Question 1

Par value reflects the current market price for a stock.

Accepted Answer

Par value is a nominal value assigned to a stock by a company when it is first issued. It has no connection with the current market price of the stock. The market price of a stock is determined by the supply and demand for the shares in the stock market.

Question 2

An executive secretary at a major investment banking firm is asked to copy documents that detail a major merger that's going to be finalized in the next two weeks.This merger will be a positive outcome for one of the companies in this deal.The secretary is thrilled to read about the merger,plans to call her broker immediately and buy stock in the company,and suggests that you should also act on her stock tip.Since you are not employed at her firm your purchase is legal.

Accepted Answer

It is unethical and potentially illegal for the executive secretary to provide insider information and suggest that others act on it. Even though you are not employed at her firm, it is still illegal to use insider information for personal gain.

Question 3

Stocks represent shares of ownership in a company.

Accepted Answer

Stocks, also known as shares or equities, represent ownership in a company. By owning stock, investors have a claim on a portion of the company’s assets and profits.

Question 4

Although companies that issue bonds are required to pay interest,companies issuing stock are not required to pay dividends.

Accepted Answer

The answer of Although companies that issue bonds are required...

Question 5

Dividends represent a portion of a firm's profits that are distributed to bondholders first then stockholders.

Accepted Answer

Dividends represent a portion of a firm's profits that are distributed to shareholders, not bondholders. Bondholders receive interest payments, which are not considered dividends.

Question 6

Once a stock exchange agrees to list a company,the firm can be assured that it will always be listed by that exchange.

Accepted Answer

A stock exchange may delist a company if it fails to meet certain requirements or standards set by the exchange.

Question 7

The number of U.S.companies that are listed on foreign stock exchanges is declining.

Accepted Answer

The answer of The number of U.S.companies that are listed...

Question 8

The prospectus is summarization of the results of detailed financial documents that a firm files with the SEC prior to being given approval to issue securities.

Accepted Answer

The prospectus is a summarized version of the detailed financial documents that a firm files with the SEC before being allowed to issue securities.

Question 9

Stock certificates identify per share dividends,expressed as a percentage of par value.

Accepted Answer

Stock certificates do not contain information about dividends. Dividend information can typically be found in a company's financial statements or dividend announcement.

Question 10

Insider trading laws prevent employees from buying or selling the securities of their employers.

Accepted Answer

Insider trading laws prevent employees from buying or selling securities based on material, non-public information about their companies. However, employees are generally allowed to buy and sell securities of their employers as long as they do not possess insider information. This is subject to any company policies that restrict trading by employees, and employees may be required to disclose their trades to their employer or regulatory authorities.

Question 11

If you want to buy the stocks of largely capitalized companies companies with millions,and even billions worth of assets),your broker will need to make the trade through the NYSE Euronext.

Accepted Answer

NYSE Euronext is not the only exchange where large-cap stocks are traded; they can also be traded on other exchanges like NASDAQ.

Question 12

In an effort to profit from stock market trading,Chad landed a job with the ABC Corporation.Chad intends to use his position to obtain privileged information about his new employer that would not be available to the public.While Chad realizes that he may be benefiting unfairly,as an employee he is not acting illegally.

Accepted Answer

Chad would be acting illegally if he uses privileged information obtained through his employment for personal gain in the stock market. This is known as insider trading and is prohibited by law.

Question 13

Insider trading involves the sale of stock to employees at discounted prices.

Accepted Answer

Insider trading refers to the buying or selling of stock by individuals with access to nonpublic information about the company. It is illegal and can result in severe penalties. Selling stock to employees at discounted prices is not insider trading.

Question 14

According to the Securities Act of 1933 it is against the law for a firm that is publicly trading securities to deny an investor from knowing how the firm is doing financially.

Accepted Answer

This statement is true. The Securities Act of 1933 requires companies that publicly trade securities to disclose certain financial information to investors in order to protect them from fraud or misleading information. This includes providing regular financial reports and disclosures about the company's financial condition and performance.

Question 15

Well-known foreign exchanges that also exchange the securities of U.S.firms include the London Exchange and the Tokyo Exchange.

Accepted Answer

The London Exchange and the Tokyo Exchange are both well-known foreign exchanges that allow for the exchange of securities of U.S. firms.

Question 16

Before a corporation's stock can be sold on a major stock exchange,the firm must provide detailed financial information to the Securities and Exchange Commission.

Accepted Answer

This is true. The Securities and Exchange Commission (SEC) requires companies to file detailed financial reports, including annual and quarterly reports, before their stock can be listed on a major exchange.

Question 17

With recent mergers of stock exchanges,beginning with the New York Stock Exchange merger with Archipilago,and subsequently with Euronext and then Deutsche Borse,most exchange floors are symbolic because trades usually take place via computers.

Accepted Answer

The statement correctly states that most exchange floors are symbolic and trades usually take place via computers.

Question 18

The Federal Trade Commission FTC)regulates the security markets in the United States.

Accepted Answer

The Federal Trade Commission (FTC) is primarily responsible for consumer protection and preventing unfair business practices. The regulation of securities markets falls under the jurisdiction of the Securities and Exchange Commission (SEC).

Question 19

The Securities and Exchange Commission requires that all prospective investors receive a copy of a firm's prospectus prior to investing.

Accepted Answer

This is true. The SEC requires companies to provide a prospectus to investors before they invest in a security. The prospectus contains important information about the company's financials, risks associated with the investment, and other relevant details.

Question 20

Insider trading refers to someone who benefits unfairly from information about a security not available to the general public.

Accepted Answer

Insider trading involves using non-public information to gain an advantage in trading securities, which is deemed unfair and illegal.

Quiz 19: Using Securities Markets for Financing and Investing Opportunities