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Exam 19: Using Securities Markets for Financing and Investing Opportunities

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Question 111

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The secondary market is where investors (both individuals and companies) go to find someone who is interested in selling their investments to them.

A) True
B) False

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Question 112

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The similarities between common stocks and bonds include a face or par value and a fixed rate of return for investors.

A) True
B) False

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Question 113

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An income stock offers investors a relatively high dividend yield on their investment.

Government employees, public school system employees, and even employees of some large companies pay a percentage of their monthly earnings into pension funds. These funds collect a large pool of money that they invest in securities. Large organizations-such as pension funds, mutual funds, and insurance companies-that invest their own funds or the funds of others into stocks, bonds, or other securities are called institutional investors.

Taking into account the risk/return trade-off, it would stand to reason that a secured bond holds a lower interest rate than an unsecured bond.

A mutual fund company buys securities from corporations and governments and packages them together into a mutual fund. It then

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.

The U.S. government just announced an increase in the interest rate paid on U.S. government bonds. This will likely cause a decrease in the interest rates paid on corporate bonds.

Elisa has an ownership interest in many different companies, yet she owns the shares of stock of just one organization. Elisa undoubtedly owns shares in a(n)

Which of the following would be classified as an institutional investor?

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.

The Dow Jones Industrial Average utilizes the prices of the same 30 companies' stocks each year to ensure consistency.

Par value reflects the current market price for a stock.

Investors who trade securities buy securities they are interested in holding or sell securities to make a profit or cut losses by trading in the secondary market.

As creditors of a firm, bondholders enjoy voting privileges for the firm's board of directors' elections.

The risk associated with Firm A's bond is greater than the risk of Firm B's bond. All other things being equal, investors would be willing to pay ________ for Firm B's bond.

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

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

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

Black Tuesday refers to the stock market crash that occurred in October 1987.