Question 1

When a corporation enjoys a profitable year, dividends must be paid.

Accepted Answer

A) True 
 B)False

Question 2

A bond sold with a sinking fund provision requires the firm to allow a stockholder to exchange his/her bond for a specified number of shares of common stock.

Accepted Answer

A) True 
 B)False

Question 3

Investing online is usually ________ than trading through a traditional stock brokerage firm.

Accepted Answer

A)  more expensive 
B)  less expensive 
C)  more volatile 
D)  less profitable

Question 4

Issuing stock is considered equity financing.

Accepted Answer

A) True 
 B)False

Question 5

When Ira purchased 500 shares of preferred stock in the Fairlawn Corporation, his certificate indicated the stock had a par value of $50 per share. This means that Ira

Accepted Answer

A)  will never get less than $50 per share when selling his stock. 
B)  has shares that are currently worth $50 per share. 
C)  may receive dividends based on this value per share. 
D)  must receive a $5 dividend each and every year.

Question 6

Preferred stockholders receive dividend payments before common stockholders are paid any dividends.

Accepted Answer

A) True 
 B)False

Question 7

The corporate certificate issued to an investor that has loaned money to the corporation or government is called a

Accepted Answer

A)  common stock. 
B)  preferred stock. 
C)  bond. 
D)  debt document.

Question 8

Investors in ________ preferred stock receive a guarantee that missed dividends will accumulate and potentially be paid later.

Accepted Answer

A)  participating 
B)  superior 
C)  convertible 
D)  cumulative

Question 9

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 10

Institutional investors include insurance companies, individual investors, and mutual funds.

Accepted Answer

A) True 
 B)False

Question 11

By buying a ________ bond, investors will have an option to exchange their bond for shares of common stock in the company at a future date.

Accepted Answer

A)  discount 
B)  contingent 
C)  convertible 
D)  preferred

Question 12

With recent mergers of stock exchanges, beginning with the New York Stock Exchange merger with Archipelago, and subsequently with Euronext and eventually the Intercontinental Exchange (ICE) in Atlanta purchase of the NYSE Euronext for $8.2 billion. Most exchange floors are symbolic because trades today usually take place on computers.

Accepted Answer

A) True 
 B)False

Question 13

Stocks represent shares of ownership in a company.

Accepted Answer

A) True 
 B)False

Question 14

________ represent the best way for investors to have their investments managed by a trained specialist for a fee.

Accepted Answer

A)  Individual stocks 
B)  Mutual funds 
C)  Corporate bonds 
D)  Government bonds

Question 15

Issuing new common stock usually expands ownership, giving all owners the right to vote for the firm's board of directors.

Accepted Answer

A) True 
 B)False

Question 16

Norman wants to supplement his current investments with a high-risk, low-priced security. Which of these best fits his strategy of high risk, low price and a potentially high rate of return?

Accepted Answer

A)  time deposits 
B)  penny stocks 
C)  blue chip stocks 
D)  split stocks

Question 17

Preemptive rights provide common stockholders the first right to purchase any new shares of common stock issued by the firm.

Accepted Answer

A) True 
 B)False

Question 18

One funding source under consideration is the issuance of $150 million worth of corporate bonds. A financial advisor predicted that in order for the fast growing company to attract investors, it would have to put up collateral to back up the bond issue. The type of bond the financial advisor suggests is

Accepted Answer

A)  debenture bonds. 
B)  asset bonds. 
C)  secured bonds. 
D)  preferred bonds.

Question 19

Jason, a stockbroker at Securitas Financial Services, called you the other day asking if you would like to purchase an IPO. "The hot new company, Leafy Greens, is going public, and I thought you might want to get in on it," he exclaimed. If you agree to buy shares of this company, this trade will occur on the secondary market.

Accepted Answer

A) True 
 B)False

Question 20

A no-load mutual fund charges no commission fees to buy or sell its shares.

Accepted Answer

A) True 
 B)False

Exam 19: Using Securities Markets for Financing and Investing Opportunities

When a corporation enjoys a profitable year, dividends must be paid.

A bond sold with a sinking fund provision requires the firm to allow a stockholder to exchange his/her bond for a specified number of shares of common stock.

Investing online is usually ________ than trading through a traditional stock brokerage firm.

Issuing stock is considered equity financing.

When Ira purchased 500 shares of preferred stock in the Fairlawn Corporation, his certificate indicated the stock had a par value of $50 per share. This means that Ira

Preferred stockholders receive dividend payments before common stockholders are paid any dividends.

The corporate certificate issued to an investor that has loaned money to the corporation or government is called a

Investors in ________ preferred stock receive a guarantee that missed dividends will accumulate and potentially be paid later.

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.

Institutional investors include insurance companies, individual investors, and mutual funds.

By buying a ________ bond, investors will have an option to exchange their bond for shares of common stock in the company at a future date.

Stocks represent shares of ownership in a company.

________ represent the best way for investors to have their investments managed by a trained specialist for a fee.

Issuing new common stock usually expands ownership, giving all owners the right to vote for the firm's board of directors.

Norman wants to supplement his current investments with a high-risk, low-priced security. Which of these best fits his strategy of high risk, low price and a potentially high rate of return?

Preemptive rights provide common stockholders the first right to purchase any new shares of common stock issued by the firm.

A no-load mutual fund charges no commission fees to buy or sell its shares.