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Exam 19: Using Securities Markets for Financing and Investing Opportunities

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Question 201

Multiple Choice

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Bond prices in the newspaper or online are quoted as a percentage of their face value of $1000.If the bond price is 103.25,this bond's value =

A) $103.25
B) $1,032.50
C) $10,325.00
D) $10.33

E) None of the above
F) B) and C)

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Question 202

True/False

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A corporate bond provides the owner with the right to sell the bond to other investors at any time during the life of the bond.

A) True
B) False

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Question 203

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

A blue chip stock represents a highly speculative stock investment.

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

The stock of companies that fail to meet a stock exchange's minimum requirements can be delisted.

Lupe's stockbroker called to inform Lupe of a margin call that requires that she pay $1,000.This indicates that the value of Lupe's stock has:

Bondholders represent creditors of a firm.

Corporations receive the proceeds for the sale of their stock in:

Yesterday,Alberto purchased on margin 100 shares of stock in the ABC Corporation for $40 per share.Today,the price of the shares dropped by $10 per share.Alberto expects his broker to issue a margin call.

When investing in mutual funds,the investor will buy shares of a fund that consists of stocks or bonds,the fund will hold shares of many companies.

The stock of well-known,high quality firms,such as Coca-Cola,General Electric,and Procter & Gamble,fit the characteristics of ________ stocks,because investors can almost always be assured a dividend and consistent stock price appreciation.

Creating a portfolio by buying several different types of investments to spread the risk of investing is called _______________.

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.

After owning a Cordero Company bond for five years,Gabrielle exercised an option that allowed her to exchange her bond for 20 shares of the company stock.Gabrielle owned a:

Stock exchanges compete with each other for the listing of a corporation's stock.

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

Once a stock exchange agrees to list a company,the firm can be assured that it will always be listed by that exchange.

As a legal contract,bonds issued by different companies carry the same level of risk.

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