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Exam 19: Using Securities Markets for Financing and Investing Opportunities

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Question 201

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Hallie owns 20% of the common stock of the Bean Brothers Coffee Company. The company announced plans to offer an additional 10,000 shares of common stock for sale. If Hallie exercises her preemptive rights, Bean Brothers must offer her the opportunity to purchase

A) 8,000 shares.
B) 2,000 shares.
C) as many of the new shares as the investor is willing and able to buy.
D) 20% of the outstanding preferred stock.

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Question 202

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

A) secondary market
B) discount
C) premium
D) date before the maturity date

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Question 203

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Bonds sold at a discount are sold for more than the bond's face value.

Securities markets represent the financial marketplaces for stocks and bonds.

Bonds, like stocks, trade daily on major security exchanges.

Young investors place more importance on low-risk investments, while elderly investors prefer significant growth in the value of their investments.

For the firm, the cost of paying dividends to common stockholders is higher than the cost of the same amount of interest paid to bondholders.

Your Uncle Mike is approaching retirement and he asks for your advice for a safe place to invest several thousand dollars. He wants to receive some kind of payment each year for investing his money without a great deal of risk. You explain

Insider trading involves the sale of stock to employees at discounted prices.

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

After buying 200 shares of common stock in Epic Electronics for $20 per share, Rashad later sold the same shares for $25 per share. Rashad's capital gain on the total transaction is:

A bull market occurs when overall stock prices increase.

Another name for the fixed rate of interest attached to a bond is the

Most businesses prefer to meet their long-term financial needs through

Growth stocks offer investors the attractive combination of low risk and high returns.

Many stock market analysts suggest that program trading was a big cause of the stock market crash of 1987.

A stock split refers to buying a share of stock at a discounted price if full payment is made at the time of purchase.