Deck 15: Pricing and Distribution

Question 1

________ are financial instruments such as stocks and bonds.

A) Savings accounts
B) Shares
C) Securities
D) Reserves
E) Short-term options

Answer 1

Securities

Question 2

Bernice, an employee of a large public company, has purchased part ownership in her company. Bernice has purchased

A) stocks.
B) bonds.
C) dividends.
D) reserves.
E) an IPO.

Answer 2

stocks.

Question 3

The two financial markets in which securities are sold are the

A) United States exchange and the global exchange.
B) New York Stock Exchange and the NASDAQ.
C) open market and the closed market.
D) short-term market and the long-term market.
E) primary market and the secondary market.

Answer 3

primary market and the secondary market.

Question 4

When a new company goes public and sells stock for the first time, it is called

A) a primary securities sale.
B) a secondary securities market.
C) an open auction.
D) an initial public offering.
E) a closed auction.

Question 5

The money derived from the sale of the stocks or bonds goes to

A) a fund held by the SEC.
B) the issuer.
C) the buyer.
D) other stockholders.
E) the executive board of the company.

Question 6

As companies that engage in buying and reselling new securities, Goldman Sachs and Morgan Stanley are examples of

A) institutional investors.
B) syndicates.
C) investment bankers.
D) closed auctions.
E) short-term security managers.

Question 7

Investment bankers sell securities to ________ investors, or large organizations such as pension funds and insurance companies.

A) corporate
B) mega
C) institutional
D) organized
E) brokerage

Question 8

Most securities sold through open auction are

A) corporate IPOs.
B) small cap companies.
C) international market securities.
D) U.S. Treasury securities.
E) municipal government bonds.

Question 9

How often are short-term securities auctioned?

A) daily
B) twice a week
C) weekly
D) monthly
E) annually

Question 10

How often are longer-term securities auctioned?

A) weekly
B) monthly
C) every six months
D) annually
E) every two years

Question 11

The NYSE and NASDAQ are both ________ securities markets.

A) primary
B) closed
C) short-term
D) secondary
E) long-term

Question 12

Lei's investment manager told her that if she wants to increase the return on the money currently in her checking account, she should invest in a bank certificate of deposit. This is

A) a short-term (one-year) IOU issued by the bank.
B) a long-term IOU issued by governments and corporations.
C) a unit of ownership in a corporation.
D) a short-term obligation of the U.S. Treasury with a maturity period of one year or less.
E) a bond issued by a state or local government or agency.

Question 13

Rashid bought a long-term IOU issued by the federal government on which he is paid interest at regular intervals. This is

A) a money market.
B) a bond.
C) a stock.
D) a cash investment.
E) commercial paper.

Question 14

Which statement about money market instruments is true?

A) They are very risky.
B) They are difficult to convert into cash.
C) They are extremely safe.
D) They generally have higher returns than other securities.
E) They are issued by governments and corporations.

Question 15

What type of bond would be issued by a state government to pay for road repairs?

A) infrastructure
B) treasury
C) general obligation
D) government
E) revenue

Question 16

Standard and Poor's and Moody's Investors Service determine a bond's ________, or the quality and safety of a bond.

A) status
B) performance
C) history
D) convertibility
E) rating

Question 17

What kind of bonds are popular with state and municipal governments because they mature on different dates, avoiding a cash flow problem?

A) retrievable
B) callable
C) convertible
D) serial
E) prerefunded

Question 18

Prerefunded bonds, also known as ________ bonds, are those in which the issuer makes annual deposits to a bank to accumulate funds for paying off the bonds on maturity.

A) junk
B) callable
C) convertible
D) serial
E) sinking-fund

Question 19

To determine a stock's ________, a company subtracts its liabilities from its assets, and the resulting figure, the shareholders' equity, is then divided by the number of shares that have been issued or sold of the stock.

A) market value
B) par value
C) book value
D) split value
E) dividend

Question 20

Which statement about holders of preferred stock is true?

A) Shareholders hold stock in common.
B) Shareholders have a say in electing the board of directors.
C) Shareholders will be the last in line to recoup investment if the company goes out of business.
D) Shareholders have first claim on dividends.
E) Shareholders have to be repaid on their investment.

Question 21

Martha Stewart went to jail for ________, which is the illegal use of private company information to further one's own fortunes or those of family or friends.

A) whistleblowing
B) insider trading
C) securities speculation
D) corporate fraud
E) falsification of a prospectus

Question 22

Latosha has a broker she uses to make trades for her and to give her investment advice based on research. What type of broker does Latosha use?

A) research-oriented
B) discount
C) transaction based
D) traditional
E) investment

Question 23

E-Trade is a ________ broker because it doesn't offer advice or tax planning and charges a low fee for trades.

