Question 1

Buying several different investment alternatives to spread the risk helps an investor achieve:

Accepted Answer

A)  lower rates of return.
B)  lower commission fees.
C)  isolation.
D)  diversification.E) A) and B)
F) A) and C)

Question 2

Bonds represent a permanent source of funding for companies.The money firms acquire by issuing bonds does not need to be repaid.

Accepted Answer

A) True 
 B)False

Question 3

Stocks that are not listed as trading on one of the national or international stock exchanges can be traded on the OTC,Over-The-Counter exchange.

Accepted Answer

A) True 
 B)False

Question 4

The Dow Jones Industrial Average provides us with a sense of direction (up or down)of the overall stock market.

Accepted Answer

A) True 
 B)False

Question 5

Applying what you have learned about investments introduced to you in Chapter 19,put the following investments in order from riskiest to least risky.Which of following lists begin with the least risky investment and ends with the most risky? Least risky = 1;most risky = 5

Accepted Answer

A)  1) Bonds;2) Mutual Funds;3) ETFs;4) Preferred Stock;5) Common Stock
B)  1) Preferred Stock;2) Common Stock;3) Mutual Funds;4) ETFs;5) Bonds
C)  1) Common Stock;2) Bonds;3) Mutual Funds;4) ETFs;5) Preferred Stock
D)  1) Bonds;2) Common Stock 3) Mutual Funds 4) ETFs 5) Preferred StockE) A) and B)
F) A) and C)

Question 6

The new potato-bar restaurant chain,Hottie Potatee wants to raise an undisclosed amount of funds in order to expand the company-owned potato bar stores,internationally.This move will require the CFO (Chief Financial Officer) to:

Accepted Answer

A)  Provide the FTC (Fair Trade Commission) documentation of where and when they plan to develop stores in other countries.
B)  Increase his profits.He will take the average U.S.store profits and multiply it by the number of stores he wants to open abroad.
C)  Do nothing different than maintaining the funding balance of his business.
D)  File full disclosure financial statements and seek the approval of the Securities and Exchange Commission.E) B) and D)
F) B) and C)

Question 7

Alejandro relies on his stockbroker to execute his buy and sell orders for shares of stock in different companies.He has found that the process of buying or selling a share of stock on a major stock exchange normally takes:

Accepted Answer

A)  weeks.
B)  seconds.
C)  days.
D)  months.E) B) and C)
F) A) and B)

Question 8

Issuing new stock increases the firm's outstanding debt on their balance sheet.

Accepted Answer

A) True 
 B)False

Question 9

Stock exchanges exist all over the world,allowing investors to buy securities in companies almost anywhere in the world.

Accepted Answer

A) True 
 B)False

Question 10

Firms establish a(n) ________ so that sufficient funds are available to repay bondholders on the maturity date.

Accepted Answer

A)  mutual fund
B)  sinking fund
C)  retirement account
D)  encumbered accountE) A) and B)
F) All of the above

Question 11

With everything else held constant,secured bonds likely pay investors a ________ interest rate than debenture bonds.

Accepted Answer

A)  lower
B)  higher
C)  less volatile
D)  more volatileE) A) and B)
F) A) and C)

Question 12

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 13

Garrett's grandmother died and left him $100,000.He will invest the funds,but wants to make enough money to pay for his monthly car payment of $300/month.One suggestion might be an income stock that pays a 4% dividend.

Accepted Answer

A) True 
 B)False

Question 14

Brokers prefer trading shares of a firm's stock in multiples of 100,known as:

Accepted Answer

A)  margin blocks.
B)  odd lots.
C)  round lots.
D)  market lots.E) B) and C)
F) A) and C)

Question 15

If an individual investor places a limit order at $38 and the stock currently sells for $41 per share,the broker will buy the stock for the investor.

Accepted Answer

A) True 
 B)False

Question 16

Stocks represent shares of ownership in a company.

Accepted Answer

A) True 
 B)False

Question 17

U.S.government bonds are considered a secure investment because:

Accepted Answer

A)  the interest rates are protected from inflation and tied to the consumer price index.
B)  they are backed by the full faith and credit of the federal government.
C)  the interest rates are higher than for corporate bonds of equal duration.
D)  if they are lost or stolen the federal government promises to replace them when the proof of purchase is provideD.U.S.government bonds are a secure investment because they are backed by the full faith and credit of the federal government.E) B) and D)
F) All of the above

Question 18

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 19

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

Accepted Answer

A) True 
 B)False

Question 20

Par value reflects the current market price for a stock.

Accepted Answer

A) True 
 B)False

Exam 19: Using Securities Markets for Financing and Investing Opportunities

Stocks represent shares of ownership in a company.

Correct AnswerverifiedShow Answer

With everything else held constant,secured bonds likely pay investors a ________ interest rate than debenture bonds.

Correct AnswerverifiedShow Answer

U.S.government bonds are considered a secure investment because:

Correct AnswerverifiedShow Answer

Garrett's grandmother died and left him $100,000.He will invest the funds,but wants to make enough money to pay for his monthly car payment of $300/month.One suggestion might be an income stock that pays a 4% dividend.

Correct AnswerverifiedShow Answer

Stock exchanges exist all over the world,allowing investors to buy securities in companies almost anywhere in the world.

Correct AnswerverifiedShow Answer

Brokers prefer trading shares of a firm's stock in multiples of 100,known as:

Correct AnswerverifiedShow Answer

Issuing new stock increases the firm's outstanding debt on their balance sheet.

Correct AnswerverifiedShow Answer

The new potato-bar restaurant chain,Hottie Potatee wants to raise an undisclosed amount of funds in order to expand the company-owned potato bar stores,internationally.This move will require the CFO (Chief Financial Officer) to:

Correct AnswerverifiedShow Answer

Applying what you have learned about investments introduced to you in Chapter 19,put the following investments in order from riskiest to least risky.Which of following lists begin with the least risky investment and ends with the most risky? Least risky = 1;most risky = 5

Correct AnswerverifiedShow Answer

Bonds represent a permanent source of funding for companies.The money firms acquire by issuing bonds does not need to be repaid.

Correct AnswerverifiedShow Answer

Buying several different investment alternatives to spread the risk helps an investor achieve:

Correct AnswerverifiedShow Answer

Firms establish a(n) ________ so that sufficient funds are available to repay bondholders on the maturity date.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Par value reflects the current market price for a stock.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Alejandro relies on his stockbroker to execute his buy and sell orders for shares of stock in different companies.He has found that the process of buying or selling a share of stock on a major stock exchange normally takes:

Correct AnswerverifiedShow Answer

Stocks that are not listed as trading on one of the national or international stock exchanges can be traded on the OTC,Over-The-Counter exchange.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The Dow Jones Industrial Average provides us with a sense of direction (up or down)of the overall stock market.

Correct AnswerverifiedShow Answer

If an individual investor places a limit order at $38 and the stock currently sells for $41 per share,the broker will buy the stock for the investor.

Correct AnswerverifiedShow Answer

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