds.

Accepted Answer

A) True 
 B)False

Question 18

The Securities and Exchange Commission does not intercede in any way in the process of an IPO. Doing so would disrupt the natural process of the capital markets.

Accepted Answer

A) True 
 B)False

Question 19

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 20

A share of preferred stock is currently selling for $160. It offers the investor a dividend rate of 7%, with a par value of $100. If the company is able to pay dividends, preferred stockholders would receive a dividend of $11.20 per share.

Accepted Answer

A) True 
 B)False

Exam 19: Using Securities Markets for Financing and Investing Opportunities

An income stock offers investors a relatively high dividend yield on their investment.

The owner of a convertible bond can exchange the bond for a specified number of shares of common stock in the same corporation.

Standard and Poor's and Fitch Ratings are well-known companies that rate bonds.

Before the announcement of a three-for-one stock split, the selling price for a share of stock in Fossil Oil Refineries was $150 per share. Immediately after the stock split, the probable price per share is

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

After operating for years as a privately held corporation, Iron Age Metalworks plans to publicly trade its stock. As a midsized firm, Iron Age wants to avoid excessive paperwork, and the fear of being delisted in the future. The ________ provides the best fit for Iron Age's plans.

The stocks of high-quality companies such as Coca-Cola and IBM are called blue chip stocks.

Program trading refers to computer trading software that automatically sells stocks when their price dips to a predetermined level.

Preferred stockholders possess the first right to purchase any new stock the company issues.

Issuing bonds to obtain long-term funds legally compels a firm to pay regular ________ payments and repay the ________ at the maturity date.

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

Bond prices in the newspaper or online are quoted as a percentage of their face value of $1,000. If the bond price is 103.25, this bond's value is equal to

The trading of previously issued securities from one investor to another takes place in the

Online trading services target those investors who

As a new father, Dan plans to accumulate funds over the next 18 years to help pay for his son's college education. Security markets provide Dan with

If a company announces a stock split, the investor may receive two or more shares of the company stock, for every one share that he/she holds.

The Securities and Exchange Commission does not intercede in any way in the process of an IPO. Doing so would disrupt the natural process of the capital markets.

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

A share of preferred stock is currently selling for $160. It offers the investor a dividend rate of 7%, with a par value of $100. If the company is able to pay dividends, preferred stockholders would receive a dividend of $11.20 per share.

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

Filters

Issuing bonds to obtain long-term funds legally compels a firm to pay regular payments and repay the at the maturity date.