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Exam 19: Using Securities Markets for Financing and Investing Opportunities

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Question 101

Multiple Choice

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Alejandro relies on his stockbroker to execute his buy and sell orders for shares of stock in different companies.He has found that the process of buying or selling a share of stock on a major stock exchange normally takes:

A) weeks.
B) seconds.
C) days.
D) months.

E) B) and D)
F) None of the above

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Question 102

Multiple Choice

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The Securities and Exchange Commission has accused Martha of benefiting unfairly from information secured from a corporate officer of Stewart Engineering.Because Martha used that information to profit in the stock market,she faces ________ charges.

A) insider trading
B) security tampering
C) corporate fraud
D) short selling

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

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Question 103

Multiple Choice

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Idle Time Gaming,Inc has reached a point in its life where it needs several million dollars in order to expand and follow its strategic plan.In negotiations with the investment banker,they agree to issue 40 million shares of common stock,at $22/share.If the Investment Banker's fee for underwriting the total sale is 6.82%,what is the discounted price that the investment bank is willing to pay Idle Time for the shares?

Each share of common stock provides the investor with a ________ right that offers the investor the first right to purchase any new shares of common stock the firm decides to issue.This allows common stockholders to maintain a proportional share of ownership in the company.

A bear is an investor that expects stock prices to rise.

Investors in ________ preferred stock receive a guarantee that missed dividends will accumulate and potentially be paid later.

Examples of institutional investors are pension funds,mutual funds,and insurance companies.

The secondary market is where investors (both individuals and companies)go to find someone who is interested in selling their investments to them.

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.

Which of the following describes the process where an investor borrows a percentage of the purchase price of stocks from the brokerage firm?

The NASDAQ reports its own average that investors follow to observe trends in the market.

Buying several different investment alternatives to spread the risk helps an investor achieve:

Bonds represent a major source of long-term financing.What is a bond? Explain the major elements that must be in a bond issue.

A mutual fund pools investors' money and then buys stocks and bonds in many companies in accordance with the purpose of the fund.

A share of preferred stock currently sells for $120.It offers the investor a dividend rate of 8%,with a par value of $100.If the company is able to pay dividends,preferred stockholders would receive a dividend of $9.60 per share.

An investor places a ________ order with a broker to buy a particular stock at a specific price,if and when that price becomes available.

Demetrius recently bought a bond with face value of $1000.He paid $1,150 for the bond.Demetrius' bond investment undoubtedly pays a higher interest rate than the going rate for similar bonds currently out on the market.

Daily reporting of the Dow Jones Industrial Average serves to:

Josh purchased the following shares of stock from three companies: Josh's total capital gain on these investments =

The NASDAQ is a floor-based exchange.