Part I: What is a corporate bond? Why would a company use bonds as a source of financing?Part II:Suppose you are a business owner and you need new equipment and immediate funds to meet short-term operating expenses. From what sources could you gain the capital you need? Which would you choose and why?A? stock’s _______ value is calculated as? owners’ equity divided by the number of shares of common stock it has outstanding.A.bookB.parC.marketD.commonE.dividendIf you have? $10,000 and invest it at? 8% for three? years, it will be worth? $11,411.66 at the end of that time. This BEST describes? _______.A.the time value of moneyB.collateralC.the rule of 72D.market capitalizationE.price appreciationA payment to shareholders from a? company’s earnings is known as? _______.A.retained earningsB.interestC.a dividendD.price appreciationE.a capital gainWhich of the following investments gives the investor the right to vote on major issues concerning the? company?A.Corporate bondB.Mutual fundC.Common stockD.Municipal bondE.?Exchange-traded fund?Charlotte, a young? lawyer, has started investing for her retirement. She is ready to take some risks to enjoy the opportunity for high capital appreciation. Which of the following investments would be a likely choice for? her?A.Money market mutual fundB.U.S. corporate bondsC.Certificates of depositD.Balanced mutual fundE.Aggressive growth mutual fundWhich of the following government agencies is responsible for the regulation of U.S. securities? markets?A.Securities and Exchange Commission? (SEC)B.Financial Industry Regulatory Authority? (FINRA)C.Internal Revenue Service? (IRS)D.National Association of Securities Dealers? (NASD)E.Federal Reserve System?_______ specialize in raising capital for companies and other entities by the issuing and reselling of new securities.A.Angel investorsB.Investment banksC.Secondary security marketsD.Venture capitalistsE.Stock brokersA prolonged time period in which stock prices fall and investors appear to lose faith in the market as a whole is referred to as? a(n) _______ market.A.bearB.secondaryC.bullD.primaryE.outcryBentley has watched the price of Grundy Company stock increase steadily since he bought it two years? ago, and he decides that it is time to sell his shares and take the profits. This sale will take place in the? _______ market.A.secondaryB.bullC.outcryD.primaryE.bearWhich of the following market indices measures the performance of the smallest? publicly-traded U.S. companies based on market? capitalization?A.Russell 2000 IndexB.?S&P 500C.NASDAQ Composite IndexD.Dow Jones Industrial Average? (DJIA)E.NYSE Composite Index?Brantley’s stockbroker calls him and tells him about an upcoming IPO that she believes is undervalued and suggests that Brantley buy some shares. If Brantley takes his? broker’s suggestion and buys the? shares, this would take place in the? _______ market.A.primaryB.hybridC.secondaryD.outcryE.tertiaryThe first electronic? exchange, where investors can buy and sell? stock, is the? _______.A.Russell 2000B.?S&P 500C.NASDAQD.DJIAE.NYSEIn order to reduce her investment? risk, Madison owns stock in several different? companies, both large and small. She has also invested in some mutual funds and owns both corporate and municipal bonds. This approach is referred to as? _______.A.diversificationB.the? risk-return relationshipC.compound growthD.equity financingE.price appreciationThe saying? “Don’t put all your eggs in one? basket” BEST describes? _______.A.price appreciationB.diversificationC.compound growthD.equity financingE.the? risk-return relationshipJada consults a new stockbroker who recommends that a sound investment strategy would be to subtract her age from 100 and invest that portion of her portfolio in?stocks, and the balance in bonds. This is an example of? _______.A.debt financingB.the rule of 72C.insider tradingD.the time value of moneyE.asset allocationThe borrower guarantees the repayment of a loan by pledging an asset to the lender. This BEST describes? _______.A.a secured loanB.equity financingC.a bond indentureD.asset allocationE.an unsecured loanIn order to secure a loan from the bank for his? business, Rob has to maintain a portion of the loan amount in an account with the bank. This is an example of? _______.A.venture capitalB.compound growthC.a compensating balanceD.a secured loanE.equity financingThe legal contract between a bond issuer and the purchaser of the bond that specifies the terms of the bond is referred to as the? _______.A.?book-entry ownershipB.prospectusC.bond indentureD.collateralE.portfolioThe amount of the bond that must be repaid to the bondholder on the maturity date of the bond is known as its? _______.A.indentureB.face valueC.market valueD.book valueE.coupon rate?Short-term corporate bonds typically mature in less than? _____ year(s) after they are? issued, whereas? long-term bonds have a maturity date of? ______ years or more.A.?10; 25B.?5; 10C.?1; 5D.?2; 7E.?5; 15Melissa is considering purchasing a corporate bond with a C rating according to Standard? & Poor’s because it has an attractive interest rate. This bond would be classified as a? _______ bond.A.?low-riskB.?blue-chipC.junkD.?no-loadE.conservative capital growthThe board of commissioners has approved a bond issue in the amount of? $340,000 for the renovation of North Side High School. This is an example of a? _______ bond.A.junkB.trustC.securedD.corporateE.municipalThe first public offering of a private? company’s stock is known as? a(n) _______.A.initial securities sale? (ISS)B.primary public offering? (PPO)C.initial public offering? (IPO)D.primary market offering? (PMO)E.initial prospectus offer? (IPO)Hansom? Products’ stock is trading for? $130 per? share, and the company currently has 2 million shares of common stock outstanding. The Board of Directors decides to increase the number of shares that are outstanding by issuing more shares to current? stockholders, and every shareholder with one share of stock is given an additional? share, but the price of shares is reduced to? $65.00 each. This is an example of? _______.A.a stock splitB.price appreciationC.an initial public offeringD.compound growthE.asset allocationWhich of the following scenarios would BEST describe insider? trading?A.The price of? O’Donnell Brothers stock has risen sharply since Ryker bought his shares and he decides to sell them in order to earn a tidy profit.B.Ethan overhears that the CEO is going to be indicted for securities fraud and quickly sells the shares of stock he owns in the company before the news of the indictment is released.C.Brantley is distressed that the price of his Apple stock has fallen and he contacts his stockbroker to put in an immediate order to sell his shares.D.?Gena’s stockbroker calls her and suggests that she should change the asset allocation in her portfolio and purchase more bonds.E.Charlotte contacts an investment broker to determine the steps she needs to follow in order to take her? company’s stock public.
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