Question 1

Brad told his stockbroker to buy 100 shares of Mineral Mining common stock if and when the price falls to $18 per share. Brad placed a(n)

Accepted Answer

Brad placed a limit order, which specifies a certain price at which to buy or sell a particular stock. In this case, Brad specified the price of $18 per share for Mineral Mining common stock.

Question 2

Bond prices in the newspaper or online are quoted as a percentage of their face value of $1,000. If the bond price is 103.25, this bond's value is equal to

Accepted Answer

The answer of Bond prices in the newspaper or online...

Question 3

A recent publication referred to a series of bonds as "the 6s of 35." What does this mean?

Accepted Answer

The answer of A recent publication referred to a series...

Question 4

Abraham found a $1,000 face value bond that belonged to his father. He checked The Wall Street Journal and found the bond was currently selling for $1,220. This bond sells at a

Accepted Answer

The bond is currently selling for more than its face value, indicating that it is selling at a premium.

Question 5

Bonds that pay very high interest rates and typically have a higher risk of default are known as

Accepted Answer

Junk bonds are issued by companies with a higher risk of default, which is why they offer high interest rates to compensate for the risk. Zero-coupon bonds are issued at a discount and do not pay interest, while bearer bonds are not as common and do not have as much to do with default risk. Volatile bonds do not have a clear definition and can refer to any bond that experiences significant fluctuations in price.

Question 6

Bondholders can sell their bonds

Accepted Answer

The answer of Bondholders can sell their bonds
...

Question 7

Which of the following organizations provides an assessment of the relative level of risk of a particular firm's bond issue?

Accepted Answer

Standard & Poor's provides credit ratings for various bond issues, which assess the relative level of risk associated with them. The SEC is a regulatory agency and does not provide credit ratings. E*trade is an online brokerage firm and the Wall Street Journal is a financial news publication, but neither of them provide credit ratings for bond issues.

Question 8

The new issue $1,000 face value bonds due in 2030 issued by Bathtub Brewing Company are seen by investors as less attractive than other bonds offered by other businesses at the same time. The coupon rate attached to these bonds will need to be ________ than other corporate bond issues in order to attract investors.

Accepted Answer

The answer of The new issue $1,000 face value bonds...

Question 9

Which of the following offers low risk, guaranteed income, backed by the full faith and credit of the federal government?

Accepted Answer

U.S. government bonds offer low risk, guaranteed income, and are backed by the full faith and credit of the federal government. Municipal bonds may have some risk and are not backed by the federal government. U.S. government preferred stocks and common stock in the U.S. postal service are subject to market fluctuations and do not offer guaranteed income.

Question 10

U.S. government bonds are considered a secure investment because

Accepted Answer

U.S. government bonds are considered a secure investment because they are backed by the full faith and credit of the federal government. This means that the government has promised to honor its debt obligations to bondholders, making them a low-risk investment. The other answer choices are not accurate: A is incorrect because interest rates on government bonds are not tied to the consumer price index, but rather determined by market demand and other factors; C is incorrect because interest rates on corporate bonds can be higher or lower than those on government bonds depending on various factors such as the creditworthiness of the issuer; and D is incorrect because while the federal government may replace lost or stolen bonds, this is not a factor that makes them a secure investment.

Question 11

The higher the risk associated with a bond issue, the ________ the interest rate the organization must offer investors.

Accepted Answer

The higher the risk associated with a bond issue, the higher the interest rate the organization must offer investors in order to compensate them for taking on that risk. This is because investors will demand a higher return on their investment when there is a greater possibility of default or other negative events happening that could impact the value of the bond.

Question 12

Game Guys announced a 2-for-1 common stock split for investors on record. Which of the following will occur?

Accepted Answer

A 2-for-1 stock split means each shareholder receives two shares for every one share they own. This doubles the number of shares outstanding, but the total value of the company remains the same. Therefore, each share will be worth half of its previous value. The total value of shareholders' investment will remain unchanged, but the number of shares will double. This is a common strategy to make the stock more affordable for smaller investors and increase liquidity.

Question 13

Brittany read about PharmaONE and wants to buy 100 common shares at $40 per share. Unfortunately, she only has $3,000 available to invest. One risky strategy Brittany could consider is

Accepted Answer

Buying on margin means borrowing money from a broker to purchase securities, using the securities themselves as collateral. This is a risky strategy as it involves taking on debt and the potential for margin calls if the value of the securities drops. However, it would allow Brittany to purchase the desired 100 shares of PharmaONE even with only $3,000 available to invest.

Question 14

When market interest rates increase, the selling price of existing bonds will

Accepted Answer

When market interest rates increase, the demand for existing bonds decreases. As a result, investors are willing to pay less for those bonds, causing their selling price to decrease.

Question 15

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

Accepted Answer

The answer of Before the announcement of a three-for-one stock...

Question 16

Bonds sold at a ________ sell for less than face value.

Accepted Answer

Bonds sold at a discount sell for less than their face value. The discount is the difference between the face value of the bond and the price at which it is sold.

Question 17

Anjali's stockbroker called to inform her of a margin call that requires that she pay $1,000. This indicates that the value of Anjali's stock has

Accepted Answer

A margin call means that the value of Anjali's stock has decreased and she is required to pay more money to maintain the required level of equity in her account. This is often due to market volatility or a decrease in the value of the specific stock she owns.

Question 18

High-risk, high-interest bonds are called

Accepted Answer

High-risk, high-interest bonds are commonly referred to as junk bonds.

Question 19

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.

Accepted Answer

If the risk associated with Firm A's bond is greater than the risk of Firm B's bond, investors will be more willing to invest in Firm B's bond as it is less risky. This will drive up the demand for Firm B's bond and therefore, investors will be willing to pay more for it.

Question 20

Bonds offering a higher interest rate than other bonds of similar risk will likely sell at a

Accepted Answer

The answer of Bonds offering a higher interest rate than...

Quiz 19: Using Securities Markets for Financing and Investing Opportunities