A) research-oriented
B) discount
C) transaction based
D) traditional
E) investment

Question 24

Loren's broker knows Loren doesn't know anything about how the stock market works, so she advises him to trust her to decide when to buy and sell. This illustrates ________ orders.

A) market
B) limit
C) discretionary
D) cost
E) value

Question 25

Stock market ________ are indexes of stock market prices of groups of stocks that are related in some way.

A) groupings
B) families
C) gauges
D) instruments
E) indicators

Question 26

The ________ index is referred to as "the total stock market index."

A) Dow Jones Industrial Average
B) NASDAQ Composite Index
C) Wilshire 5000
D) NYSE 500
E) Standard & Poor's 500

Question 27

Portia has a high-risk tolerance, so she decides to use futures contracts to buy lumber in spite of the fact that the United States may be placing tariffs on Canadian lumber. Portia is most likely

A) investing in mutual finds that focus on lumber.
B) buying exchange-traded funds.
C) engaging in commodities trading.
D) buying stock in Canadian companies.
E) diversifying her portfolio.

Question 28

Which type of mutual fund focuses on investments that pay high dividends and interest?

A) balanced
B) growth
C) income
D) index
E) money market

Question 29

Catherine invests her retirement savings in no-load funds, which means she

A) pays no sales charges.
B) doesn't use a broker.
C) doesn't pay a management fee.
D) pays a small flat rate for every trade.
E) won't pay taxes when she withdraws the funds.

Question 30

Which statement about exchange-traded funds is true?

A) They don't allow investors to spread their risk.
B) They are less convenient than a mutual fund.
C) You can only buy shares in an ETF at the end of the trading day.
D) They usually charge lower fees than mutual funds.
E) They require a minimum initial investment.

Question 31

A(n) ________ exchange is a security exchange in which futures contracts are bought and sold.

A) futures
B) commodity
C) raw materials
D) index
E) hybrid

Question 32

In working with the Millers on their investment strategy, Milton noticed that they have most of their money tied up in their house. He suggests that if they need cash quickly, they will have problems with

A) available funds.
B) liquidity.
C) risk.
D) speculation.
E) asset allocation.

Question 33

When considering how much money you can afford to invest, you are considering which element of your investment profile?

A) available funds
B) liquidity
C) risk
D) speculation
E) asset allocation

Question 34

Of the five investment strategies, which has the highest risk?

A) buying and holding
B) investing for income
C) investing for growth
D) market timing
E) value investing

Question 35

Which statement describes investing for growth?

A) I want an attractive return over the long haul without having to constantly track my investments.
B) I want a steady flow of income, even though the value of the investments won't increase much.
C) I want to increase my wealth fast and am willing to take risks.
D) I'm willing to risk my time and money hunting for undervalued stocks that might become profitable.
E) I'm willing to take big risks and pay very close attention to buy low and sell high for quick profits.

Question 36

Which statement describes value investing?

A) I want an attractive return over the long haul without having to constantly track my investments.
B) I want a steady flow of income, even though the value of the investments won't increase much.
C) I want to increase my wealth fast and am willing to take risks.
D) I'm willing to risk my time and money hunting for undervalued stocks that might become profitable.
E) I'm willing to take big risks and pay very close attention to buy low and sell high for quick profits.

Question 37

Apple Tree Electronics is planning to offer its stock on the primary securities market. Investors are excited as Apple Tree has never sold shares of their stock before. Apple Tree is most likely having a(n)

A) initial public offering.
B) stock split.
C) institutional investment sale.
D) callable stock funding.
E) open auction.

Question 38

Fortunato is excited for the coming week. He works for a large investment firm and will be taking part in his first IPO. He will be responsible for purchasing the stock and then reselling it to public investors. Fortunato most likely works as a(n)

A) capital gains advisor.
B) underwriter.
C) institutional investor.
D) day trader.
E) liquidity provider.

Question 39

Roxane has been buying and selling securities on her own for more than five years. Last year she made more than $10,000 by selling securities. This money can be best described as

A) capital gains.
B) revenue.
C) convertible profit.
D) revenue futures.
E) dividends.

Question 40

Jerry tracks stock on the New York Stock Exchange every morning while he has breakfast. He then purchases stocks when he feels they have strong possibility for growth. Jerry is most likely using the ________ market.

A) common stock
B) primary securities
C) open auction
D) institutional investment
E) secondary securities

Question 41

Bashaud is interested in purchasing some long-term U.S. Treasury securities. He will most likely need to purchase them through

A) an underwriting exchange.
B) a portfolio auction.
C) the secondary securities market.
D) a money market.
E) an open auction.

Question 42

Adriann purchased a 10-year bond. After three years paying 5 percent interest, the interest rate drops to 3 percent. Adriann is surprised when the bond issuer recalled her bond shortly after the rate drop. Adrianna had most likely purchased a ________ bond.

