Question 1

A company with cash flow shortages must pay common stockholders their dividends before paying preferred stockholders their dividends.

Accepted Answer

A) True 
 B)False

Question 2

Investment bankers ________ new issues of bonds or stocks by purchasing, at a discount, the entire stock or bond issue of a firm and selling the issue to interested investors at a higher price.

Accepted Answer

A)   syndicate
B)   underwrite
C)   guarantee
D)   sanctionE) C) and D)
F) All of the above

Question 3

Only government employees represent institutional investors.

Accepted Answer

A) True 
 B)False

Question 4

The Securities and Exchange Commission has accused Martha of benefiting unfairly from information secured from a corporate officer of Stewart Engineering. Because Martha used that information to profit in the stock market, she faces ________ charges.

Accepted Answer

A)   insider trading
B)   security tampering
C)   corporate fraud
D)   short sellingE) A) and B)
F) C) and D)

Question 5

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?

Accepted Answer

A)   an investment banker
B)   a commodities broker
C)   an officer of the Securities and Exchange Commission (SE
C)  
D)   an institutional investor advisorE) None of the above
F) A) and B)

Question 6

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) All of the above
F) A) and B)

Question 7

Both preferred stocks and bonds represent funding sources that require repayment to investors.

Accepted Answer

A) True 
 B)False

Question 8

Investment bankers provide ________ services by purchasing the entire new security issue from a corporation seeking to raise capital, and selling it to interested investors.

Accepted Answer

A)   underwriting
B)   investing
C)   leveraging
D)   discountingE) None of the above
F) A) and B)

Question 9

Buying stock on margin lowers the overall risk for the investor.

Accepted Answer

A) True 
 B)False

Question 10

Corporations that issue preferred stock incur a legal obligation to pay dividends to those stockholders.

Accepted Answer

A) True 
 B)False

Question 11

An investor places a ________ order with a broker to sell a stock at the best price available at that time.

Accepted Answer

A)   discretionary
B)   market
C)   limit
D)   leveragedE) B) and D)
F) A) and D)

Question 12

To reduce the risk of investing in an individual stock, an ownership position in many different companies can be achieved by purchasing shares in a(n)

Accepted Answer

A)   indexed security.
B)   mutual fund.
C)   diversification bond.
D)   stock cooperative.E) B) and C)
F) A) and D)

Question 13

Christopher, a Leafy Greens shareholder, sells 100 shares of Leafy Greens stock to Martin. This transaction takes place in the

Accepted Answer

A)   primary market.
B)   secondary market.
C)   initial offerings market.
D)   security resale market.E) A) and B)
F) A) and C)

Question 14

Issuing ________ increases a firm's debt and may adversely affect the financial community's perception of the firm.

Accepted Answer

A)   common stock
B)   bonds
C)   preferred stock
D)   retained earningsE) A) and B)
F) None of the above

Question 15

Only those with a membership on a stock exchange can buy and sell securities on that stock exchange.

Accepted Answer

A) True 
 B)False

Question 16

A ________ is a registered representative acting as an intermediary to buy and sell securities for clients.

Accepted Answer

A)   certified stock underwriter
B)   stockbroker
C)   securities banker
D)   trading accountantE) B) and D)
F) C) and D)

Question 17

Which of the following organizations provides an assessment of the relative level of risk of a particular firm's bond issue?

Accepted Answer

A)   Securities and Exchange Commission
B)   E*trade
C)   Wall Street Journal
D)   Standard & Poor'sE) C) and D)
F) B) and D)

Question 18

The term ________ refers to investors who anticipate increases in stock prices.

Accepted Answer

A)   bears
B)   bulls
C)   dogs
D)   lionsE) All of the above
F) None of the above

Question 19

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

Question 20

Tressan wants to purchase stock in a company that is headquartered in Australia. Tressan

Accepted Answer

A)   will have to place her order through the Sydney Stock Exchange.
B)   cannot legally own the stock of a Australian corporation.
C)   can buy the shares from a broker on a U.S. exchange.
D)   must obtain an investor visa to complete the purchase.E) None of the above
F) A) and B)

Exam 19: Using Securities Markets for Financing and Investing Opportunities

Investment bankers ________ new issues of bonds or stocks by purchasing, at a discount, the entire stock or bond issue of a firm and selling the issue to interested investors at a higher price.

Correct AnswerverifiedShow Answer

The term ________ refers to investors who anticipate increases in stock prices.

Correct AnswerverifiedShow Answer

Both preferred stocks and bonds represent funding sources that require repayment to investors.

Correct AnswerverifiedShow Answer

A ________ is a registered representative acting as an intermediary to buy and sell securities for clients.

Correct AnswerverifiedShow Answer

An investor places a ________ order with a broker to sell a stock at the best price available at that time.

Correct AnswerverifiedShow Answer

The Securities and Exchange Commission has accused Martha of benefiting unfairly from information secured from a corporate officer of Stewart Engineering. Because Martha used that information to profit in the stock market, she faces ________ charges.

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

Christopher, a Leafy Greens shareholder, sells 100 shares of Leafy Greens stock to Martin. This transaction takes place in the

Correct AnswerverifiedShow Answer

Tressan wants to purchase stock in a company that is headquartered in Australia. Tressan

Correct AnswerverifiedShow Answer

To reduce the risk of investing in an individual stock, an ownership position in many different companies can be achieved by purchasing shares in a(n)

Correct AnswerverifiedShow Answer

Only those with a membership on a stock exchange can buy and sell securities on that stock exchange.

Correct AnswerverifiedShow Answer

Buying stock on margin lowers the overall risk for the investor.

Correct AnswerverifiedShow Answer

Issuing ________ increases a firm's debt and may adversely affect the financial community's perception of the firm.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following situations would be considered insider trading?

Correct AnswerverifiedShow Answer

Investment bankers provide ________ services by purchasing the entire new security issue from a corporation seeking to raise capital, and selling it to interested investors.

Correct AnswerverifiedShow Answer

Only government employees represent institutional investors.

Correct AnswerverifiedShow Answer

A company with cash flow shortages must pay common stockholders their dividends before paying preferred stockholders their dividends.

Correct AnswerverifiedShow Answer

Which of the following organizations provides an assessment of the relative level of risk of a particular firm's bond issue?

Correct AnswerverifiedShow Answer

Corporations that issue preferred stock incur a legal obligation to pay dividends to those stockholders.

Correct AnswerverifiedShow Answer

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