Chapter 19 5 Samad wants to supplement his current investments with a high risk, low priced security. Which of these best fits his strategy of high risk, low price and a potentially high rate of return

348. (p. 526) 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:

D. primary market.

349. (p. 526) 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.

D. a premium

350. (p. 525) All U.S. government bonds are considered a secure investment because:

D. if they are lost or stolen the federal government promises to replace them when the proof of purchase is

provided.

351. (p. 526) The $1,000 face value bonds issued by the Delaware Fabrication Corporation are perceived by

investors as being less attractive than other bonds offered by other businesses at the same time. The most likely

selling price for these bonds in the market would be:

A. $1,000.

352. (p. 526) Erica invests $5,000 in 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?

A. She can immediately sell the bonds for $5000 plus interest for the week.

353. (p. 526) The forces of supply and demand rule the stock and bond markets. If the bond offerings of the ABC

Corporation are perceived as more attractive than similar bonds, the ABC bonds will likely sell for ________

face value.

D. not enough information to answer.

354. (p. 526) Investors that purchase stock in a company become a(n):

D. speculator.

355. (p. 526) Which of the following has provided investors with the highest return of any popular investment

since 1925?

D. oil futures

356. (p. 526) The market price of a share of common stock depends heavily on:

A. the number of stocks traded on the New York Stock Exchange.

357. (p. 526) When an investor sells a security for more than the purchase price, the investor earns a(n):

358. (p. 526) The term ________ refers to investors who anticipate increases in stock prices.

D. lions

359. (p. 526) When stock prices decline steadily, investors refer to the market as a ________ market.

D. lion

360. (p. 526-527) Stocks of corporations with earnings expected to increase faster than the overall economy are

called ________ stocks.

D. blue sky

361. (p. 527) A __________ stock sells for less than $5.00.

362. (p. 527) Which of the following securities are considered high quality and limited risk?

A. dollar stocks

363. (p. 527) Stocks offering investors a high dividend yield are called:

A. growth stocks.

364. (p. 527) An investor places a ________ order with a broker to buy a particular stock at a specific price, if and

when that price becomes available.

A. call

365. (p. 527) An investor places a ________ order with a broker to sell a stock at the best price available at that

time.

D. leveraged

366. (p. 527) The financial community prefers trading shares of a firm’s stock in multiples of 100, known as:

A. margin blocks.

367. (p. 527) Corporations occasionally issue two or more shares of stock to existing stockholders for each share

they currently own. This practice represents a(n):

C. share dividend.

D. earnings split.

368. (p. 526) Shannon believes the best investment strategy is to “buy low, and sell high.” Shannon’s optimism

regarding future stock price increases indicates that she is a:

D. lion.

369. (p. 526) In the security markets, capital gains take place when:

D. stockholders profit from the firm’s use of leverage.

370. (p. 526-527) ________ stocks represent speculative investments that may pay small dividends, but offer better

than average increases in the stock prices.

A. Blue chip

371. (p. 527) Jason instructed his stockbroker to buy 100 shares of Utah Industries common stock if and when the

price falls to $25 per share. Jason placed a(n):

A. market order.

372. (p. 527) What will happen to the value of a corporation’s stock when the firm issues a two-for-one stock split?

The price of each share of stock will likely:

D. fall over a twelve-month time period.

373. (p. 527) The stock of well-known, high quality firms, such as Coca-Cola, General Electric, and Procter &

Gamble, fit the characteristics of ________ stocks.

D. callable

374. (p. 527) Corporations that want to attract more investors by lowering the selling price of their common stock

might consider declaring a:

A. bankruptcy filing.

375. (p. 526) Cynthia plans to buy 100 shares of common stock in the Idaho Spud Corporation. She willingly

accepts the risk of this investment because she:

D. believes that a bear market is on the way.

376. (p. 526) After buying 100 shares of common stock in the It’s All Good Corporation for $20 per share, Popeye

later sold the same shares for $25 per share. Popeye’s capital gain on this transaction is:

A. $5.

377. (p. 527) Samad wants to supplement his current investments with a high risk, low priced security. Which of

these best fits his strategy of high risk, low price and a potentially high rate of return?

