Exam 16: Securities and Investments

Jessica is looking forward to a family reunion at the beach. She is the first in her family to have graduated from college. She started her studies at the local community college and transferred to a prestigious private college several hours from her family's home. Jessica's major in college was business administration with a concentration in finance. As she approaches the beach house where her family will be staying, Jessica is glad that her days of being quizzed and tested are over. She is looking forward to an opportunity to relax and to put her brain on "pause." However, Jessica's family has other plans for her. Almost before she emerges from her car, the questions begin. Jessica's great-aunt Irene is hoping for a little investment advice. Irene explains, "One of my CDs has recently matured and I'm hoping to roll it into an investment where I might make a little more interest. Your cousin Eddie has suggested that I invest in bonds, but I'm not sure what to think. You know, dear, Eddie's never been very bright and I'd be foolish to take his advice without a little more information. -Jessica wonders if mutual funds may be the best investment option for her aunt. What are mutual funds?

While the Securities and Exchange Commission (SEC) is the federal effort to police trading in stocks, states have become involved, too, with their _____.

Which of the services listed below would be offered by a full-service broker?

The _____ is the current price of the stock divided by the firm's current annual earnings per share.

One of the safest investments available is bonds issued by _____.

The over-the-counter market trades stock outside the formal institutional setting of the organized stock exchanges.

A debenture is an unsecured corporate bond.

_____ are desirable because they allow the issuers to keep their plans confidential.

How would a low rating by Standard & Poor's or Moody's affect a corporate bond issue?

A(n) _____ is a stock transaction in which an investor borrows securities from a broker to be sold and then replaced at a specified future date.

What does it mean when an investment bank underwrites a new security?

U.S. government bonds are among the most risky investments available.

Insider trading involves the use of special knowledge about a firm for profit or gain.

Ideally, an investor will diversify his or her portfolio within one category of investments.

A _____ bond is issued by a company as a source of long-term funding.

What is a broker? Distinguish between discount- and full-service brokers.

Which of the following is well known for their ratings of bonds?

A(n) _____ order instructs the broker to sell if a stock price falls to a certain level.

Jessica is looking forward to a family reunion at the beach. She is the first in her family to have graduated from college. She started her studies at the local community college and transferred to a prestigious private college several hours from her family's home. Jessica's major in college was business administration with a concentration in finance. As she approaches the beach house where her family will be staying, Jessica is glad that her days of being quizzed and tested are over. She is looking forward to an opportunity to relax and to put her brain on "pause." However, Jessica's family has other plans for her. Almost before she emerges from her car, the questions begin. Jessica's great-aunt Irene is hoping for a little investment advice. Irene explains, "One of my CDs has recently matured and I'm hoping to roll it into an investment where I might make a little more interest. Your cousin Eddie has suggested that I invest in bonds, but I'm not sure what to think. You know, dear, Eddie's never been very bright and I'd be foolish to take his advice without a little more information. -Jessica's grandmother asks her for advice. "Jessica, I own 5,000 shares of stock in Plus Cola. Can you help me understand the following stock listing information?" $\frac{\text { High }}{145} \quad \frac{\text { Low }}{124.5} \quad \frac{\text { Stock }}{\text { PLUS }} \frac{\text { Sym }}{\text { PC }} \quad \frac{\text { Div }}{2.5} \quad \frac{\text { Yield }}{1.8} \quad \frac{\text { PE }}{20} \quad \frac{\text { Vol 100s }}{1500} \quad \frac{\text { Last Net Chg }}{140} \frac{1.5}{+1.5}$

Which of the items below are considered services offered by a discount broker such as Charles Schwab?