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Exam 19: Using Securities Markets for Financing and Investing Opportunities

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Question 111

True/False

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Before a corporation's stock can be sold on a major stock exchange, the firm must provide detailed financial information to the Securities and Exchange Commission.

A) True
B) False

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Question 112

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In the language of bonds, the terms "principal" and "face value" are synonymous.

A) True
B) False

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Question 113

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Daily reporting of the Dow Jones Industrial Average serves to:

The initial cost of investing in mutual funds depends in part on:

A no-load mutual fund charges no commission fees to buy or sell its shares.

A mutual fund that carries a load will require the investor to pay a commission, only if the fund appreciates in price.

Security markets assist businesses in performing their ________ function.

Bond prices in the newspaper or online are quoted as a percentage of their face value of $1,000. If the bond price is 103.25, this bond's value is equal to:

Which of the following describes a mutual fund that charges no commission to buy or sell its shares?

Bonds, like stocks, trade daily on major security exchanges.

A blue chip stock represents a highly speculative stock investment.

The owner of a convertible bond can exchange the bond for a specified number of shares of common stock in the same corporation.

Dividends on preferred stock are:

The Dow Jones Industrial Average provides us with a sense of direction (up or down) of the overall stock market.

Once a stock exchange agrees to list a company, the firm can be assured that it will always be listed by that exchange.

A stock split immediately increases the value of an investor's holdings.

The prospectus is summarization of the results of detailed financial documents that a firm files with the SEC prior to being given approval to issue securities.

Raising long-term funds through the sale of bonds requires the firm to make debt repayment when and if the organization has sufficient cash flow.

Maplewood Toy Company hopes to raise long-term capital by promising in writing to repay the principal provided by potential creditors in ten years. Additionally, the certificate issued by Maplewood promises to pay 5% interest annually for the ten-year life of the security. Maplewood intends to issue:

Insider trading refers to someone who benefits unfairly from information about a security not available to the general public.