Question 1

Dividends on preferred stock are:

Accepted Answer

A)  paid after common stockholders receive their dividends.
B)  guaranteed,except in the event of bankruptcy.
C)  normally fixed,if and when dividends are paid.
D)  always greater than dividends on common stock.

Question 2

Many stock market analysts suggest that program trading was a big cause of the stock market crash of 1987.

Accepted Answer

A) True 
 B)False

Question 3

According to the Standard & Poor's Investor Services ratings,which of these ratings indicate a highly speculative bond?

Accepted Answer

A)  AA
B)  B
C)  C
D)  BBB

Question 4

From a risk standpoint,stocks are considered the riskiest investments,followed by mutual funds,preferred stock,and ETFs.Bonds represent a lower risk investment.

Accepted Answer

A) True 
 B)False

Question 5

The interest earned on municipal bonds is often tax-free at the state level.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

Ken owns 100 shares in XYZ Company,currently selling for $60 per share.His stock split yesterday 3-for-1.The number of shares that Ken owns has tripled.

Accepted Answer

A) True 
 B)False

Question 8

If the firm should find itself in bankruptcy,preferred stockholders would have claim to the value of any remaining assets before common stockholders.

Accepted Answer

A) True 
 B)False

Question 9

Abraham found a $1000 face value bond that belonged to his father.He checked the Wall Street Journal and found the bond was currently selling for $1220.This bond sells at a:

Accepted Answer

A)  discount.
B)  premium.
C)  price that is overvalued.
D)  primary market.

Question 10

After retirement,Hector 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

Question 11

Cumulative preferred stockholders enjoy the first right to purchase any new shares of stock issued by the firm.

Accepted Answer

A) True 
 B)False

Question 12

Most businesses prefer to meet their long-term financial needs through:

Accepted Answer

A)  debt financing.
B)  capital from the sale of stock.
C)  retained earnings.
D)  capital from the sale of bonds.

Question 13

A margin call requires an investor to repay money borrowed from the broker used to purchase the stock.

Accepted Answer

A) True 
 B)False

Question 14

A bear is an investor that expects stock prices to rise.

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

Buying stock on margin allows an investor to borrow funds from the brokerage company as part of the transaction.This __________ the potential return to the investor and ___________ the risk.

Accepted Answer

A)  increases;increases
B)  increases;decreases
C)  decreases;increases
D)  decreases;decreases

Question 17

Corporations benefit from securities markets primarily by:

Accepted Answer

A)  creating an efficient mechanism to invest in stocks and bonds.
B)  obtaining the capital they need to finance their operations.
C)  securing memberships on various stock exchanges.
D)  participating in the mutual funds of investment bankers.

Question 18

The interest rate on a AAA rated government treasury bond is 3.5%.A secured corporate bond is likely to pay:

Accepted Answer

A)  The same as the treasury bond.
B)  Less than the treasury bond.
C)  More than the treasury bond.
D)  The same as the treasury bond,but with a shorter maturity date.

Question 19

Which of the following securities are historically considered high quality and usually pay dividends?

Accepted Answer

A)  Dollar stocks
B)  Growth stocks
C)  Preferred stocks
D)  Blue chip stocks

Question 20

Securities and Exchange Commission SEC)rules prohibit the listing of the stock of foreign firms on U.S.stock exchanges.

Accepted Answer

A) True 
 B)False

Exam 19: Using Securities Markets for Financing and Investing Opportunities

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

Correct AnswerverifiedShow Answer

Many stock market analysts suggest that program trading was a big cause of the stock market crash of 1987.

Correct AnswerverifiedShow Answer

If the firm should find itself in bankruptcy,preferred stockholders would have claim to the value of any remaining assets before common stockholders.

Correct AnswerverifiedShow Answer

From a risk standpoint,stocks are considered the riskiest investments,followed by mutual funds,preferred stock,and ETFs.Bonds represent a lower risk investment.

Correct AnswerverifiedShow Answer

The interest rate on a AAA rated government treasury bond is 3.5%.A secured corporate bond is likely to pay:

Correct AnswerverifiedShow Answer

Corporations benefit from securities markets primarily by:

Correct AnswerverifiedShow Answer

The interest earned on municipal bonds is often tax-free at the state level.

Correct AnswerverifiedShow Answer

Which of the following securities are historically considered high quality and usually pay dividends?

Correct AnswerverifiedShow Answer

Dividends on preferred stock are:

Correct AnswerverifiedShow Answer

A bear is an investor that expects stock prices to rise.

Correct AnswerverifiedShow Answer

A margin call requires an investor to repay money borrowed from the broker used to purchase the stock.

Correct AnswerverifiedShow Answer

Abraham found a $1000 face value bond that belonged to his father.He checked the Wall Street Journal and found the bond was currently selling for $1220.This bond sells at a:

Correct AnswerverifiedShow Answer

Cumulative preferred stockholders enjoy the first right to purchase any new shares of stock issued by the firm.

Correct AnswerverifiedShow Answer

Ken owns 100 shares in XYZ Company,currently selling for $60 per share.His stock split yesterday 3-for-1.The number of shares that Ken owns has tripled.

Correct AnswerverifiedShow Answer

According to the Standard & Poor's Investor Services ratings,which of these ratings indicate a highly speculative bond?

Correct AnswerverifiedShow Answer

Buying stock on margin allows an investor to borrow funds from the brokerage company as part of the transaction.This __________ the potential return to the investor and ___________ the risk.

Correct AnswerverifiedShow Answer

After retirement,Hector began a search for a low-risk investment.He should consider buying a secured bond of a major corporation.

Correct AnswerverifiedShow Answer

Securities and Exchange Commission SEC)rules prohibit the listing of the stock of foreign firms on U.S.stock exchanges.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Most businesses prefer to meet their long-term financial needs through:

Correct AnswerverifiedShow Answer

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Buying stock on margin allows an investor to borrow funds from the brokerage company as part of the transaction.This the potential return to the investor and _ the risk.

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