A) convertible
B) sinking-fund
C) common
D) serial
E) callable

Question 43

Ashlynn recently purchased a bond from a large corporation. The corporation is using proceeds from the bond sale to help pay for a new research facility. The corporation did not put up any of its assets as collateral, but Ashlynn still went ahead with the purchase since she believes the corporation is trustworthy and reliable. Ashlynn most likely purchased a(n) ________ bond.

A) general obligation
B) investment-grade
C) secured
D) speculative-grade
E) unsecured

Question 44

Pathways Logistics is considering issuing bonds to help fund the purchase of land for a new production facility. Which statement best represents a potential disadvantage that Pathways should consider before committing to the bond sale?

A) Bonds will increase the company's debt.
B) Bonds can change the firm's ownership.
C) Bond interest payments are not tax deductible.
D) Bond payments are permanent.
E) Bonds will require dividend payments each year.

Question 45

Your hometown is looking to build a new multi purpose stadium for the local semi pro soccer team. Proceeds from ticket sales go directly to the city. In order to fund the stadium, the city has decided to issue bonds. The bonds can be best classified as a ________ bond.

A) mutual, general obligation
B) municipal, secured
C) callable, revenue
D) municipal, revenue
E) treasury, callable

Question 46

Felicia purchased some stock last year. She was disappointed at the end of the year when she realized that she would not have the opportunity to vote in the company election, but she was very pleased when she received a cash payout from the company at the end of the following quarter. Felicia most likely owns ________ stock.

A) preferred
B) treasury
C) common
D) secured
E) convertible

Question 47

Hasan bought 10 shares of stock in a company two years ago. He feels like he hit the jackpot because the company has given him additional shares of stock at the end of four of the last five quarters. This additional stock can be best described as a

A) dividend.
B) split.
C) portfolio.
D) commodity.
E) diversification.

Question 48

Anatoliy had purchased five shares of stock with a par value of $20 last year. At a financial review, his advisor tells Anatoliy that he now owns 10 shares of stock with a par value of $10. What has most likely occurred in this situation?

A) The company completed a stock split.
B) The company finalized a diversification.
C) The company received a limit order.
D) The company increased its market value.
E) The company approved a dividend payout.

Question 49

Rasheed is considering purchasing stock in a few companies. He wants to start by researching whether the stock for any of the companies is underpriced at this time. Rasheed's best course of action would be to review the ________ for each stock.

A) maturity value
B) par value
C) dividend value
D) book value
E) market value

Question 50

Carina is considering the purchase of stock in a company. She tells her broker about her interest. At this point the broker must provide Carina with a

A) strategy.
B) portfolio.
C) speculation.
D) disclosure.
E) prospectus.

Question 51

Neelima has been working in the financial industry for more than 20 years. She helps regulate the different United States Stock Exchanges. Which federal agency does Neelima most likely work for?

A) The Securities and Exchange Commission
B) The Federal Reserve
C) The Federal Deposit Insurance Corporation
D) The Consumer Financial Protection Bureau
E) The Department of the Treasury

Question 52

Rocky's broker has played a huge role in helping him with his investments. The broker has helped complete research and provided advice to Rocky. In addition, he executes trades and completes all of Rocky's tax planning. Rocky's broker can be best described as a(n) ________ broker.

A) inside
B) discount
C) portfolio
D) traditional
E) asset

Question 53

Liorit has been monitoring a specific stock for the past month. He calls his broker and tells him to buy 20 shares when he feels the price is most optimum. This can be best described as a ________ order.

A) market
B) discount
C) discretionary
D) limit
E) speculative

Question 54

Eevi has been researching and monitoring a company all day and logs into the E-Trade app on her phone to purchase 100 shares shortly before the market closes for the day. Eevi's purchase was most likely facilitated by a(n) ________ broker.

A) traditional
B) discount
C) on-demand
D) full-service
E) speculation

Question 55

Aqib thinks one of the stocks he owns might be dropping, but he's not confident enough to sell it yet. He calls his broker and requests that she sell the stock if it drops more than 10 percent during the day. This can be best described as a ________ order.

A) market
B) limit
C) speculation
D) discretionary
E) discount

Question 56

Marcela is a professional investor and is preparing to research the general movement of U.S. stock prices. As she sits down to her computer, which website would most likely provide Marcela with a picture of the total stock market?

A) NASDAQ Composite Index
B) Wilshire 5000
C) Security Exchange Commission
D) Standard & Poor's 500
E) Dow Jones Industrial Average

Question 57

Aeron owns shares of a mutual fund and decides to purchase additional shares. After making the purchase he notices that he was charged a 3 percent commission. Aeron's mutual fund can best be described as a(n) _______ fund.

