Exam 9: Securities Markets : Trading Financial Resources

Portia qualifies as an accredited investor.This means that,unlike most investors,she can buy stocks and bonds on the secondary market.

On which market do the stocks of firms that don't meet listing requirements for stock exchanges trade?

The CEO of your firm has just remarked to you,"Quit worrying about the price of the company stock on the secondary market.After all,we received our funds for long-term expansion when we issued the stock in the primary market." As the finance director of the firm,what would your response be?

What is the term for a financial intermediary that assists corporations when they issue new securities?

An advantage of mutual funds is that they pool the funds of many investors so that these investors can own a broader portfolio of securities than they could not afford if they tried to purchase these securities individually.

Stock indices provide investors with a way to track the performance of individual stocks.

Corporation GHI has issued bonds in $100 000 increments to raise capital for product development efforts.The bonds contain a provision that allows the bondholders to exchange each bond for 25 shares of common stock.What are bonds with this type of arrangement called?

Public offerings of newly issued securities normally raise larger amounts of money than private placements.

How does an investor typically track the performance of stocks?

Historically,the NYSE has operated as an auction market.In an auction market,brokers representing buyers and sellers of securities meet at a physical location to conduct their business.

To successfully employ the buy and hold strategy,individuals must do which of the following?

Pam bought 500 shares of stock in the Lottadoe Corporation last year at a price of $24 per share.The market price has now risen to $35 per share.This result indicates that Pam could realize a capital gain if she sold her stock.

People who invest in preferred stocks tend to want to achieve which of the following?

Stox & Sellers is a relatively new corporation that has been working with an investment bank to carry out an initial public offering for its stock.The investment bank has agreed to a best efforts approach to selling the shares.This is good news for Stox & Sellers,because it means the investment bank has guaranteed that all of the shares will be sold at the agreed-upon offer price.

A callable bond allows the person holding the bond to redeem it before its maturity date for the par value.

Which of the following instructs the broker to buy or sell a security at the best available current market price?

In general,a public offering of newly issued securities is simpler than and less expensive to organize than a private placement.

A capital gain is an additional payment the company makes to the holder of one of its securities over and above the normal dividend or interest payment.

A sinking fund consists of funds set aside to retire bonds over a period of time.Money deposited into a sinking fund is used to call in bonds or purchase bonds on the open market over a period of several years.

Joe owns some stock in the Eck-Witty Corporation,while Sharon owns a bond in the same company.Eck-Witty must pay a dividend to Joe before it can pay any interest to Sharon.