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Exam 19: Using Securities Markets for Financing and Investing Opportunities

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Question 131

Multiple Choice

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The new issue $1,000 face value bonds due in 2020 issued by Bay Books,Ltd.are perceived by investors as being less attractive than other bonds offered by other businesses at the same time.The coupon rate attached to these bonds will need to be __________ than other corporate bond issues in order to attract investors.

A) the same
B) lower
C) higher
D) not important because it is a new issue

E) A) and D)
F) A) and C)

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Question 132

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"Black Tuesday" refers to the stock market crash that occurred in October 1987.

A) True
B) False

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Question 133

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A company often exercises the call provision of a bond if it's available when prevailing interest rates fall below the interest rate currently being paid to bondholders.

Bonds that pay very high interest rates and typically have a higher risk of default are known as:

The risk/return trade-off is inherent in any investment strategy.What are the five key criteria investors should consider when selecting investment options?

Before issuing stock or bonds,corporations must meet the disclosure requirements of the Federal Trade Commission FTC).

Which of the following trades corporate stocks not listed on the national securities exchanges?

Preemptive rights provide common stockholders the first right to purchase any new shares of common stock issued by the firm.

If an investor owns a bond that pays a higher rate of interest than other bonds of similar risk,the investor should be able to sell the bond on the secondary market for more than its face value.

An investment banking firm assists corporations in selling the new security issue.

An investor earns a capital gain when they sell a stock for more than they paid for it.

Last week,Danielle purchased 200 shares of High Tech Heaven,Inc on margin for $50 per share.This week,the price of High Tech Heaven's shares dropped by $10 per share due to a poor profit outlook.Danielle should anticipate:

Erica invests $5,000 in five ABC Corporation bonds that mature in ten years.Unexpectedly just the week after she invests,she has the opportunity to work abroad,which she has always wanted to do,but she needs cash.Which of the following most likely applies to Erica?

With recent mergers of stock exchanges,beginning with the New York Stock Exchange merger with Archipilago,and subsequently with Euronext and then Deutsche Borse,most exchange floors are symbolic because trades usually take place via computers.

One funding source under consideration is the issuance of $150 million worth of corporate bonds.A financial advisor predicted that in order for the fast growing company to attract investors,it would have to put up collateral to back-up the bond issue.The type of bond the financial advisor suggests is:

When market interest rates increase,the selling price of existing bonds will:

Which of the following legislative acts created the Securities and Exchange Commission?

A bond represents a contract of indebtedness issued by a corporation that promises payment of a principal amount plus interest at a specified future date.

A stock split refers to buying a share of stock at a discounted price if full payment is made at the time of purchase.

Ricardo owns 100 shares of stock in the ABC Corporation that currently sell for $100 per share.ABC just announced a two-for-one stock split for all current stockholders.Ricardo now owns $20,000 worth of stock in the ABC Corporation.