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Exam 19: Using Securities Markets for Financing and Investing Opportunities

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Question 181

True/False

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

A) True
B) False

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Question 182

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

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.

E) A) and C)
F) A) and B)

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Question 183

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

Private investors benefit from securities markets primarily by:

The new issue $1,000 face value bonds due in 2020 issued by Bay Books, Ltd., are perceived by investors as being 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.

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

One of the criticisms of the Dow Jones Industrial Average is that it does not include enough stocks to provide a good representation of the entire stock market.

As the chief financial officer (CFO) , you identify that your firm needs to raise additional funds by selling new shares of stock. Which of the following refers to a specialist that assists corporations in the issue and sale of new securities?

Stocks represent shares of ownership in a company.

A recent publication referred to a series of bonds as "the 6s of 25."

When you place a limit order, it means you are willing to buy or sell the stock at the best price available.

A sinking fund is a reserve account where the firm will periodically deposit funds in anticipation of repayment of a bond issue on the maturity date.

The disadvantages of selling stock to obtain long-term financing include:

Andrew invested in a new issue corporate bond on the primary market for $1,000, with a coupon rate of 5%, and a maturity date of 2025. The bond was held in his brokerage account electronically, so he did not think about it on a daily basis. In 2015, he thought about selling the bond on the secondary market to help pay for his school tuition. At that time, interest rates had climbed to 6.5%. This was great news for Andrew because now he could sell his bond for more than the principal amount he would receive in 2025.

The stocks of high-quality companies such as Coca-Cola and Microsoft are called blue chip stocks.

Last year Alexis landed her first professional job after graduating from college. She also started her first investment account. Having met with several brokers before choosing someone to work with, Alexis wanted to make certain that her investment choices would provide for long-term growth, yet satisfy her concern for diversification. The person who won her business prepared an asset allocation plan that would start her account by investing in several index funds. Her adviser has offered her a sound way to combine the concern for diversification since index funds are a sensible way for Alexis to start.

An investor places a ________ order with a broker to buy a particular stock at a specific price, if and when that price becomes available.

Corporations receive the proceeds for the sale of their stock in:

The interest paid to bondholders represents the principal of the bond.

In the Reaching Beyond Our Borders box, one of the global investment suggestions given was to invest in stocks from countries with a history of currency problems or political instability.