Question 1

In the securities markets,capital gains take place when:

Accepted Answer

A)  the value of the Dow Jones Industrial Average appreciates. 
B)  a security sells for more than the original purchase price. 
C)  additional investors buy stock in an existing corporation. 
D)  stockholders profit from the firm's use of leverage. 
A)  the value of the Dow Jones Industrial Average appreciates. 
B)  a security sells for more than the original purchase price. 
C)  additional investors buy stock in an existing corporation. 
D)  stockholders profit from the firm's use of leverage. B

Question 2

As a new father,Dave plans to accumulate funds over the next eighteen years to help pay for his son's college education.Security markets provide Dave with:

Accepted Answer

A)  financing opportunities. 
B)  investing opportunities. 
C)  opportunities to reduce his taxes. 
D)  borrowing opportunities. 
A)  financing opportunities. 
B)  investing opportunities. 
C)  opportunities to reduce his taxes. 
D)  borrowing opportunities. B

Question 3

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. 
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. B

Question 4

Creating a portfolio by buying several different types of investments to spread the risk of investing is called ______________.

Accepted Answer

A)  modulation 
B)  diversification 
C)  re-allocation 
D)  formula investing 
A)  modulation 
B)  diversification 
C)  re-allocation 
D)  formula investing

Question 5

When a corporation enjoys a profitable year,dividends must be paid.

Accepted Answer

A) True 
 B)False

Question 6

Bonds sold at a discount are sold for more than the bond's face value.

Accepted Answer

A) True 
 B)False

Question 7

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 Exchanges Commission (SE
C)  
D)  An institutional investor advisor 
A)  An investment banker 
B)  A commodities broker 
C)  An officer of the Securities and Exchanges Commission (SE
C)  
D)  An institutional investor advisor

Question 8

The similarities between common stocks and bonds include a face or par value and a fixed rate of return for investors.

Accepted Answer

A) True 
 B)False

Question 9

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)  sanction 
A)  syndicate 
B)  underwrite 
C)  guarantee 
D)  sanction

Question 10

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 11

Describe four different types of common stock that an investor may consider,depending upon the investor's strategy and risk tolerance.

Accepted Answer

Blue Chip Stocks: These are the stocks o

Question 12

Seattle Music,Inc.recently offered bonds for sale to the public.The unsecured corporate bond paid interest of 9% to investors for the twenty-year life of the bonds.Seattle Music is obligated to:

Accepted Answer

A)  Represent each bondholder as an owner in the company. 
B)  Pay interest semi-annually. 
C)  Pay stockholders their dividends,before paying bondholders their interest. 
D)  Pay each owner their principal if and when they want to cash-in their investment. 
A)  Represent each bondholder as an owner in the company. 
B)  Pay interest semi-annually. 
C)  Pay stockholders their dividends,before paying bondholders their interest. 
D)  Pay each owner their principal if and when they want to cash-in their investment.

Question 13

Dividends represent a portion of a firm's profits that are distributed to bondholders first then stockholders.

Accepted Answer

A) True 
 B)False

Question 14

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. 
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 15

For the firm,the cost of paying dividends to common stockholders is higher than the cost of the same amount of interest paid to bondholders.

Accepted Answer

A) True 
 B)False

Question 16

Jennifer prefers corporate bonds as an investment option because investors always receive the face value of the bond whenever it is sold.

Accepted Answer

A) True 
 B)False

Question 17

After buying 100 shares of common stock in the It's All Good Corporation for $20 per share,Popeye later sold the same shares for $25 per share.Popeye's capital gain on the total transaction is:

Accepted Answer

A)  $5. 
B)  $50. 
C)  $500. 
D)  $2,500. 
A)  $5. 
B)  $50. 
C)  $500. 
D)  $2,500.

Question 18

Stock market "circuit breakers" stop stock trading for a short time when the stock market experiences a significant drop in stock values.

Accepted Answer

A) True 
 B)False

Question 19

A Bond's face value is the same as its:

Accepted Answer

A)  risk rating. 
B)  principal. 
C)  coupon value. 
D)  yielD. 
A)  risk rating. 
B)  principal. 
C)  coupon value. 
D)  yielD.

Question 20

Bond prices in the newspaper or online are quoted as a percentage of their face value of $1000.If the bond price is 103.25,this bond's value =

Accepted Answer

A)  $103.25. 
B)  $1,032.50. 
C)  $10,325.00. 
D)  $10.33. 
A)  $103.25. 
B)  $1,032.50. 
C)  $10,325.00. 
D)  $10.33.

Exam 19: Using Securities Markets for Financing and Investing Opportunities

In the securities markets,capital gains take place when:

As a new father,Dave plans to accumulate funds over the next eighteen years to help pay for his son's college education.Security markets provide Dave with:

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

Creating a portfolio by buying several different types of investments to spread the risk of investing is called ______________.

When a corporation enjoys a profitable year,dividends must be paid.

Bonds sold at a discount are sold for more than the bond's face value.

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?

The similarities between common stocks and bonds include a face or par value and a fixed rate of return for investors.

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.

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

Describe four different types of common stock that an investor may consider,depending upon the investor's strategy and risk tolerance.

Seattle Music,Inc.recently offered bonds for sale to the public.The unsecured corporate bond paid interest of 9% to investors for the twenty-year life of the bonds.Seattle Music is obligated to:

Dividends represent a portion of a firm's profits that are distributed to bondholders first then stockholders.

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

For the firm,the cost of paying dividends to common stockholders is higher than the cost of the same amount of interest paid to bondholders.

Jennifer prefers corporate bonds as an investment option because investors always receive the face value of the bond whenever it is sold.

After buying 100 shares of common stock in the It's All Good Corporation for $20 per share,Popeye later sold the same shares for $25 per share.Popeye's capital gain on the total transaction is:

Stock market "circuit breakers" stop stock trading for a short time when the stock market experiences a significant drop in stock values.

A Bond's face value is the same as its:

Bond prices in the newspaper or online are quoted as a percentage of their face value of $1000.If the bond price is 103.25,this bond's value =

Taking Risks and Making Profits Within the Dynamic Business Environment

Understanding How Economics Affects Business

Doing Business in Global Markets

Demanding Ethical and Socially Responsible Behavior

How to Form a Business

Entrepreneurship and Starting a Small Business

Management and Leadership

Adapting Organizations to Todays Markets

Production and Operations Management

Motivating Employees

Human Resource Management: Finding and Keeping the Best Employees

Dealing With Employee-Management Issues and Relationships

Marketing: Helping Buyers Buy

Developing and Pricing Goods and Services

Distributing Products

Using Effective Promotions

Understanding Accounting and Financial Information

Financial Management

Money, Financial Institutions, and the Federal Reserve

Appendix A: Using Technology to Manage Information

Appendix B: Managing Risk

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