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Exam 19: Using Securities Markets for Financing and Investing Opportunities

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Question 131

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Dividends are paid out of a corporation's:

A) profit, before taxes.
B) profit, after taxes.
C) sales revenue.
D) capital contributed by bondholders.

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

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Question 132

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

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A bond is a corporate certificate indica...

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Question 133

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Corporations and brokers prefer to have stock purchases conducted in round lots of 100 shares.

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

An investor placing a market order with a broker agrees to buy or sell a stock immediately at the best price available.

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.

A U.S. government bond paying 3.25% interest annually is a lower risk than a Bellandro Bay Brewery bond paying 6%.

An investor places a ________ order with a broker to sell a stock at the best price available at that time.

Jennifer prefers corporate bonds as an investment option because investors always receive the face value of the bond whenever it is sold.

Insider trading involves the sale of stock to employees at discounted prices.

Through disciplined investing, Alyssa now owns 10% or 50,000 shares of a small biotech company. Although she has enjoyed a lot of control, she realizes that in order for the firm to acquire the funds to grow in a recessionary economy, it will need to issue more stock. Her regret is that it will dilute her ownership.

_____________ have a set dollar goal the fund manager wants to manage. Once the fund has reached that goal, it does not accept new investors.

Investing in common stock can give an individual the opportunity to participate in the success or failure of a corporation.

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

The Dow Jones Industrial Average reflects the average of the eleven largest corporations traded on the New York Stock Exchange as originally selected by Charles Dow.

The Dow Jones Industrial Average utilizes the prices of the same 30 companies' stocks each year to ensure consistency.

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

A ________ is a registered representative acting as an intermediary to buy and sell securities for clients.

Tyler is looking for an investment that will pay a little better than what he can get from a government bond. You suggest that he consider a new issue of debenture bonds by Very Vegetarian that pay 8.5% annually. You explain that Very Vegetarian has operated for a long time, and the debenture feature makes these bonds more secure than others.

When reading mutual fund quotations, the ________ is the price per share.