A) exchange-traded
B) hybrid
C) load
D) asset
E) no-load

Question 58

Ofelia purchased shares of an investment fund over her lunch hour. She was pleased by the low fees that she paid and the fact that there wasn't a minimum investment requirement. Ofelia's investment was most likely a(n)

A) mutual fund.
B) unsecured bond.
C) exchange-traded fund.
D) commodity.
E) stock.

Question 59

Kaoru wanted to retire early so he placed his free money in high-risk stocks. Unfortunately, the country entered a recession and the stock market dropped significantly. Kaoru lost most of the money he had invested. What option would have most likely insulated Kaoru from the market crash?

A) asset portfolios
B) underwriting
C) futures contracts
D) diversification
E) institutional investments

Question 60

Mortimer is preparing an agreement to buy a large amount of oranges at their current prices. Due to an early freeze in Florida, he believes prices will soon increase significantly. Mortimer is most likely participating in

A) exchange trading.
B) asset allocation.
C) commodity trading.
D) buying and holding
E) sinking-fund trading.

Question 61

Diana is planning to begin investing, so she schedules time to do some research. Diana is intrigued when she finds some information about a type of investment that interests her. While there are some fees associated with the investment, she will be able to easily spread out her risk thanks to the many different options that are available. The investments are also professionally managed, so she can read a short summary before purchasing any shares without having to do any research. Diana has most likely discovered

A) mutual funds.
B) revenue bonds.
C) commodities.
D) preferred stock.
E) exchange-traded funds.

Question 62

Deepika is meeting with a financial advisor to discuss her desire to begin investing. The first area that the advisor wants to cover focuses on the amount of money Deepika wants to have when she reaches her desired retirement age. The advisor most likely wants to know about Deepika's

A) portfolio
B) liquidity.
C) goals.
D) portfolio.
E) asset allocation.

Question 63

Opeyemi is discussing his investment strategy with a friend. The friend tells Opeyemi to review his portfolio to ensure he has options he can convert to cash in the event of an emergency. Which of the factors that make up an investor's profile does this best represent?

A) liquidity
B) risk
C) asset allocation
D) available funds
E) speculation

Question 64

Kahina keeps a very close eye on world affairs and always considers how particular issues might impact the financial environment. If she sees an issue, Kahina is quick to adjust her investments to adapt to the changes. Which of the factors that make up an investor's profile does this best represent?

A) asset allocation
B) available funds
C) speculation
D) liquidity
E) risk

Question 65

Salvatrice is a commodities investor. He loves looking for opportunities that offer the possibility for tremendous profit, even if they pose a large risk. Which of the factors that make up an investor's profile does this best represent?

A) risk
B) goals
C) risk allocation
D) available funds
E) speculation

Question 66

Irene and Serena recently were married. They want to ensure they start investing for their future, so they sit down to review their income. When they are done, they want to reach an agreement as to how much they will invest from each of their respective paychecks. Which of the factors that make up an investor's profile does this best represent?

A) goals
B) risk
C) available funds
D) taxes
E) speculation

Question 67

Rajya is very pleased by the money she has made from investing in securities. This income can also be described as the

A) secondary gain.
B) par value.
C) dividend.
D) yield.
E) market rate.

Question 68

Jung-Hoon is comfortable taking on significant risk in order to maximize his savings. He primarily invests in start-ups and companies that focus on new technology. Which investment strategy does this best represent?

A) market timing
B) value investing
C) buying and holding
D) investing for income
E) investing for growth

Question 69

Bjorn wants to pay for his son's college education so that his son can be debt-free when he graduates. Bjorn needs to have a reliable source of income so that he can make regular payments to the school. Which investment strategy would be best for Bjorn's situation?

A) investing for growth
B) market timing
C) value investing
D) investing for income
E) buying and holding

Question 70

Faris enjoys researching and analyzing investment options. He is always trying to uncover stocks that he perceives as undervalued. When he finds an undervalued stock, he buys it with the hope that other investors will eventually want to buy the same stocks, which will increase their price. Which investment strategy does this best represent?

A) market timing
B) investing for growth
C) value investing
D) buying and holding
E) investing for income

Question 71

Keston left his career in information technology to focus on investing. He loves the thrill of taking a risk that could lead to income. His favorite investment activity centers around buying stock at a low price and then quickly selling it at a higher price. Which investment strategy does this best represent?

A) investing for income
B) buying and holding
C) market timing
D) value investing
E) investing for growth

Question 72

What is the primary securities market? Describe the role investment banking has in the primary securities market.

Question 73

Define the three types of securities and provide at least two examples of each one.

Question 74

Provide an overview of the ways that stocks are valued.

Question 75

You are interested in buying stock in Technocube, a technology company. Provide an example that illustrates what you would tell your broker under each of the three conditions for securities orders.