207. Trading curbs motivate traders to utilize their computerized programs to reduce market
volatility.
208. Stock market “circuit breakers” stop stock trading for a short time when the stock market
experiences a significant drop in stock values.
209. Many stock market analysts suggest that program trading was a big cause of the stock
market crash of 1987.
210. The largest one-day drop in the stock market occurred in 1987—a 22% drop.
211. Changes in investor trust and confidence strongly influence stock market prices.
212. The Dow Jones Industrial Average reflects the average of the eleven largest corporations
traded on the New York Stock Exchange as originally selected by Charles Dow.
213. One of the criticisms of the Dow Jones Industrial Average is that it does not include
enough stocks to provide a good representation of the entire stock market.
214. Many stock analysts believe that program trading decreases the volatility of stock market
prices.
215. Corporations benefit from securities markets primarily by:
216. Private investors benefit from securities markets primarily by:
217. A(n) ________ refers to the first public offering of a corporation’s stock.
218. Trading in newly issued securities takes place in the:
219. The trading of previously issued securities from one investor to another takes place in
the:
220. When retained earnings are not enough to meet their long-term funding needs,
businesses may be able to raise funds by:
221. _________ represent a powerful force in the buying and selling of corporate securities.
222. Investment bankers ________ new issues of bonds or stocks by purchasing, at a discount,
the entire stock or bond issue of a firm and selling the issue to interested investors at a higher
price.
223. Corporations receive the proceeds for the sale of their stock in:
224. Security markets assist businesses in performing their ________ function.
225. Which of the following would be classified as an institutional investor?
226. Most businesses prefer to meet their long-term financial needs through:
227. Investment bankers provide ________ services by purchasing the entire new security issue
from a corporation seeking to raise capital, and selling it to interested investors.
228. How do investment bankers generate revenues for their firms?
229. Molly Manufacturing plans to issue $75 million of common stock. The firm will likely rely
on the advice and assistance of a(n):
230. Shareholder Jones sells 100 shares of Very Vegetarian Corporation stock to investor
Smith. This transaction takes place in the:
231. As the chief financial officer (CFO), you identify that your firm needs to raise additional
funds by selling new shares of stock. Which of the following refers to a specialist that assists
corporations in the issue and sale of new securities?
232. As a new father, Sean plans to accumulate funds over the next 18 years to help pay for
his son’s college education. Security markets provide Sean with:
233. Ina Vestor has a brokerage account with one of the remaining large investment firms.
This morning her broker called asking if she is interested in participating in an IPO. He went on to
say that he could get her 200 shares for $23/share. If Ina agrees to buy the IPO, the trade will
take place in the ____________.
234. Idle Time Gaming, Inc., has reached the point where it needs several million dollars in
order to expand and follow its strategic plan. In negotiations with the investment banker, they
agree to issue 40 million shares of common stock, at $22/share. If the investment banker’s fee
for underwriting the total sale is 6.82%, what is the
discounted price
that the investment bank is
willing to pay Idle Time for the shares?
235. Chipper’s Golf Resort has learned that Rory McIlroy is interested in putting his name on
golf course designs; however, in order for any golf course to be acceptable to him, it will cost a
minimum of $20 million to build. Chipper’s owners want an international presence, and they
believe that “just the way golf club companies became publicly traded corporations, it may be
time for golf courses to do the same.” The plan is to begin to purchase real estate for four new
golf resorts. Proceeding with their venture, the owners have calculated that they will need
approximately $100 million. But putting together an IPO is another matter. After meeting with
their investment banker, they believe that investors will be willing to pay $16/share for the IPO.
As the ___________ for this issue, the investment bank requires 3% of the revenues generated by
the sale. Chipper’s will need to issue _______ shares in order to have the $100 million they need
to proceed with their plan.
236. Which of the following terms best describes the relationship between the New York Stock
Exchange and the NASDAQ?
237. An organization whose members can buy and sell securities for companies and investors
is known as a:
238. A company’s stock does not have to be listed on one of the major stock exchanges in
order to trade. It can be traded on ____________.
239. If a publicly traded corporation fails to maintain specific minimum requirements, the
exchange can ________ the firm’s securities.
240. The ________ is a large national electronic stock trading market.
241. Which of the following trades corporate stocks not listed on the national securities
exchanges?
242. A(n) ________ represents a condensed version of the registration statement that enables
prospective investors to evaluate a stock for possible purchase.
243. Which of the following federal government agencies has responsibility for regulating the
various stock exchanges in the U.S.?
244. Using information not available to the public to unfairly benefit in the stock market
represents:
245. Which of the following legislative acts created the Securities and Exchange Commission?
246. Which of the following statements best describes the current legal interpretation of
insider trading?