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Exam 19: Using Securities Markets for Financing and Investing Opportunities

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Question 51

Multiple Choice

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

A) increase.
B) decrease.
C) remain constant.
D) be less volatile.

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Question 52

Multiple Choice

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The ABC Corporation issues a $1,000 bond, with an interest rate of 10%, and a maturity date of 2025. This creates a liability for the ABC Corporation to pay the bondholder:

A) $100 interest per year and $1,000 in the year 2025.
B) 10% of the selling price of the bond.
C) an interest payment equal to the dividend payment distributed to the common stockholders.
D) $1,100 annually until the year 2025.

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Question 53

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On a mutual fund quotation, the Net Asset Value (NAV) = the number of persons who are investing in the fund.

Program trading refers to computer trading software that automatically sells stocks when their price dips to a predetermined level.

Stock certificates identify per share dividends, expressed as a percentage of par value.

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

A company with cash flow shortages must pay common stockholders their dividends before paying preferred stockholders their dividends.

________ represent the best way for investors to have their investments managed by a trained specialist for a fee.

Diversification means:

Jason instructed his stockbroker to buy 100 shares of Utah Industries common stock if and when the price falls to $25 per share. Jason placed a(n) :

When given a choice, businesses prefer to obtain long-term financing through retained earnings or by borrowing from a lending institution such as a bank.

Securities markets represent the financial marketplaces for stocks and bonds.

Yolanda has an ownership interest in many different companies, yet she owns the shares of stock of just one organization. Yolanda undoubtedly owns shares in a(n) :

U.S. investors have invested $13 trillion in mutual funds.

Which of the following is not an odd lot of stock?

Corporations that want to attract more investors by lowering the selling price of their common stock might consider declaring a:

From a risk standpoint, stocks are considered the riskiest investments, followed by mutual funds, preferred stock, and ETFs. Bonds represent a lower-risk investment.

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) _________.

U.S. government bonds are considered safe investments. Therefore such government bonds usually have a lower interest rate than corporate bonds.

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.