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Exam 19: Using Securities Markets for Financing and Investing Opportunities

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Question 31

True/False

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Unlike stocks, for selling purposes, bond prices remain stable over the life of the bond.

A) True
B) False

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Question 32

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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.

A) underwriter; more than 6.250 million shares
B) underwriter; 6.250 million shares
C) regulator; more than 10 million shares
D) regulator; more than 60 thousand shares

E) B) and D)
F) None of the above

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Question 33

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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:

Many stock analysts believe that program trading decreases the volatility of stock market prices.

Which of the following securities provides the owner the right to vote for the corporate board of directors?

Bondholders can sell their bonds:

When a corporation enjoys a profitable year, dividends must be paid.

Preferred stock may include callable and convertible provisions.

Alejandro relies on his stockbroker to execute his buy and sell orders for shares of stock in different companies. He has found that the process of buying or selling a share of stock on a major stock exchange normally takes:

Shareholder Jones sells 100 shares of Very Vegetarian Corporation stock to investor Smith. This transaction takes place in the:

An income stock offers investors a relatively high dividend yield on their investment.

With everything else constant, investors prefer a bond issued with a sinking fund compared to a bond without a sinking fund.

Bonds represent a permanent source of funding for companies. The money firms acquire by issuing bonds does not need to be repaid.

The dollar amount assigned to shares of stock by the corporation's charter represents the stock's:

Erica invests $5,000 in five ABC Corporation bonds that mature in 10 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?

Which of these represents a special feature included with some bond issues?

A bull market occurs when overall stock prices increase.

Which of the following trades corporate stocks not listed on the national securities exchanges?

Which of the following offers low risk, guaranteed income, backed by the full faith and credit of the federal government?

From an investor's point of view, corporate bonds offer less risk than government bonds.