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Exam 19: Using Securities Markets for Financing and Investing Opportunities

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Question 71

True/False

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With everything else constant, investors prefer a bond issued with a sinking fund compared to a bond without a sinking fund.

A) True
B) False

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Question 72

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Dividends are paid out of a corporation's:

A) Profit, before taxes.
B) Profit, after taxes.
C) Sales revenue.
D) Capital contributed by bondholders.

E) A) and C)
F) A) and D)

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Question 73

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One of the criticisms of the Dow Jones Industrial Average is that it does not include enough stocks to provide a good representation of the entire stock market.

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

The Thinking Green box, titled, "Investing with Integrity" features SRIs, where mutual fund managers let you recycle your shares in a fund. If you don't like your investment, you send it back and receive shares in another fund.

Demetrius recently bought a bond with face value of $1000. He paid $1,150 for the bond. Demetrius' bond investment undoubtedly pays a higher interest rate than the going rate for similar bonds currently out on the market.

Preferred stockholders have voting rights privileges not shared by common stockholders.

Both stocks and bonds represent temporary sources of funding for a firm. Eventually they must be repaid.

Preferred stock is a source of long-term funds that requires a future repayment of the stockholder's investment.

When an investor sells a security for more than the purchase price, the investor earns a(n) :

Investors trading online:

Roberto directed his broker to buy 75 shares of New Mexico Technologies at the best possible price available that day. These directions indicate that Roberto placed a order with his broker.

The maturity date of a bond refers to the date on which the interest payment is due to be paid.

The Securities and Exchange Commission does not intercede in any way in the process of an IPO. Doing so would disrupt the natural process of the capital markets.

If an investor's strategy is: "buy low, and sell high." We could conclude that his optimism regarding future stock price increases indicates that he is:

involve(s) computer instructions that automatically sell stocks whose value has dropped by a predetermined amount.

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

Bonds sold at a , sell for less than face value.

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.

The maturity date represents the date on which a corporation must pay investors the principal (face value) of their bond.