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Exam 19: Using Securities Markets for Financing and Investing Opportunities

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Question 151

Multiple Choice

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As a new father, Dan plans to accumulate funds over the next 18 years to help pay for his son's college education. Security markets provide Dan with

A) financing opportunities.
B) investing opportunities.
C) opportunities to reduce his taxes.
D) borrowing opportunities.

E) B) and C)
F) A) and C)

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Question 152

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The number of U.S. companies that are listed on foreign stock exchanges is declining.

A) True
B) False

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Question 153

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An initial public offering (IPO) represents the first time a corporation's stock is offered and sold to persons outside of the company.

A U.S. government bond paying 3.25% interest annually is a lower risk than a Bathtub Brewing Company bond paying 6%.

By issuing bonds with a ________, the corporation retains the right to pay off the bond prior to the maturity date.

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

The higher the risk associated with a bond issue, the ________ the interest rate the organization must offer investors.

Although the interest rate is fixed when the bond is issued, the interest rate that one firm must pay compared to another may vary depending upon risk factors such as the reputation of the firm.

By buying a ________ bond, investors will have an option to exchange their bond for shares of common stock in the company at a future date.

In the Adapting to Change box, Millennials, who distrusted and overlooked traditional financial advisors, started using robo-advisors when investing.

When an investor purchases a security, the investor does so with the expectation of

A mutual fund's purpose is rapid investment growth, not to provide diversification for investors.

After operating for years as a privately held corporation, Iron Age Metalworks plans to publicly trade its stock. As a midsized firm, Iron Age wants to avoid excessive paperwork, and the fear of being delisted in the future. The ________ provides the best fit for Iron Age's plans.

Unlike stocks, for selling purposes, bond prices remain stable over the life of the bond.

A callable bond allows a bondholder to exchange his/her bond for shares of common stock in the same corporation.

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.

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

Both preferred stocks and bonds represent funding sources that require repayment to investors.

Leafy Greens wants to raise an undisclosed amount of funds in order to expand the company-owned vegetarian restaurants overseas. The CFO of the company will negotiate with an expert at the FTC who will underwrite the issue of stock that Leafy Greens plans to offer.

Katherine inherited $35,000 when her grandfather died and decided to invest it in the Leafy Greens restaurants. As a student of business, you inform her that she can call a stockbroker who will help her purchase stock on the secondary market.