QUESTION What is the term for an investment bank’s practice of buying new issues of corporate securities and selling them to the public? A) syndication B) underwriting C) initial public offering D) auctioning E) institutional investing ANSWER Answer: B Explanation: B) The activity of buying new issues of stocks or bonds from issuing corporations […]
QUESTION The Massive Steel Corporation issued bonds to finance upgrades to its aging plants. The upgrades are costly, and the bond issue is a substantial amount. To ensure its ability to pay the bonds on maturity, Massive Steel makes annual payments to a dedicated fund. What type of bonds did the company issue? A) convertible […]
QUESTION The yield of a particular security is determined by dividing the dividend or income by the security’s market price. Indicate whether the statement is true or false. ANSWER Answer: TRUE Explanation: Yield is income from securities, calculated by dividing income or dividend by the market price. An investing-for-income strategy focuses on obtaining the […]
QUESTION Which of the following gives an investor a portion of ownership in the issuer of a security? A) U.S. Treasury bond B) bank certificate of deposit C) stock D) secured corporate bond E) municipal bond ANSWER Answer: C Explanation: C) Stocks represent shares of ownership in a company.
QUESTION Blue-chip stocks usually pay investors regular dividends. Indicate whether the statement is true or false. ANSWER Answer: TRUE Explanation: Blue-chip stocks are issued by big, reputable companies and usually pay regular dividends. They can be common stock or preferred stock.
QUESTION A town issues $15 million in bonds to pay for construction of a new high school. The bonds will mature over 20 years, but the town will begin paying off a portion of the bonds annually after 15 years. What type of bonds are being used to help finance the school construction? A) callable […]
QUESTION An investment bank buys the first issue of stock from XYZ Company at $35 per share. As XYZ’s shares are sold on the secondary securities market, the price falls to $28 a share. Which of the following describes the outcome of this dynamic? A) The investment bank sells the shares back to XYZ Company […]
QUESTION Which of the following is considered an institutional investor on the securities market? A) Goldman Sachs B) Charles Schwab C) E-Trade D) Liberty Mutual Insurance E) U.S. Treasury ANSWER Answer: D Explanation: D) Institutional investors are large and powerful organizations, such as pension funds and insurance companies, that invest their own or others’ […]
QUESTION The market for stocks progresses through a series of steps. Which step comes last in the process? A) Investment banks buy stocks. B) Corporations issue stocks. C) Investment banks form a syndicate. D) Investors sell stocks on an exchange. E) Investment banks sell stocks. ANSWER Answer: D Explanation: D) After investment banks sell […]
QUESTION Marco bought 100 shares of Xtreem Energy Drink stock at $75 per share. One year later the stock price is $87, and Marco is content to watch his investment grow. Which of the following statements is true? A) Marco has earned a capital gain of $1,200. B) Marco has earned a capital gain of […]
