Question 1

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 2

Which of the following situations would be considered insider trading?

Accepted Answer

A)   You read online that Marshall Manufacturing has a new CEO, who plans to bring in his own team. You decide to call your broker and buy shares of Marshall Manufacturing.
B)   Your Uncle Tim works for Marshall Manufacturing and sends you a news release put out by the company that talks about the acquisition of a Korean company. You believe this will significantly boost Marshall Manufacturing revenues so you buy 200 shares through an online service.
C)   You buy 500 shares of Marshall Manufacturing because you just heard from the CEO's administrative assistant that the CEO was just fired. You figure that this emotional news has got to help the stock price.
D)   Your stockbroker recommends that you diversify your portfolio with a few shares of Marshall Manufacturing because its request through the FTC and several international trade commissions to finalize the purchase of two oil companies was successful. You act on this information.E) B) and C)
F) All of the above

Question 3

In an effort to profit from stock market trading, Tony landed a job with the Newport Group. Tony intends to use his position to obtain privileged information about his new employer that would not be available to the public. While he realizes that he may be benefiting unfairly, he is not acting illegally because he is an employee.

Accepted Answer

A) True 
 B)False

Question 4

Some analysts refer to ________ stocks as issues that sell for less than $2 (others say for less than $5) .

Accepted Answer

A)   dollar
B)   growth
C)   penny
D)   discountE) All of the above
F) C) and D)

Question 5

Brittany read about PharmaONE and wants to buy 100 common shares at $40 per share. Unfortunately, she only has $3,000 available to invest. One risky strategy Brittany could consider is

Accepted Answer

A)   buying on margin.
B)   buying from the dealer's account.
C)   arranging for security funding.
D)   Leveraging her future professional earnings.E) A) and B)
F) B) and D)

Question 6

Amy plans to buy 100 shares of common stock in Marshall Manufacturing. She willingly accepts the risk of this investment because she

Accepted Answer

A)   understands that creditors are protected from risk.
B)   desires an opportunity to share in the success of this company.
C)   knows that every gambler wins occasionally.
D)   believes that a bear market is on the way.E) All of the above
F) A) and B)

Question 7

The Dow Jones Industrial Average reflects the daily average price of all the stocks traded on the New York Stock Exchange.

Accepted Answer

A) True 
 B)False

Question 8

Many observers suggest that the stock market is dominated by the buying and selling activities of institutional investors.

Accepted Answer

A) True 
 B)False

Question 9

When investing in mutual funds, the investor will buy shares of a fund that consists of stocks or bonds; the fund will hold shares of many companies.

Accepted Answer

A) True 
 B)False

Question 10

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 11

One criticism of the Dow Jones Industrial Average suggests that it

Accepted Answer

A)   magnifies the fluctuations in the stock market.
B)   does not indicate the cause of changes in stock prices.
C)   is too small (too few companies)  to get a good statistical representation.
D)   is biased causing an overstatement of bond price increases and an understatement of stock price decreases.E) A) and C)
F) A) and B)

Question 12

The new issue $1,000 face value bonds due in 2030 issued by Bathtub Brewing Company are seen by investors as less attractive than other bonds offered by other businesses at the same time. The coupon rate attached to these bonds will need to be ________ than other corporate bond issues in order to attract investors.

Accepted Answer

A)   the same
B)   lower
C)   higher
D)   not important because it is a new issueE) A) and C)
F) A) and B)

Question 13

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.E) C) and D)
F) A) and B)

Question 14

The disadvantages of issuing stock to obtain long-term financing include

Accepted Answer

A)   the legal obligation to pay dividends if the company is profitable.
B)   the funds contributed by stockholders must be repaid from after-tax profits.
C)   a reduction in the market value of the firm's products.
D)   a possible change in management and policies in the company.E) B) and D)
F) C) and D)

Question 15

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 16

Describe four different types of common stock that an investor may consider, depending upon the investor's strategy and risk tolerance.

Accepted Answer

Blue Chip Stocks: These are the stocks o...

Question 17

When market interest rates increase, the selling price of existing bonds will

Accepted Answer

A)   increase.
B)   decrease.
C)   remain constant.
D)   be less volatile.E) B) and C)
F) A) and B)

Question 18

Andrea invests $5,000 in five Epic Electronics bonds that mature in 10 years. Unexpectedly just the week after she invests, she has the opportunity to work abroad, which she has always wanted to do, but she needs cash. Which of the following most likely applies to Andrea?

