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Exam 19: Using Securities Markets for Financing and Investing Opportunities

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Question 51

Multiple Choice

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Which of the following represents a disadvantage of issuing bonds?

A) Bonds are permanent debt on the firm's balance sheet.
B) Dividends are legally required.
C) Bonds increase the firm's debt.
D) Bondholders receive voting rights.

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

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Question 52

True/False

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A bond offering description reads: "6s of 2015." This means the bond pays 3% interest semi-annually and matures in 2015.

A) True
B) False

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Question 53

Multiple Choice

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

According to the Securities Act of 1933 it is against the law for a firm that is publicly trading securities to deny an investor from knowing how the firm is doing financially.

What agency sets the margin rates for purchasing stock in the U.S.?

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

Monica met with a financial planner last week and he urged her to consider only government bonds and mutual funds in her portfolio. Since she is in her 20's, Monica believes she can tolerate a little more risk. You suggest that it is a better plan to follow the advice of the financial planner, rather than research her choices on her own.

Over the past 50 years, the average annual return on bonds has exceeded the return from stocks.

In an effort to profit from stock market trading, Chad landed a job with the ABC Corporation. Chad intends to use his position to obtain privileged information about his new employer that would not be available to the public. While Chad realizes that he may be benefiting unfairly, as an employee he is not acting illegally.

Well-known foreign exchanges that also exchange the securities of U.S. firms include the London Exchange and the Tokyo Exchange.

The market price of a share of common stock depends heavily on:

Which of the following securities guarantees preferred stockholders payment of missed dividends before any dividends are paid to common stockholders?

After owning a Cordero Company bond for five years, Gabrielle exercised an option that allowed her to exchange her bond for 20 shares of the company stock. Gabrielle a owned a(n) :

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

A round lot refers to the purchase of 100 shares of stock in the same company in a single transaction.

Before the announcement of a three-for-one stock split, the selling price for a share of stock in Olympia Oil Refineries was $150 per share. Immediately after the stock split, the probable price per share is:

A Bond's face value is the same as its:

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

Issuing stock is considered equity financing.

Corporations that issue preferred stock incur a legal obligation to pay dividends to those stockholders.