Question 1

Ryan owns 100 shares in Marshall Manufacturing, currently selling for $80 per share. His stock split yesterday 3-for-1. The number of shares that Ryan owns has tripled.

Accepted Answer

A) True 
 B)False

Question 2

In a secondary market sale of stock, the proceeds go to the investor selling the stock, not to the corporation.

Accepted Answer

A) True 
 B)False

Question 3

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 4

Which of the following securities provides the owner the right to vote for the corporate board of directors?

Accepted Answer

A)  common stock 
B)  bonds 
C)  preferred stock 
D)  callable bonds

Question 5

When retained earnings are not enough to meet their long-term funding needs, businesses may be able to raise funds by

Accepted Answer

A)  selling common stock. 
B)  petitioning the government for a loan. 
C)  purchasing additional assets. 
D)  decreasing their accounts payable.

Question 6

Elisa has an ownership interest in many different companies, yet she owns the shares of stock of just one organization. Elisa undoubtedly owns shares in a(n)

Accepted Answer

A)  investment trust. 
B)  security account. 
C)  options association. 
D)  mutual fund.

Question 7

As interest rates increase, bond prices fall.

Accepted Answer

A) True 
 B)False

Question 8

When corporations elect to issue two or more shares of stock to existing stockholders for each share they currently own, they have initiated a(n)

Accepted Answer

A)  stock split. 
B)  dividend spread. 
C)  share dividend. 
D)  earnings split.

Question 9

Black Tuesday refers to the stock market crash that occurred in October 1987.

Accepted Answer

A) True 
 B)False

Question 10

If stock is issued in Pirate Recording, analysts predict that the company has potential for strong growth. The prospects for dividend payments to stockholders, at least in the beginning, are not good. Pirate Recording will need to retain its earnings in order to grow rapidly. The firm's stock would most likely be classified as a(n)

Accepted Answer

A)  blue chip stock. 
B)  income stock. 
C)  growth stock. 
D)  capital stock.

Question 11

A company often exercises the call provision of a bond if it's available when prevailing interest rates fall below the interest rate currently being paid to bondholders.

Accepted Answer

A) True 
 B)False

Question 12

Unlike stocks, for selling purposes, bond prices remain stable over the life of the bond.

Accepted Answer

A) True 
 B)False

Question 13

Investment bankers assist in the issuing and selling of new securities.

Accepted Answer

A) True 
 B)False

Question 14

A stock exchange provides a marketplace where the public can directly buy and sell securities without the need for a membership.

Accepted Answer

A) True 
 B)False

Question 15

From an investor's viewpoint, bonds generally provide a safer investment option than does the stock of the same corporation.

Accepted Answer

A) True 
 B)False

Question 16

By issuing bonds, a firm's debt level increases, which may adversely affect the firm's image in the financial community.

Accepted Answer

A) True 
 B)False

Question 17

Explain the differences between preferred stock and common stock.

Accepted Answer

The answer of Explain the differences between preferred stock and...

Question 18

Which of the following describes a benefit enjoyed by investors in mutual funds?

Accepted Answer

A)  Guaranteed dividend payments are received annually. 
B)  Investment risk is eliminated. 
C)  Investors buy an ownership interest in many different companies. 
D)  Investors exercise managerial authority in many different companies.

Question 19

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 20

Which of the following represents a disadvantage of issuing bonds?

Accepted Answer

A)  Bonds are permanent debt on the firm's balance sheet. 
B)  Dividends are legally required. 
C)  Bonds increase the firm's debt. 
D)  Bondholders receive voting rights.

Exam 19: Using Securities Markets for Financing and Investing Opportunities

Ryan owns 100 shares in Marshall Manufacturing, currently selling for $80 per share. His stock split yesterday 3-for-1. The number of shares that Ryan owns has tripled.

In a secondary market sale of stock, the proceeds go to the investor selling the stock, not to the corporation.

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

Which of the following securities provides the owner the right to vote for the corporate board of directors?

When retained earnings are not enough to meet their long-term funding needs, businesses may be able to raise funds by

Elisa has an ownership interest in many different companies, yet she owns the shares of stock of just one organization. Elisa undoubtedly owns shares in a(n)

As interest rates increase, bond prices fall.

When corporations elect to issue two or more shares of stock to existing stockholders for each share they currently own, they have initiated a(n)

Black Tuesday refers to the stock market crash that occurred in October 1987.

A company often exercises the call provision of a bond if it's available when prevailing interest rates fall below the interest rate currently being paid to bondholders.

Unlike stocks, for selling purposes, bond prices remain stable over the life of the bond.

Investment bankers assist in the issuing and selling of new securities.

A stock exchange provides a marketplace where the public can directly buy and sell securities without the need for a membership.

From an investor's viewpoint, bonds generally provide a safer investment option than does the stock of the same corporation.

By issuing bonds, a firm's debt level increases, which may adversely affect the firm's image in the financial community.

Explain the differences between preferred stock and common stock.

Which of the following describes a benefit enjoyed by investors in mutual funds?

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:

Which of the following represents a disadvantage of issuing bonds?