Question 1

Purchasing stock from a foreign company whose home nation has an unstable currency or government is a relatively safe investment because you are not exchanging currency, you are exchanging stock.

Accepted Answer

The answer of Purchasing stock from a foreign company whose...

Question 2

When thinking about purchasing foreign company stocks, U.S investors should proceed with caution if the foreign company's home nation has political unrest.

Accepted Answer

Political unrest can have negative impacts on a foreign company's operations and financial performance, therefore it is important for U.S investors to assess the geopolitical risks before investing in foreign company stocks.

Question 3

Once a stock exchange agrees to list a company, the firm can be assured that it will always be listed by that exchange.

Accepted Answer

A stock exchange can delist a company for various reasons, including failure to meet listing requirements or violating exchange rules. Therefore, a company cannot always be assured of being permanently listed by an exchange once it is initially listed.

Question 4

According to the "Reaching Beyond Our Borders" box in Chapter 19, purchasing ADRs is one way that U.S. investors participate in the global securities market.

Accepted Answer

The "Reaching Beyond Our Borders" box in Chapter 19 states that purchasing ADRs (American Depository Receipts) is a way for U.S. investors to participate in the global securities market. Therefore, the statement is true.

Question 5

Before a corporation's stock can be sold on a major stock exchange, the firm must provide detailed financial information to the Securities and Exchange Commission.

Accepted Answer

This is a requirement of the Securities and Exchange Commission before a corporation's stock can be publicly traded on a major stock exchange.

Question 6

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

Accepted Answer

The London Exchange and the Tokyo Exchange are both well-known foreign exchanges that also offer trading of securities for U.S. firms.

Question 7

Insider trading laws prevent employees from buying or selling the securities of their employers.

Accepted Answer

Insider trading laws prevent employees from trading securities based on non-public information about their companies, but they are allowed to buy or sell securities as long as they do not possess any material non-public information. However, they may still be subject to restrictions or disclosure requirements under company policies or other regulations.

Question 8

The number of U.S. companies that are listed on foreign stock exchanges is declining.

Accepted Answer

The answer of The number of U.S. companies that are...

Question 9

Insider trading involves the sale of stock to employees at discounted prices.

Accepted Answer

Insider trading is the illegal practice of trading on the stock market using confidential information that is not available to the general public. It is unrelated to the sale of stock to employees at discounted prices, which is a common practice known as employee stock ownership or equity compensation.

Question 10

Stock exchanges exist all over the world, allowing investors to buy securities in companies almost anywhere in the world.

Accepted Answer

This statement is true. Stock exchanges exist in many countries around the world and allow individuals and institutions to invest in securities in companies from different regions and industries.

Question 11

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.

Accepted Answer

This is known as full disclosure and is required by law for publicly traded firms under the Securities Act of 1933.

Question 12

Insider trading refers to someone who benefits unfairly from information about a security not available to the general public.

Accepted Answer

Insider trading is defined as taking advantage of non-public information about a company or security to buy or sell shares, giving that individual an unfair advantage over other investors. It is illegal in most countries, including the United States.

Question 13

An executive secretary at a major investment banking firm is asked to copy documents that detail a major merger that's going to be finalized in the next two weeks. This merger will be a positive outcome for one of the company's in this deal. The secretary is thrilled to read about the merger, plans to call her broker immediately and buy stock in the company, and suggests that you should also act on her stock tip. Since you are not employed at her firm your purchase is legal.

Accepted Answer

Trading based on non-public, material information, regardless of employment status, is considered insider trading and is illegal.

Question 14

If you want to buy the stocks of largely capitalized companies (companies with millions, and even billions worth of assets), your broker will need to make the trade through the NYSE Euronext.

Accepted Answer

The answer of If you want to buy the stocks...

Question 15

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.

Accepted Answer

Chad's actions would be considered insider trading, which is illegal. It is a violation of securities law to use non-public information for personal gain.

Question 16

Stock exchanges compete with each other for the listing of a corporation's stock.

Accepted Answer

Stock exchanges compete with each other to attract corporations to list their stock on their exchange. This competition can take the form of lower listing fees, better trading technology or market data, and other incentives.

Question 17

The prospectus is summarization of the results of detailed financial documents that a firm files with the SEC prior to being given approval to issue securities.

Accepted Answer

A prospectus is indeed a summary of financial information that a company must file with the Securities and Exchange Commission (SEC) in order to register to offer securities to the public. It provides important information about the company's operations, financial condition, management, and other relevant information that investors can use to make informed decisions about whether or not to invest in the company.

Question 18

The Securities and Exchange Commission requires that all prospective investors receive a copy of a firm's prospectus prior to investing.

Accepted Answer

This statement is true. The SEC requires companies to provide a prospectus, which is a document that contains important information about the company and the securities being offered, to all prospective investors prior to making an investment decision.

Question 19

Many foreign firms are listed on the NYSE Euronext.

Accepted Answer

Many companies from outside the United States are listed on the NYSE Euronext, which operates stock exchanges in New York, Amsterdam, Brussels, Lisbon, and Paris.

Question 20

In 2008, the NYSE Euronext purchased AMEX, creating the world's largest exchange.

Accepted Answer

In 2008, the NYSE Euronext (parent company of the New York Stock Exchange) purchased the American Stock Exchange (also known as AMEX), creating the world's largest exchange.

Quiz 19: Using Securities Markets for Financing and Investing Opportunities