QUESTION Which of the following, if true, most clearly strengthens Karola’s point of view? A) E-Trade is somewhat quicker than Merrill Lynch in putting in orders. B) Several other managers in the same firm use E-Trade and are satisfied with the quality of the investments they make. C) E-Trade offers online chats with an experienced […]
QUESTION Which of the following, if true, most directly supports Latisha’s position, that handling the Textmoor IPO could be risky for the bank? A) Several other tablets are already being sold by major companies in the competitive tablet market. B) Olympic Daniels failed to sell all the shares of the last IPO it handled, taking […]
QUESTION How is the concept of time important to commodities trading? What will be an ideal response? ANSWER Answer: Commodities trading is very future-oriented. Futures contracts are a main element of this process. In these contracts, the trader agrees to buy a specific amount of a commodity at a certain price at a certain […]
QUESTION Which allows an investor to practice the theory of a security limit order: a mutual fund or an exchange-traded fund? Explain why. What will be an ideal response? ANSWER Answer: Exchange-traded funds can be sold throughout the day, so they allow investors to buy or sell ETF shares when they reach a specified […]
QUESTION Explain the difference between a stock and a bond. What will be an ideal response? ANSWER Answer: A stock represents a share of ownership in a company. A bond is a certificate that shows the owner has lent money to a company or government agency. Explanation: Stocks represent shares of ownership in a […]
QUESTION Within the securities market, what is considered a “short-term IOU,” what is considered a “long-term IOU,” and which offers lower risk for investors? What will be an ideal response? ANSWER Answer: Short-term IOUs are money market instruments, such as U.S. treasury bills or bank CDs, that mature within one year. Long-term IOUs are […]
QUESTION Investment banks can take a financial loss when new issues of stocks they purchase are sold to investors at a lower price. How can they decrease their risk? What will be an ideal response? ANSWER Answer: Investment banks can form a syndicate to purchase and sell a particular stock issue. Rather than one […]
QUESTION What is the difference between investment-grade bonds and speculative-grade bonds? What will be an ideal response? ANSWER Answer: Investment-grade bonds are relatively safe with little chance the issuer will default on them. Speculative-grade bonds are considered higher risk with a greater probability of default. Due to their higher level of risk, they pay […]
QUESTION What does it mean for a bond issuer to default? What will be an ideal response? ANSWER Answer: When a bond issuer defaults, it cannot make the scheduled interest payments on the bonds or repay the principal on the bonds. Explanation: A bond issuer that defaults is unable to meet scheduled interest payments […]
QUESTION Which of the following is NOT a benefit of a mutual fund? A) They can be traded by investors at will. B) They are managed by professionals with investment expertise. C) They distribute risk across a variety of securities. D) They offer a wide range of investment strategies. E) They are an economical way […]
