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Exam 19: Using Securities Markets for Financing and Investing Opportunities

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Question 31

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A share of preferred stock for Marshall Manufacturing currently sells for $120. It offers the investor a dividend rate of 8%, on a par value of $100. If the investor owns 500 shares, her total annual dividend will equal

A) $800
B) $8.00
C) $2,000
D) $4,000

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

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Question 32

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Bond classifications include, but are not limited to corporate bonds, treasury bonds, treasury notes, and municipal bonds.

A) True
B) False

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Question 33

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Corporate bonds provide investors the option of reselling the bond back to the issuing corporation at any time during the life of the bond.

Mutual fund investors will note that

Two kinds of equity financing are

In an effort to profit from stock market trading, Tony landed a job with the Newport Group. Tony intends to use his position to obtain privileged information about his new employer that would not be available to the public. While he realizes that he may be benefiting unfairly, he is not acting illegally because he is an employee.

The ________ is a large national electronic stock trading market.

Investment bankers are in the business of underwriting securities. They profit from purchasing the new stock offering of a corporation at a discount, and then selling those shares of stock to the public at the market price.

According to the Standard & Poor's Investor Services ratings, which of these ratings indicates a highly speculative bond?

Government employees, public school system employees, and even employees of some large companies pay a percentage of their monthly earnings into pension funds. These funds collect a large pool of money that they invest in securities. Large organizations-such as pension funds, mutual funds, and insurance companies-that invest their own funds or the funds of others into stocks, bonds, or other securities are called institutional investors.

Taking into account the risk/return trade-off, it would stand to reason that a secured bond holds a lower interest rate than an unsecured bond.

Iron Age Metalworks, known for its very generous dividend policy, easily attracts investors. These dividend payments basically represent

If you are willing to hold on to your growth stock long enough, at least five years or more, you will realize capital gains.

Juanita owns stock in Elite Technologies. Her stock provides a priority claim on dividend payments and on the firm's assets in the event of liquidation. However, her ________ stock ownership does not offer her voting rights.

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

As he was approaching retirement, Gabriel began a search for a low-risk investment. He should consider buying a secured bond of a major corporation.

Diversification means buying several different types of investments with the funds you have available for investment.

Bond interest is usually paid in two times each year, even though the interest rate that is usually quoted is an annual rate.

A sinking fund provision decreases the risk of repayment in the minds of the investors.

Growth stocks offer investors the attractive combination of low risk and high returns.