Using Securities Markets for Financing and Investing Opportunities (19 L.S.)

Question 1

What is the first public offering of a corporation’s stock?

Answer 1

Initial public offering (IPO)

Question 2

____ involves buying several different types of investments to spread the risk of investing.

Answer 2

Diversification

Question 3

Preferred stockholders are given preference over common stockholders in:

Answer 3

• The payment of dividends

- The claim on company assets

Question 4

List the steps in investing in stocks and bonds in order.

Answer 4

1-decide what stock/bond to invest in
2- find a stockbroker
3- the stockbroker negotiates a price and places an order
4- the trade is reported to your broker, who then notifies you

Question 5

Type of specialist assists in the issue and sale of new securities…

Answer 5

Investment Bankers

Question 6

Stocks of corporations in emerging fields such as technology and biotechnology or Internet-related firms, whose earnings are expected to grow at a faster rate than other stocks, are referred to as ____ stocks.

Answer 6

Growth Stocks

Question 7

Institutional investors are large organizations such as pension funds, mutual funds, and insurance companies that…

Answer 7

invest in their own funds or the funds of others

Question 8

Bonds that are not backed by any collateral such as equipment are called ____ bonds.

Answer 8

Debenture bonds

Question 9

The members of a stock exchange such as the NYSE…

Answer 9

-Buy and sell securities for companies and individuals

Question 10

A(n) ____ order tells the broker to buy or sell a stock at specific price, if that price becomes available.

Answer 10

limit order

Question 11

Securities that are not traded on registered stock exchanges are traded on…

Answer 11

over-the-counter (OTC) market

Question 12

An action by a company that gives stockholders two or more shares of stock for each one they own is called a(n) ___ ___.

Answer 12

Stock Split

Question 13

Buying stock on margin

Answer 13

Purchasing stocks by borrowing some of the purchase cost from the brokerage firm

Question 14

Propectus

Answer 14

• is a condensed version of the registration statement

- it must be sent to prospective investors

Question 15

Share of ownership in a company are called

Answer 15

Stocks

Question 16

The positive difference between the purchase price of a stock and its sale price is called ___ ____.

Answer 16

Capital gain

Question 17

What are stocks of public utilities that usually offer investors a high dividend yield that generally keeps pace with inflation?

Answer 17

Income stocks

Question 18

The ____ is a telecommunication network that links dealers across the nation, so that they can buy and sell securities electronically rather than in person.

Answer 18

NASDAQ

Question 19

Cash payments or additional shares of stock that are distributed to stockholders from corporate profits are called…

Answer 19

Dividends

Question 20

A(n) ____ fund buys stocks and bonds and then sells shares in those securities to the public.

Answer 20

Mutual Fund

Question 21

What is the payment that the issuer of the bond makes to the bondholders for use of the borrowed money?

Answer 21

Intrest

Question 22

The exact date the issuer of a bond must pay the principal to the bondholder is called the ___ ___.

Answer 22

maturity date

Question 23

The Dow Jones Industrial Average is the average cost of ____ selected industrial stocks.

Answer 23

30

Question 24

What is provided in a STOCK QUOTE?

Answer 24

• The highest and lowest price the stock traded for that day
• The stock’s high and low over the past 52 weeks
• The dividend paid (if any)
• The stock’s dividend yield
• imported ratios like the price/earnings ratio
• Earnings per share

Question 25

The primary purpose of a SINKING FUND is to…

Answer 25

ensure that enough money will be available to repay bondholders on the bond’s maturity date.

Question 26

What type of stock is the most basic form of ownership in a firm?

Answer 26

Common Stock

Question 27

Advantages of ISSUING BONDS:

Answer 27

• Bondholders are creditors of the firm, not owners.
• Bond interest is a business expense and tax-deductible to the firm
• Bonds are a temporary source of funding
• Bonds can be repaid before the maturity date if they are callable

Question 28

Bonds that is high-risk, high-interest

Answer 28

Junk Bonds

Question 29

Bonds can range from the highest quality to ___ bonds.

Answer 29

Junk bonds

Question 30

Exchange-traded funds are collections of stocks, bonds and other investments that are….

Answer 30

traded more like individual stocks than like mutual funds

Question 31

A(n) ____ order tells a broker to buy or to sell a stock immediately at the best price available.

Answer 31

Market order

Question 32

Evidence of stock ownership that specifies the name of the company, the number of shares it represents, and the type of stock being issued is called a(n) ___ certificate.

Answer 32

Stock certificate

Question 33

The ___ and ___ Commissions is the federal agency that has responsibility for regulating the various stock exchanges.

Answer 33

Securities and Exchange Commission (SEC)

Question 34

A(n) ____ is a registered representative who works as a market intermediary to buy and sell securities for clients.

Answer 34

Stockbroker

Question 35

Preferred stock differs from common stock as it…

Answer 35

• Pays a fixed dividend
• Pays dividends to preferred stockholders first
• Does not usually have voting rights

Question 36

The SEC was created by..

Answer 36

The Securities and Exchange Act of 1934

Question 37

Giving instructions to computers to automatically sell if the price of a stock dips to a certain point to avoid potential losses is called ____ trading.

Answer 37

Program trading

Question 38

A corporate certificate indicating that an investor has lent money to a firm is called a(n)…

Answer 38

Bond certificate

Question 39

Young or new investors may be advised to diversify by purchasing shares in mutual funds or a variety of…

Answer 39

Index funds

Question 40

A STOCK CERTIFICATE contains…

Answer 40

• the name of the company
• number of shares owned
• the type of stock it represents

Question 41

_____ stock is identified by the letters “pf” on a stock quote.

Answer 41

Preferred Stock

Question 42

How do independent rating firms such as Standard & Poor’s and Moody’s Investors Service rate bonds?

Answer 42

Degree of risk