Accepted Answer

A)   She can immediately sell the bonds for $5,000 plus interest for the week.
B)   She is out of luck. She must keep the bonds for the full 10 years.
C)   She may immediately sell the bonds but it is unclear how much money they will sell for.
D)   She will be able to sell the bonds immediately on the primary market.E) B) and C)
F) None of the above

Question 19

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 stocksE) B) and C)
F) A) and D)

Question 20

As he was approaching retirement, Gabriel began a search for a low-risk investment. He should consider buying a secured bond of a major corporation.

Accepted Answer

A) True 
 B)False

Exam 19: Using Securities Markets for Financing and Investing Opportunities

The disadvantages of issuing stock to obtain long-term financing include

Correct Answer
verified

Some analysts refer to ________ stocks as issues that sell for less than $2 (others say for less than $5) .

Correct Answer
verified

Many observers suggest that the stock market is dominated by the buying and selling activities of institutional investors.

Correct Answer
verified

Which of the following situations would be considered insider trading?

Correct Answer
verified

Brittany read about PharmaONE and wants to buy 100 common shares at $40 per share. Unfortunately, she only has $3,000 available to invest. One risky strategy Brittany could consider is

Correct Answer
verified

One criticism of the Dow Jones Industrial Average suggests that it

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

Andrea invests $5,000 in five Epic Electronics bonds that mature in 10 years. Unexpectedly just the week after she invests, she has the opportunity to work abroad, which she has always wanted to do, but she needs cash. Which of the following most likely applies to Andrea?

Correct Answer
verified

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

Correct Answer
verified

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?

Correct Answer
verified

When investing in mutual funds, the investor will buy shares of a fund that consists of stocks or bonds; the fund will hold shares of many companies.

Correct Answer
verified

The Dow Jones Industrial Average reflects the daily average price of all the stocks traded on the New York Stock Exchange.

Correct Answer
verified

Correct Answer
verified

When market interest rates increase, the selling price of existing bonds will

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

As he was approaching retirement, Gabriel began a search for a low-risk investment. He should consider buying a secured bond of a major corporation.

Correct Answer
verified

Describe four different types of common stock that an investor may consider, depending upon the investor's strategy and risk tolerance.

Correct Answer
verified
Blue Chip Stocks: These are the stocks o...
View Answer

Amy plans to buy 100 shares of common stock in Marshall Manufacturing. She willingly accepts the risk of this investment because she

Correct Answer
verified

Exam 19: Using Securities Markets for Financing and Investing Opportunities

The disadvantages of issuing stock to obtain long-term financing include

Correct AnswerverifiedShow Answer

Some analysts refer to ________ stocks as issues that sell for less than $2 (others say for less than $5) .

Correct AnswerverifiedShow Answer

Many observers suggest that the stock market is dominated by the buying and selling activities of institutional investors.

Correct AnswerverifiedShow Answer

Which of the following situations would be considered insider trading?

Correct AnswerverifiedShow Answer

Brittany read about PharmaONE and wants to buy 100 common shares at $40 per share. Unfortunately, she only has $3,000 available to invest. One risky strategy Brittany could consider is

Correct AnswerverifiedShow Answer

One criticism of the Dow Jones Industrial Average suggests that it

Correct AnswerverifiedShow Answer

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

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

Andrea invests $5,000 in five Epic Electronics bonds that mature in 10 years. Unexpectedly just the week after she invests, she has the opportunity to work abroad, which she has always wanted to do, but she needs cash. Which of the following most likely applies to Andrea?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

When investing in mutual funds, the investor will buy shares of a fund that consists of stocks or bonds; the fund will hold shares of many companies.

Correct AnswerverifiedShow Answer

The Dow Jones Industrial Average reflects the daily average price of all the stocks traded on the New York Stock Exchange.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When market interest rates increase, the selling price of existing bonds will

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

Correct AnswerverifiedShow Answer

As he was approaching retirement, Gabriel began a search for a low-risk investment. He should consider buying a secured bond of a major corporation.

Correct AnswerverifiedShow Answer

Describe four different types of common stock that an investor may consider, depending upon the investor's strategy and risk tolerance.

Correct AnswerverifiedBlue Chip Stocks: These are the stocks o...View AnswerShow Answer

Amy plans to buy 100 shares of common stock in Marshall Manufacturing. She willingly accepts the risk of this investment because she

Correct AnswerverifiedShow Answer

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verified

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Correct Answer
verified

Correct Answer
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verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Blue Chip Stocks: These are the stocks o...
View Answer

Correct Answer
verified