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Exam 19: Using Securities Markets for Financing and Investing Opportunities

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Question 191

True/False

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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.

A) True
B) False

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Question 192

Multiple Choice

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Some analysts refer to ___________ stocks as issues that sell for less than $2 (others say: for less than $5) .

A) dollar
B) growth
C) penny
D) discount

E) All of the above
F) A) and D)

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Question 193

Multiple Choice

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Which of the following accurately describes an advantage of selling bonds to raise long-term capital?

Stocks offering investors a high dividend yield are called:

Another term for portfolio strategy is:

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. -If stock is issued in Pirate Recording,analysts predict that the company has potential for strong growth.The prospects for dividend payments to stockholders,at least in the beginning,are not good.Pirate Recording will need to retain its earnings in order to grow rapidly.The firm's stock would most likely be classified as a(n) :

Laura read about Living Longer Biotechnology,Inc.and wants to buy 100 common shares at $45 per share.Unfortunately,she only has $3000 available to invest.One risky strategy Laura could consider is:

A mutual fund that carries a load will require the investor to pay a commission,only if the fund appreciates in price.

Chipper's Golf Resort has learned that Tiger Woods is interested in putting his name on golf course designs;however,in order for any golf course to be acceptable to him,it will cost a minimum of $20 million to build.Chipper's owners want an international presence,and they believe that,"just the way golf club companies became publicly traded corporations,it may be time for golf courses to do the same." The plan is to begin to purchase real estate for four new golf resorts.Proceeding with their venture,the owners have calculated that they will need approximately $100 million.But putting together an IPO is another matter.After meeting with their investment banker,they believe that investors will be willing to pay $16/share for the IPO.As the ___________ for this issue,the investment bank requires 3% of the revenues generated by the sale.Chipper's will need to issue _______ shares in order to have the $100 million they need to proceed with their plan.

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

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

Moody's Investor Service currently rates the Sasha Deal Corporation bonds as a C grade.This indicates that these bonds are:

Demonte owns 600 shares in the Kentucky Bluegrass Corporation and he just received notice that the firm declared a three-for-one stock split.After the split,Demonte will own _______ shares in the firm.

On-line trading services target those investors who:

The Securities and Exchange Commission requires that all prospective investors receive a copy of a firm's prospectus prior to investing.

Corporate management decisions are influenced by the desire to keep stockholders happy.

Juan recently invested in 15-year Bellandro Bay Brewery bonds paying 6% interest annually,with a maturity date of 2020.The bonds are callable in 2015.If interest rates go down to 4.5% in the year 2015,the brewery is likely to:

Penny stocks represent a high-risk stock investment.

An investor earns a capital gain when they sell a stock for more than they paid for it.

The ________ is a large national electronic stock trading market.