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Unformatted text preview: rt authority is typically a ____________.
A . revenue bond
B. general obligation bond
C. industrial development bond
D. A and B are equally likely
E. B and C are equally likely
Revenue bonds depend on revenues from the project to pay the coupon payment and are normally issued for airports, hospitals, turnpikes, or port authorities. General obligations bonds are backed by the taxing power of the municipality. Industrial development bonds are used to support private enterprises.
D ifficulty: Easy
77. Unsecured bonds are called ____________.
A . junk bonds
D. subordinated debentures
E. either A or D
Debentures are unsecured bonds. chapter 03
Multiple Choice Questions
3. Firms raise capital by issuing stock
A . in the secondary market.
B. in the primary market.
C. to unwary investors.
D. only on days when the market is up.
E. C and D.
Funds from the sale of new issues flow to the issuing corporation, making this a primary market transaction.
4. The following statements regarding the spet are true:
A . Spets maintain a book listing outstanding unexecuted limit orders.
B. Spets earn income from commissions and spreads in stock prices.
C. Spets stand ready to trade at quoted bid and ask prices.
D. Spets cannot trade in their own accounts.
E. A, B, and C are all true.
T he spets' functions are all of the items listed in A, B, and C. In addition, spets trade in their own accounts.
7. The secondary market consists of
A . transactions on the AMEX.
B. transactions in the OTC market.
C. transactions through the investment banker.
D. A and B.
E. A, B, and C.
T he secondary market consists of transactions on the organized exchanges and in the OT C market. T he investment banker is involved in the placement of new issues in the primary market.
8. The use of the Internet to trade and underwrite securities
A . is illegal under SEC regulations.
B. is regulated by the New York Stock Exchange.
C. decreases underwriting costs for a new security issue.
D. increases underwriting costs for a new security issue.
E. is regulated by the National Association of Securities Dealers.
T he SEC permits trading and underwriting of securities over the Internet, but has required firms participating in this activity to take steps to safeguard investment funds. T his form of underwriting is expected to grow quickly due to its lower cost.
9. Initial margin requirements are determined by
A . the Securities and Exchange Commission.
B. the Federal Reserve System.
C. the New York Stock Exchange.
D. B and C.
E. A and B
T he Board of Governors of the Federal Reserve System determines initial margin requirements. T he New York Stock Exchange determines maintenance margin requirements on NYSE-listed stocks; however, brokers usually set maintenance margin requirements above those established by the NYSE.
10. You purchased JNJ stock at $50 per share. The stock is currently selling at $65. Your gains may be protected by placing a __________.
A . stop-buy order
B. limit-buy order
C. market order
D. limit-sell order
E. none of the above.
With a limit-sell order, your stock will be sold only at a specified price, or better. T hus, such an order would protect your gains. None of the other orders are applicable to this situation.
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This document was uploaded on 02/06/2014.
- Spring '14