Question 1

The NASDAQ is a floor-based exchange.

Accepted Answer

A) True 
 B)False

Question 2

The Dow Jones Industrial Average reflects the average of the eleven largest corporations traded on the New York Stock Exchange as originally selected by Charles Dow.

Accepted Answer

A) True 
 B)False

Question 3

Bonds offering a higher interest rate than other bonds of similar risk, will likely sell at a:

Accepted Answer

A)  secondary market.
B)  discount.
C)  premium.
D)  price equal to the face value of the bond.E) B) and D)
F) None of the above

Question 4

Which of the following terms best describes the relationship between the New York Stock Exchange and the NASDAQ?

Accepted Answer

A)  Cooperative
B)  Dependent
C)  Competitive
D)  DisastrousE) A) and B)
F) None of the above

Question 5

When corporations elect to issue two or more shares of stock to existing stockholders for each share they currently own, they have initiated a(n)  .

Accepted Answer

A)  stock split
B)  dividend spread
C)  share dividend
D)  earnings splitE) B) and C)
F) C) and D)

Question 6

The threat of terrorist attacks tends to depress stock market prices.

Accepted Answer

A) True 
 B)False

Question 7

From an investor's point of view, corporate bonds offer less risk than government bonds.

Accepted Answer

A) True 
 B)False

Question 8

Although the interest rate is fixed when the bond is issued, the interest rate that one firm must pay compared to another may vary depending upon risk factors such as the reputation of the firm.

Accepted Answer

A) True 
 B)False

Question 9

When retained earnings are not enough to meet their long-term funding needs, businesses may be able to raise funds by:

Accepted Answer

A)  selling common stock.
B)  petitioning the government for a loan.
C)  purchasing additional assets.
D)  decreasing their accounts payable.E) A) and B)
F) All of the above

Question 10

By issuing bonds, a firm's debt level increases which may adversely affect the firm's image in the financial community.

Accepted Answer

A) True 
 B)False

Question 11

Index funds invest in one specific type of investment, for example, an index fund might only invest in income stocks, companies whose stocks pay dividends.

Accepted Answer

A) True 
 B)False

Question 12

According to the "Reaching Beyond Our Borders" box in Chapter 19, purchasing ADRs is one way that U.S. investors participate in the global securities market.

Accepted Answer

A) True 
 B)False

Question 13

The corporate certificate issued to an investor that has loaned money to the corporation or government is called a:

Accepted Answer

A)  common stock.
B)  preferred stock.
C)  bond.
D)  debt document.E) B) and D)
F) A) and C)

Question 14

The call provision set by a company on its bonds benefits the investor.

Accepted Answer

A) True 
 B)False

Question 15

Investors buying bonds and corporations issuing bonds (both)  accept investment risk. Which of the following statements is most correct when it comes to the investment that one or the other party accepts?

Accepted Answer

A)  If investor Joe is holding a bond that pays 5% and market interest rates on similar bonds go down, Joe must hold the bond until maturity because if he were to sell it today, he would have to sell it at a discount.
B)  If investor Joe is holding a bond that pays 5% and market interest rates on similar bonds go down, Joe's bond is now worth more than its face value, and if he needed to sell it on the secondary market, he could probably sell it at a premium.
C)  If investor Joe is holding a bond that pays 5% and interest rates on similar bonds go up, Joe stands to gain more than the face value of the bond if he were to sell it on the secondary market today.
D)  If XYZ Corporation wants to issue bonds to pay for an expansion project, and analysts predict that interest rates are projected to climbE) B) and C)
F) A) and B)

Question 16

The stocks of high quality companies such as Coca-Cola and Microsoft are called blue chip stocks.

Accepted Answer

A) True 
 B)False

Question 17

According to the Thinking Green box, titled, "Invest with Integrity", socially responsible investment funds (SRIs) managed to prosper and grow through the recession and credit crisis of 2008.

Accepted Answer

A) True 
 B)False

Question 18

Institutional investors include insurance companies, individual investors, and mutual funds.

Accepted Answer

A) True 
 B)False

Question 19

The interest paid to bondholders represents the principal of the bond.

Accepted Answer

A) True 
 B)False

Question 20

Stocks offering investors a high dividend yield are called:

Accepted Answer

A)  growth stocks.
B)  blue chip stocks.
C)  income stocks.
D)  penny stocks.E) B) and C)
F) All of the above

Exam 19: Using Securities Markets for Financing and Investing Opportunities

The call provision set by a company on its bonds benefits the investor.

Correct AnswerverifiedShow Answer

Institutional investors include insurance companies, individual investors, and mutual funds.

Correct AnswerverifiedShow Answer

The NASDAQ is a floor-based exchange.

Correct AnswerverifiedShow Answer

When corporations elect to issue two or more shares of stock to existing stockholders for each share they currently own, they have initiated a(n) .

Correct AnswerverifiedShow Answer

Although the interest rate is fixed when the bond is issued, the interest rate that one firm must pay compared to another may vary depending upon risk factors such as the reputation of the firm.

Correct AnswerverifiedShow Answer

Investors buying bonds and corporations issuing bonds (both) accept investment risk. Which of the following statements is most correct when it comes to the investment that one or the other party accepts?

Correct AnswerverifiedShow Answer

According to the Thinking Green box, titled, "Invest with Integrity", socially responsible investment funds (SRIs) managed to prosper and grow through the recession and credit crisis of 2008.

Correct AnswerverifiedShow Answer

The threat of terrorist attacks tends to depress stock market prices.

Correct AnswerverifiedShow Answer

The stocks of high quality companies such as Coca-Cola and Microsoft are called blue chip stocks.

Correct AnswerverifiedShow Answer

Which of the following terms best describes the relationship between the New York Stock Exchange and the NASDAQ?

Correct AnswerverifiedShow Answer

Index funds invest in one specific type of investment, for example, an index fund might only invest in income stocks, companies whose stocks pay dividends.

Correct AnswerverifiedShow Answer

By issuing bonds, a firm's debt level increases which may adversely affect the firm's image in the financial community.

Correct AnswerverifiedShow Answer

Bonds offering a higher interest rate than other bonds of similar risk, will likely sell at a:

Correct AnswerverifiedShow Answer

Stocks offering investors a high dividend yield are called:

Correct AnswerverifiedShow Answer

When retained earnings are not enough to meet their long-term funding needs, businesses may be able to raise funds by:

Correct AnswerverifiedShow Answer

The corporate certificate issued to an investor that has loaned money to the corporation or government is called a:

Correct AnswerverifiedShow Answer

The interest paid to bondholders represents the principal of the bond.

Correct AnswerverifiedShow Answer

From an investor's point of view, corporate bonds offer less risk than government bonds.

Correct AnswerverifiedShow Answer

The Dow Jones Industrial Average reflects the average of the eleven largest corporations traded on the New York Stock Exchange as originally selected by Charles Dow.

Correct AnswerverifiedShow Answer

According to the "Reaching Beyond Our Borders" box in Chapter 19, purchasing ADRs is one way that U.S. investors participate in the global securities market.

Correct AnswerverifiedShow Answer

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