Exam 10: Securities Markets: Trading Financial Resources

The _____ is the largest securities exchange in the world.

Credit unions are the most common depository institutions.

The advantage of electronic communication networks (ECNs) is that they:

Jack Richman works as a senior manager at The Brown Brothers Co. During a recent strategy session, Jack learned that the company was on the verge of announcing a major technological breakthrough. He's confident that once the breakthrough is announced to the public, the price of the company's stock will surge dramatically. If Jack buys more of his company's stock before the announcement, his actions could be investigated by the Securities and Exchange Commission.

The common stockholders' right to a residual claim on assets means that if a corporation goes out of business and liquidates its assets, it must pay the stockholders before it clears other debts and back taxes.

Earnings per share (EPS) is computed by:

A bond is a formal IOU issued by a corporation or government entity.

An initial public offering is the first time a company issues stock to be purchased by the general public.

Unlike stocks, bondholders cannot sell their bonds to other investors before they mature.

The Securities Act of 1933 created the Federal Reserve System to serve as the central bank in the United States.

What is a stock index? List and describe the top two well­known stock indices.

A(n) _____ is a financial intermediary that specializes in helping firms raise financial capital by issuing securities in primary markets.

The _____ price indicates how much the market maker will pay per share to buy a stated quantity of the stock.

All corporations have a legal obligation to pay dividends to their preferred stockholders.

A financial intermediary that obtains funds from checking and savings deposits, and then loans these funds to borrowers is known as a depository institution.

The current yield expresses a bond's interest payment as a percentage of the bond's current market price rather than its par value.

Convertible securities are bonds or shares of preferred stock that investors can exchange for a given number of shares of the issuing corporation's common stock.

Jason holds a bond with a par value of $1,000 issued by the Asbury Corporation that will mature in seven years. The coupon rate on the bond is 7 percent. He bought the bond for $900. Assuming Asbury lives up to its financial obligations and that he doesn't trade the bond, Jason can expect to receive $70 in interest from Asbury over the next year.

Stuart wants to buy additional stock in Admiral Engines, but the price of the stock has fluctuated in recent days. He wants to make sure he doesn't pay too much. His analysis suggests that $26 per share is the highest price he should pay. Stuart is likely to place a _____ with his broker.

Only accredited investors can legally buy stock offered in an initial public offering.