D. split stocks

378. (p. 527) Roberto directed his broker to buy 75 shares of New Mexico Technologies at the best possible price

available that day. These directions indicate that Roberto placed a ________ order with his broker.

D. split

379. (p. 527) Realizing that Mississippi Industries stock currently sells for $35 a share, Juanita directed her broker

to buy 100 shares if and when the price dropped to $33. Apparently, Juanita placed a ________ order with her

broker.

D. confirmation

380. (p. 527) Before the announcement of a three-for-one stock split, the selling price for a share of stock in

Olympia Oil Refineries was $150 per share. Immediately after the stock split, the probable price per share is:

D. $150.

381. (p. 527) Prior to declaring a 4-for-1 stock split, Carbello Enterprises’ stock sold for $44 a share. Immediately

after the stock split, the value of a share of Carbello’s stock should be ________ per share.

D. $176

382. (p. 527) Demonte owns 600 shares in the Kentucky Bluegrass Corporation and he just received notice that the

firm declared a three-for-one stock split. After the split, Demonte will own _______ shares in the firm.

A. 200

383. (p. 527-528) A ________ pools investors’ money to buy securities in many different companies.

D. Public Investment Corporation

384. (p. 527-528) Which of the following describes a benefit enjoyed by investors in mutual funds?

A. Guaranteed dividends payments are received annually.

385. (p. 528) A(n) __________ fund provides an investor with a mutual fund that covers the entire stock market.

D. relief

386. (p. 528) __________ are collections of stocks that are traded on exchanges but are traded more like individual

stocks than like mutual funds.

D. SRTs

387. (p. 530) Buying several different investment alternatives to spread the risk helps an investor achieve:

A. lower rates of return.

388. (p. 528-529) ________ represent the best way for smaller investors to have their investments managed by a

trained specialist.

D. Government bonds

389. (p. 529, Dealing with Change box) According to one of the “Dealing with Change” boxes in Chapter 19, Diamonds,

Spiders and Vipers are:

D. SBAs

390. (p. 527-528) 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):

D. stock cooperative.

391. (p. 528) Which of the following describes a mutual fund that charges no commission to buy or sell its shares?

A. open-end fund

392. (p. 528) The initial cost of investing in mutual funds depends in part on:

D. the imposition of government tariffs.

393. (p. 530) Lisa put 25% of her money into growth stocks, another 25% in government bonds, 10% in gold, and

the rest in the bank for emergencies. Lisa’s apparent objective is:

A. speculation.

394. (p. 527) Yolanda has an ownership interest in many different companies, yet she owns the shares of stock of

just one organization. Yolanda apparently owns shares in a(n):

A. investment trust.

395. (p. 528) Gerald, a recent graduate of a community college, is about to make his first investment in the stock

market. Which of the following would be Gerald’s best option for that first investment?

D. commodity market transactions in precious metals

396. (p. 530) Which of the following terms refers to high-risk bonds that are non-investment grade?

A. registered bonds

397. (p. 530) High-risk, high-interest bonds are called:

A. convertible bonds.

398. (p. 530) Which of the following describes the process where an investor borrows a percentage of the purchase

price of stocks from the brokerage firm?

A. margin calling

399. (p. 530) What agency sets the margin rates for purchasing stock in the U.S.?

D. the Federal Trade Commission on Exchange Markets

400. (p. 531) A(n) ________ exchange specializes in creating a market for buying and selling precious metals,

minerals, and agricultural products.

A. stock

401. (p. 531) The Chicago Board of Trade (CBOT) is a:

402. (p. 531) When compared to mutual funds, trading in commodities represent ________ investments.

D. risk-free

403. (p. 531) The trading in goods to be delivered at a future date takes place in the ________ market:

A. raw materials

404. (p. 531) ________ of the investors who speculate in commodities lose money in the long term.

D. None

405. (p. 531) Trading in commodities represents a ________ investment than trading stocks and bonds.

D. less demanding

406. (p. 531) The largest trading futures exchange in the world is the:

C. San Palo Commodity Exchange.

D. New York Mercantile Exchange.