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Exam 19: Using Securities Markets for Financing and Investing Opportunities

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Question 91

Multiple Choice

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Shareholder Jones sells 100 shares of Very Vegetarian Corporation stock to Investor Smith.This transaction takes place in the:

A) primary market.
B) secondary market.
C) initial offerings market.
D) security resale market.

E) B) and D)
F) All of the above

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Question 92

Multiple Choice

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Dividends on preferred stock are:

A) paid after common stockholders receive their dividends.
B) guaranteed,except in the event of bankruptcy.
C) normally fixed,if and when dividends are paid.
D) always greater than dividends on common stock.

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

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Question 93

Multiple Choice

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High-risk,high-interest bonds are called:

Ashleigh is looking for an investment that will pay a little better than what she can get from a government bond.You suggest that she consider a new issue of debenture bonds by Very Vegetarian that pay 8.5% annually and mature in 2025.A debenture bond:

An initial public offering (IPO)represents the first time a corporation's stock is offered and sold to persons outside of the company.

A share of preferred stock 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:

When issuing stock to obtain long-term funding,dividend payments are:

Security markets assist businesses in performing their ________ function.

A callable bond allows a bondholder to exchange his/her bond for shares of common stock in the same corporation.

It is easier for a small business to raise funds through a stock issuance than for a large,well-known company.

Most mutual funds provide investors an opportunity to buy shares directly without using a stockbroker.

Cumulative preferred stockholders enjoy a promise that missed dividends will accumulate and be paid later,before any dividends are paid to common stockholders.

The disadvantages of selling stock to obtain long-term financing include:

To reduce the risk of investing in an individual stock,an ownership position in many different companies can be achieved by purchasing shares in a(n) :

Zach purchased 200 shares of Fast Track Corporation last year.This year,he plans to hire an attorney to go after the company for failure to pay dividends.If Zach follows through with his plan,he will probably win the lawsuit because companies are obligated to pay their stockholders dividends for owning and holding the firm's stock.

The number of U.S.companies that are listed on foreign stock exchanges is declining.

Ina Vestor has a brokerage account with one of the remaining large investment firms.This morning her broker called asking if she is interested in participating in an IPO.He went on to say that he could get her 200 shares for $23/share.If Ina agrees to buy the IPO,the trade will take place in the ____________.

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

Bonds represent a permanent source of funding for companies.The money firms acquire by issuing bonds does not need to be repaid.

Stock exchanges compete with each other for the listing of a corporation's stock.