Question 1

Abraham found a $1000 face value bond that belonged to his father.He checked the Wall Street Journal and found the bond was currently selling for $1220.This bond sells at a:

Accepted Answer

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

Question 2

Erica invests $5,000 in five ABC Corporation bonds that mature in ten years.Unexpectedly just the week after she invests,she has the opportunity to work abroad,which she has always wanted to do,but she needs cash.Which of the following most likely applies to Erica?

Accepted Answer

Erica may immediately sell the bonds, but it is unclear how much money they will sell for. The value of bonds can fluctuate depending on various factors such as interest rates, market conditions, and the credit rating of the issuer. Therefore, it is uncertain how much Erica will receive if she sells the bonds immediately after purchasing them.

Question 3

_____________ have a set dollar goal the fund manager wants to manage.Once the fund has reached that goal,it does not accept new investors.

Accepted Answer

Closed-end funds have a set value or dollar goal that the fund manager wants to manage. Once the fund has reached that goal, it does not accept new investors. No load funds do not have sales charges, and drop-off funds and zero sum load are not common investment terms.

Question 4

New investors may want to consider _______ funds,which are mutual funds that invest in one particular kind of stock or a particular kind of bond,or even stocks that are representative of the entire market.

Accepted Answer

Index funds are a good option for new investors as they provide diversified exposure to the market and typically have low fees. They track specific indexes, such as the S&P 500, which represents a broad range of the market. Option A (international) and option C (global) may be too narrow in focus for a new investor, while option D (relief) is not related to investing.

Question 5

The new issue $1,000 face value bonds due in 2020 issued by Bay Books,Ltd.are perceived by investors as being 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 6

Yolanda has an ownership interest in many different companies,yet she owns the shares of stock of just one organization.Yolanda undoubtedly owns shares in a(n):

Accepted Answer

The answer of Yolanda has an ownership interest in many...

Question 7

Which of the following describes a mutual fund that charges no commission to buy or sell its shares?

Accepted Answer

A no-load fund is a type of mutual fund that does not charge a commission for buying or selling its shares. This can make it a more affordable option for investors looking to invest smaller amounts of money, as they won't have to pay additional fees to buy or sell shares of the fund. Open-end funds and closed-end funds can both be either load or no-load funds, depending on whether they charge a commission or not. Front-load funds, on the other hand, charge a commission when you buy into the fund.

Question 8

An investment that pools together investors' money in order to buy securities in many different companies or governments is a __________.

Accepted Answer

A mutual fund pools together money from multiple investors and uses it to buy securities across a variety of companies or governments. Commercial funds and holding companies have different structures and purposes, while the Public Investment Corporation is a specific organization rather than a general investment type.

Question 9

________ represent the best way for investors to have their investments managed by a trained specialist for a fee.

Accepted Answer

Mutual funds provide professional management by trained specialists who are responsible for selecting and managing the fund's investments. Investors pay a fee for the management services provided by the mutual fund. Individual stocks require investors to make their own investment decisions and research, while corporate and government bonds do not provide the same level of professional management as mutual funds.

Question 10

Buying several different investment alternatives to spread the risk helps an investor achieve:

Accepted Answer

Diversification helps an investor spread their risk among different investment options, reducing the potential impact of losses from any one investment. This can help to achieve a more stable portfolio and potentially higher rates of return over the long-term.

Question 11

A mutual fund company buys securities from corporations and governments,and packages them together into a "mutual fund".It then _______________.

Accepted Answer

The mutual fund company sells shares of the packaged investment to interested investors.

Question 12

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 associated with Firm B's bond, investors would prefer the safer option which is Firm B's bond. Hence, investors would be willing to pay more for Firm B's bond.

Question 13

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 guarantees to repay the principal plus interest to the bondholders, making them a low-risk investment. The other options mentioned in the question are not entirely accurate - interest rates on U.S. government bonds can fluctuate and are not necessarily tied to the consumer price index, and they may not necessarily have a higher interest rate than corporate bonds. Additionally, the federal government does not replace lost or stolen bonds, as they are typically held in electronic form nowadays.

Question 14

To reduce the risk of investing in an individual stock,an ownership position in many different companies can be achieved by purchasing shares in a(n):

Accepted Answer

By purchasing shares in a mutual fund, an investor can own a diversified portfolio of stocks. This can help reduce the risk of investing in a single stock because the investor's money is spread across multiple companies. Indexed securities, diversification bonds, and stock cooperatives are not typically used for achieving diversification in a stock portfolio.

Question 15

__________ are collections of stocks that are traded on exchanges but are traded more like individual stocks than like mutual funds.

Accepted Answer

Exchange-Traded Funds (ETFs) are collections of stocks that are traded on exchanges but are traded more like individual stocks than like mutual funds. ETFs allow investors to diversify their portfolios easily and at a lower cost than traditional mutual funds. ETFs are also known for their flexibility, transparency, and tax efficiency.

Question 16

Which of the following describes a benefit enjoyed by investors in mutual funds?

Accepted Answer

Mutual funds allow investors to buy an ownership interest in many different companies, which spreads out the investment risk and provides diversification. Mutual funds also typically have professional fund managers who make investment decisions on behalf of the investors. However, there is no guarantee of dividend payments and investors do not exercise managerial authority in the companies held by the mutual fund.

Question 17

The initial cost of investing in mutual funds depends in part on:

Accepted Answer

The initial cost of investing in mutual funds depends on whether the fund is a load or no-load fund. Load funds charge a fee at the time of investment, while no-load funds do not.

Question 18

When reading mutual fund quotations,the ________ is the price per share.

Accepted Answer

The answer of When reading mutual fund quotations,the ________ is...

Question 19

____________ means that the mutual fund company does not show a fee or commission for investing in the fund.

Accepted Answer

No load means that there is no fee or commission charged by the mutual fund company for investing in the fund. This can be beneficial for investors as it allows them to invest their entire amount towards the fund without any deductions.

Question 20

Mutual fund investors will note that:

Accepted Answer

Loads, which are commissions or fees that investors pay when they buy or sell shares in a mutual fund, can vary from one mutual fund to another. The fund manager sets the amount of the load, which can range from none to several percent of the investment amount. However, it should be noted that some mutual funds do not charge loads at all. Option A is incorrect as many mutual funds do invest in foreign securities. Option B is incorrect as mutual funds can be purchased through a brokerage house. Option D is incorrect as mutual funds are still allowed to charge loads, but it is not required by law.

Quiz 19: Using Securities Markets for Financing and Investing Opportunities