Question 1

Most investment advisors put mutual funds high on the list of recommended investments for experienced investors, but consider them too risky for beginning investors.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following accurately describes an advantage of selling bonds to raise long-term capital?

Accepted Answer

A)  Interest is a legal obligation. 
B)  Face value must be repaid. 
C)  Bondholders have voting rights. 
D)  Interest is a tax-deductible expense.

Question 3

Well-known foreign exchanges that also exchange the securities of U.S. firms include the Sydney Exchange and the Tokyo Exchange.

Accepted Answer

A) True 
 B)False

Question 4

According to the Connecting Through Social Media box, one goal of the JOBS Act of 2012 (Jumpstart Our Business Startups Act) is to make crowdinvesting more accessible to small businesses.

Accepted Answer

A) True 
 B)False

Question 5

Discuss the role of investment bankers in the securities markets.

Accepted Answer

The answer of Discuss the role of investment bankers in...

Question 6

Raising long-term funds through the sale of bonds requires the firm to make debt repayment when and if the organization has sufficient cash flow.

Accepted Answer

A) True 
 B)False

Question 7

The risk/return trade-off investors assume means

Accepted Answer

A)  the less you risk, the more you stand to gain. 
B)  the same as diversification of your portfolio. 
C)  you will assume added risk, if you believe you can get a greater return. 
D)  the goal is to never risk liquidity; your investments should always be liquid and of short duration.

Question 8

A bond represents a contract of indebtedness issued by a corporation that promises payment of a principal amount plus interest at a specified future date.

Accepted Answer

A) True 
 B)False

Question 9

A company with cash flow shortages must pay common stockholders their dividends before paying preferred stockholders their dividends.

Accepted Answer

A) True 
 B)False

Question 10

When acquiring funds through the sale of a bond, the business incurs a legal obligation to pay regular interest payments.

Accepted Answer

A) True 
 B)False

Question 11

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 12

Corporations that issue preferred stock incur a legal obligation to pay dividends to those stockholders.

Accepted Answer

A) True 
 B)False

Question 13

Firms are at a disadvantage when issuing bonds because the interest rate that they must pay to bondholders is not tax deductible.

Accepted Answer

A) True 
 B)False

Question 14

Buying on margin is a relatively risk-free way of investing in the stock market.

Accepted Answer

A) True 
 B)False

Question 15

The high start-up costs of online businesses cause online brokers to charge higher commissions than traditional brokerage firms.

Accepted Answer

A) True 
 B)False

Question 16

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

Question 17

To reduce the risk of investing in an individual stock, an ownership position in many different companies can be achieved by purchasing shares in a(n)

Accepted Answer

A)  indexed security. 
B)  mutual fund. 
C)  diversification bond. 
D)  stock cooperative.

Question 18

Using information not available to the public to unfairly benefit in the stock market represents

Accepted Answer

A)  security fraud. 
B)  an unethical, but a legal activity. 
C)  blue-sky violations. 
D)  insider trading.

Question 19

Mineral Mining Corporation makes regular monetary deposits that will accumulate and provide for an orderly retirement of their bonds when they come due in 2025. Mineral Mining appears to be utilizing a

Accepted Answer

A)  call provision. 
B)  sinking fund. 
C)  compensating balance system. 
D)  retirement escrow account.

Question 20

What agency sets the margin rates for purchasing stock in the U.S.?

Accepted Answer

A)  high commissioners of the Securities and Exchange Commission 
B)  board of governors of the Federal Reserve System 
C)  Securities Division of the Treasury Department 
D)  Federal Trade Commission on Exchange Markets

Exam 19: Using Securities Markets for Financing and Investing Opportunities

Most investment advisors put mutual funds high on the list of recommended investments for experienced investors, but consider them too risky for beginning investors.

Which of the following accurately describes an advantage of selling bonds to raise long-term capital?

Well-known foreign exchanges that also exchange the securities of U.S. firms include the Sydney Exchange and the Tokyo Exchange.

According to the Connecting Through Social Media box, one goal of the JOBS Act of 2012 (Jumpstart Our Business Startups Act) is to make crowdinvesting more accessible to small businesses.

Discuss the role of investment bankers in the securities markets.

Raising long-term funds through the sale of bonds requires the firm to make debt repayment when and if the organization has sufficient cash flow.

The risk/return trade-off investors assume means

A bond represents a contract of indebtedness issued by a corporation that promises payment of a principal amount plus interest at a specified future date.

A company with cash flow shortages must pay common stockholders their dividends before paying preferred stockholders their dividends.

When acquiring funds through the sale of a bond, the business incurs a legal obligation to pay regular interest payments.

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.

Corporations that issue preferred stock incur a legal obligation to pay dividends to those stockholders.

Firms are at a disadvantage when issuing bonds because the interest rate that they must pay to bondholders is not tax deductible.

Buying on margin is a relatively risk-free way of investing in the stock market.

The high start-up costs of online businesses cause online brokers to charge higher commissions than traditional brokerage firms.

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

To reduce the risk of investing in an individual stock, an ownership position in many different companies can be achieved by purchasing shares in a(n)

Using information not available to the public to unfairly benefit in the stock market represents

Mineral Mining Corporation makes regular monetary deposits that will accumulate and provide for an orderly retirement of their bonds when they come due in 2025. Mineral Mining appears to be utilizing a

What agency sets the margin rates for purchasing stock in the U.S.?