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Exam 19: Using Securities Markets for Financing and Investing Opportunities

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Question 1

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

A) tax deductible.
B) legally required.
C) intended to discourage firms from issuing an excessive number of shares.
D) not tax deductible.

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Question 2

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Interest rates vary with changes in the state of the economy.

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Question 3

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U.S. investors have invested $12 trillion in mutual funds.

A recent publication referred to a series of bonds as "the 6s of 25".

means that the mutual fund company does not show a fee or commission for investing in the fund.

When you place a limit order, it means you are willing to buy or sell the stock at the best price available.

Which of the following lists the securities of the greatest number of firms?

Corporations benefit from securities markets primarily by:

Growth stocks are the stocks of corporations whose earnings are expected to grow faster than the overall economy.

During Ben's lunch break, he logged on to his computer to find the mutual fund he wanted to buy. As he made his way around several websites, he realized that the NAV (net asset value) quoted was yesterday's close. His shares would be purchased tomorrow, with today's closing price. Looking over his shoulder, one of his coworkers suggested that he look into because they are similar to mutual funds, but could be traded during the entire trading day, just like stocks.

The dramatic decrease in stock market prices during the 2000 to 2002 time period occurred in part because:

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

Which of the following trades corporate stocks not listed on the national securities exchanges?

Diversification means:

A well-diversified portfolio would consist of a variety of investments and even cash for emergencies. The important thing is that the choice of investments spreads the risk. Some investments may perform very well in any one year while others may lag. Those performing well will balance out those that are underperforming.

For the firm, the cost of paying dividends to common stockholders is higher than the cost of the same amount of interest paid to bondholders.

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

The new issue $1,000 face value bonds due in 2020 issued by Bay Books, Ltd. are perceived by investors as being less attractive than other bonds offered by other businesses at the same time. The coupon rate attached to these bonds will need to be than other corporate bond issues in order to attract investors.

The prospectus is summarization of the results of detailed financial documents that a firm files with the SEC prior to being given approval to issue securities.

The investor will receive the face value of the bond on the date.