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Exam 19: Using Securities Markets for Financing and Investing Opportunities

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Question 121

Multiple Choice

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________ stocks represent investments in emerging fields that have the potential to realize better than average increases in the stock's prices.

A) Blue chip
B) Penny
C) Growth
D) Income

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Question 122

Multiple Choice

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

A) certified underwriter
B) investment banker
C) stock exchange member or dealer where the stock is traded
D) trading officer of the Securities Exchange Commission

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Question 123

True/False

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Bond interest is usually paid in two times each year, even though the interest rate that is usually quoted is an annual rate.

Corporations benefit from securities markets primarily by:

An investment banking firm assists corporations in selling the new security issue.

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

_________ represent a powerful force in the buying and selling of corporate securities.

A stock exchange provides a marketplace where the public can directly buy and sell securities without the help of intermediaries.

Mutual funds offer small investors an opportunity to diversify their investments.

Stocks offering investors a high dividend yield are called:

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.

Which of the following statements best describes the current legal interpretation of insider trading?

After many years as a privately held corporation, Connecticut Industries decided to offer stock to the general public. Connecticut may discover that stockholders:

Ricardo owns 100 shares of stock in the ABC Corporation that currently sell for $100 per share. ABC just announced a two-for-one stock split for all current stockholders. Ricardo now owns $20,000 worth of stock in the ABC Corporation.

Seattle Music, Inc., recently offered bonds for sale to the public. The unsecured corporate bond paid interest of 9% to investors for the twenty-year life of the bonds. Seattle Music is obligated to:

An executive secretary at a major investment banking firm is asked to copy documents that detail a major merger that's going to be finalized in the next two weeks. This merger will be a positive outcome for one of the companies in this deal. The secretary is thrilled to read about the merger, plans to call her broker immediately and buy stock in the company, and suggests that you should also act on her stock tip. Since you are not employed at her firm your purchase is legal.

Georgia Corporation, known for its very generous dividend policy, easily attracts investors. These dividend payments basically represent:

Preemptive rights provide common stockholders the first right to purchase any new shares of common stock issued by the firm.

Mini-Case Penny Stock is the chairperson of Pirate Recording Company Inc. She is the person responsible for the tremendous growth this company has enjoyed over the past three years. It was Penny's intuition and clever negotiating that enabled the company to sign two very hot recording artists: Half a Dollar and N'elli. These groups have generated profits of over $25 million. The future looks even brighter at the firm because several current and aspiring entertainers have indicated an interest in signing on with Pirate Recording. This incredible growth has delighted everyone at the company, but it has also created a major problem for Penny. Pirate Recording has never been a major player in the recording industry, primarily because of limited capital. In order to take the company to the next level Penny realizes that she will need to expand the firm's personnel and equipment. The amount of new funds required to finance this needed expansion is $150 million. Penny has started to consult with others about how to finance this major expansion of the company. -One funding source under consideration is the issuance of $150 million worth of corporate bonds. A financial advisor predicted that in order for the fast growing company to attract investors, it would have to put up collateral to back up the bond issue. The type of bond the financial advisor suggests is:

Stock quotations are now available online. Which of the following pieces of information is not likely to be on the stock quotation?