Question 1

Your Uncle Mike is approaching retirement and he asks for your advice for a safe place to invest several thousand dollars. He wants to receive some kind of payment each year for investing his money without a great deal of risk. You explain

Accepted Answer

A)  Yankee bonds are certain not to default. 
B)  common stock always pays quarterly dividends. 
C)  junk bonds do not pay annual interest. 
D)  treasury and top-grade corporate bonds pay interest two times each year.

Question 2

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 3

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

Accepted Answer

A)  yield to maturity. 
B)  dividend. 
C)  coupon rate. 
D)  security rate.

Question 4

Hallie owns 20% of the common stock of the Bean Brothers Coffee Company. The company announced plans to offer an additional 10,000 shares of common stock for sale. If Hallie exercises her preemptive rights, Bean Brothers must offer her the opportunity to purchase

Accepted Answer

A)  8,000 shares. 
B)  2,000 shares. 
C)  as many of the new shares as the investor is willing and able to buy. 
D)  20% of the outstanding preferred stock.

Question 5

Growth stocks offer investors the attractive combination of low risk and high returns.

Accepted Answer

A) True 
 B)False

Question 6

Bonds sold at a ________ sell for less than face value.

Accepted Answer

A)  secondary market 
B)  discount 
C)  premium 
D)  date before the maturity date

Question 7

For the firm, the cost of paying dividends to common stockholders is higher than the cost of the same amount of interest paid to bondholders.

Accepted Answer

A) True 
 B)False

Question 8

A bull market occurs when overall stock prices increase.

Accepted Answer

A) True 
 B)False

Question 9

Bonds, like stocks, trade daily on major security exchanges.

Accepted Answer

A) True 
 B)False

Question 10

Bonds sold at a discount are sold for more than the bond's face value.

Accepted Answer

A) True 
 B)False

Question 11

Insider trading involves the sale of stock to employees at discounted prices.

Accepted Answer

A) True 
 B)False

Question 12

Many stock market analysts suggest that program trading was a big cause of the stock market crash of 1987.

Accepted Answer

A) True 
 B)False

Question 13

Young investors place more importance on low-risk investments, while elderly investors prefer significant growth in the value of their investments.

Accepted Answer

A) True 
 B)False

Question 14

Securities markets represent the financial marketplaces for stocks and bonds.

Accepted Answer

A) True 
 B)False

Question 15

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.

Question 16

After buying 200 shares of common stock in Epic Electronics for $20 per share, Rashad later sold the same shares for $25 per share. Rashad's capital gain on the total transaction is:

Accepted Answer

A)  $10. 
B)  $110. 
C)  $1,000. 
D)  $1,500.

Question 17

Therese prefers corporate bonds as an investment option because investors always receive the face value of the bond whenever it is sold.

Accepted Answer

A) True 
 B)False

Exam 19: Using Securities Markets for Financing and Investing Opportunities

Your Uncle Mike is approaching retirement and he asks for your advice for a safe place to invest several thousand dollars. He wants to receive some kind of payment each year for investing his money without a great deal of risk. You explain

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

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

Hallie owns 20% of the common stock of the Bean Brothers Coffee Company. The company announced plans to offer an additional 10,000 shares of common stock for sale. If Hallie exercises her preemptive rights, Bean Brothers must offer her the opportunity to purchase

Growth stocks offer investors the attractive combination of low risk and high returns.

Bonds sold at a ________ sell for less than face value.

For the firm, the cost of paying dividends to common stockholders is higher than the cost of the same amount of interest paid to bondholders.

A bull market occurs when overall stock prices increase.

Bonds, like stocks, trade daily on major security exchanges.

Bonds sold at a discount are sold for more than the bond's face value.

Insider trading involves the sale of stock to employees at discounted prices.

Many stock market analysts suggest that program trading was a big cause of the stock market crash of 1987.

Young investors place more importance on low-risk investments, while elderly investors prefer significant growth in the value of their investments.

Securities markets represent the financial marketplaces for stocks and bonds.

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

After buying 200 shares of common stock in Epic Electronics for $20 per share, Rashad later sold the same shares for $25 per share. Rashad's capital gain on the total transaction is:

Therese prefers corporate bonds as an investment option because investors always receive the face value of the bond whenever it is sold.