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Exam 19: Using Securities Markets for Financing and Investing Opportunities

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Question 151

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Institutional investors include insurance companies,individual investors,and mutual funds.

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Question 152

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Securities markets represent the financial marketplaces for stocks and bonds.

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Question 153

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One of the criticisms of the Dow Jones Industrial Average is that it does not include enough stocks to provide a good representation of the entire stock market.

An organization whose members can buy and sell securities for companies and investors is known as a:

The dollar amount assigned to shares of stock by the corporation's charter represents the stock's:

Investors who trade securities,buy securities they are interested in holding or sell securities to make a profit or cut losses by trading in the secondary market.

Buying stock on margin lowers the overall risk for the investor.

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.

Preferred stockholders receive dividend payments before common stockholders are paid any dividends.

Explain the differences between preferred stock and common stock.

As market interest rates increase,the selling price for existing bonds also increases.

Interest represents the payment to bondholders for the use of their money.

Corporations benefit from securities markets primarily by:

Peak Performance Sporting Goods,Inc. ,needs a large amount of funds to expand its operation and open new stores.Jackson is one of a team of finance professionals that is working on Peak Performance's initial public offering.Peak Performance will partner with an investment banker to assist in pricing and selling several million original issue shares of company stock.Jackson just received word that the investment bank is willing to _____________ the issue.This means the investment bank will purchase the entire issue at a discount,and sell it for full price to interested investors.

Suzanne wants to purchase stock in a company that is headquartered in Germany.Suzanne:

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.

When an investor places a buy order with a stockbroker,the broker contacts a(n) __________ to complete the transaction.

In a secondary market sale of stock,the proceeds go to the investor selling the stock,not to the corporation.

As your elderly Uncle Bill approaches retirement,he asks for your advice for a safe place to invest several thousand dollars.He wants to receive some kind of payment each year for investing his money without a great deal of risk.You explain:

The proceeds from a secondary market sale of securities go to the corporation whose security is being traded.