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Exam 19: Using Securities Markets for Financing and Investing Opportunities

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Question 121

Multiple Choice

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Corporations that want to attract more investors by lowering the selling price of their common stock might consider declaring a

A) bankruptcy filing.
B) cash dividend.
C) margin call.
D) stock split.

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

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Question 122

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Examples of institutional investors are pension funds, mutual funds, and insurance companies.

A) True
B) False

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Question 123

Multiple Choice

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Which of the following describes the process where an investor borrows a percentage of the purchase price of stocks from the brokerage firm?

Stocks offering investors a high dividend yield are called

Marshall Manufacturing plans to issue $100 million of common stock. The firm will likely rely on the advice and assistance of a(n)

By issuing bonds with a ________, the corporation retains the right to pay off the bond prior to the maturity date.

Similar to bond investments, preferred shares can be ________, meaning the firm may buy them back.

A bull market occurs when overall stock prices increase.

A penny stock generally sells for a low initial price, pays regular dividends, and provides consistent growth in the stock's value.

Last week, Caitlin met with her financial planner, Derek. Derek urged Caitlin to consider only government bonds and mutual funds in her portfolio. Since she is in her 20s, Caitlin thinks she can accept a little more risk. You suggest that it is a better plan to follow Derek's advice, rather than research her choices on her own.

The stock of well-known, high-quality firms, such as Coca-Cola, General Electric, and Procter & Gamble, fit the characteristics of ________ stocks, because investors can almost always be assured a dividend and consistent stock price appreciation.

The over-the-counter market utilizes an electronic securities trading system.

Leafy Greens wants to raise an undisclosed amount of funds in order to expand the company-owned vegetarian restaurants overseas. The CFO of the company will negotiate with an expert at the FTC who will underwrite the issue of stock that Leafy Greens plans to offer.

Marshall Manufacturing issues a $1,000 bond, with an interest rate of 10%, and a maturity date of 2025. This creates a liability for Marshall Manufacturing to pay the bondholder

The traditional market barometer used to measure the direction of the stock market is the

________ are collections of stocks that are traded on exchanges but are traded more like individual stocks than like mutual funds.

If paid, dividends come from any profits remaining after the firm has paid taxes. The company cannot deduct dividends as an expense of doing business.

Tomas purchased on margin 100 shares of stock in the Marshall Manufacturing for $50 per share yesterday. Today, the price of the shares dropped by $20 per share. Tomas expects his broker to issue a margin call.

Small investors can spread the risk of investing by purchasing shares of mutual funds or ETFs.

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