Question 1

ABC Corporation is selling additional shares of common stock.Although ABC Corporation has already sold shares of stock in the public equity markets,these are new shares of stock,and have never been sold or traded previously.This is called a(n)
A) initial public offering.
B) seasoned new issue.
C) secondary issue.
D) blue chip issue.
E) none of the above.

Accepted Answer

This is called a seasoned new issue, which refers to the process of a company that has already gone public issuing additional shares to the market. An initial public offering (IPO) is the first sale of stock by a company to the public. A secondary issue would involve existing shares being sold by one investor to another, not the company issuing new shares. A blue chip issue refers to the stock of a large, well-established, and financially sound company that has operated for many years, not specifically to new or additional shares being issued.

Question 2

The difference between an organized exchange and an over-the-counter market is that the transactions that occur on an organized exchange ________ and the over-the-counter transactions ________.
A) are initial offerings; are seasoned issues
B) are seasoned issues; are initial offerings
C) take place in a physical building; are conducted over the phone or via a computer
D) are conducted over the phone or via a computer; take place in a physical building
E) are initial offerings; are conducted over the phone

Accepted Answer

An organized exchange, such as the New York Stock Exchange, operates in a physical building where transactions are conducted face-to-face. In contrast, over-the-counter transactions occur over the phone or via a computer, without the need for a physical meeting. Therefore, option C correctly describes the difference between the two markets.

Question 3

All of the following are true about the American Stock Exchange except
A) it is the second most important of the organized exchanges.
B) it is one of the secondary markets.
C) its trading volume is a small fraction of that of the NYSE.
D) its dollar volume is larger than all the regional exchanges.
E) it ranks as number two in terms of the number of companies it lists.

Accepted Answer

The statement "its dollar volume is larger than all the regional exchanges" is incorrect. The American Stock Exchange is a regional exchange itself and its trading volume is a small fraction of that of the NYSE, mentioned in option C. Therefore, options A, B, and E are all true about the American Stock Exchange.

Question 4

Jordan has a few thousand dollars to invest.He wants to find newly issued stock of a fast- growing new company.He will contact an underwriter and attempt to purchase the shares in the ________ market.
A) secondary
B) New York Stock Exchange
C) primary
D) NASDAQ
E) commodity

Accepted Answer

Jordan wants to invest in newly issued stock of a fast-growing new company, which means he wants to participate in the primary market where initial public offerings (IPOs) take place. Underwriters help companies to sell their shares in the primary market to investors like Jordan. The secondary market (A) is where existing shares are traded among investors, while the New York Stock Exchange (B) and NASDAQ (D) are exchanges where shares are traded in the secondary market. The commodity market (E) is for trading commodities such as gold, oil, and agricultural products.

Question 5

The two major organized stock exchanges in the Unites States are the ________ and the ________.
A) AMEX; Chicago
B) NYSE; AMEX
C) NYSE; Chicago
D) NYSE; Pacific
E) AMEX; Pacific

Accepted Answer

The two major organized stock exchanges in the United States are the New York Stock Exchange (NYSE) and the American Stock Exchange (AMEX). Therefore, the correct choice is B, which lists the NYSE and AMEX together. Choices A, C, D, and E are incorrect as they include either the Chicago Stock Exchange or the Pacific Exchange, which are not considered the two major exchanges in the US.

Question 6

Acting upon assumed good advice,your brother buys stock in I-Link,an upcoming communications firm.Since this is the first time I-Link is trading its stock,your brother will be involved in a(n)
A) secondary market transaction.
B) initial public offering.
C) seasoned new issue.
D) tombstone purchase.
E) buy low transaction.

Accepted Answer

Since this is the first time I-Link is trading its stock, it means that they are offering their shares to the public for the first time, and your brother is buying in the primary market, making it an initial public offering (IPO). Therefore, the correct answer is B.

Question 7

ABC Corporation is selling additional shares of common stock.These are new shares of stock,and have never been sold or traded previously.The selling of these shares would take place in the ________ market.
A) primary
B) secondary
C) tertiary
D) quaternary
E) none of the above

Accepted Answer

The sale of new shares of common stock by a corporation takes place in the primary market, where the securities are issued for the very first time to the public. The primary market is the market where the securities are sold first hand, and the proceeds from the sale go directly to the issuing company. In contrast, the secondary market is the market where the securities that have already been issued are traded among investors.

Question 8

Jeffery is an underwriter and sells shares on the ________ market for his job.However,in his personal investment life,he will purchase his stocks through the ________ market.
A) primary, secondary
B) secondary, primary
C) primary, bond
D) open, closed
E) none of the above

Accepted Answer

Underwriters sell shares on the primary market, which is where new securities are issued and sold directly to investors. Jeffrey's personal purchases of stocks would be on the secondary market where previously-issued securities are bought and sold among investors.

Question 9

Much of the day-to-day regulation of the market is left to the securities industry and is performed by the exchanges and the
A) SRC.
B) FDIC.
C) OTC.
D) SIPC.
E) FINRA.

Accepted Answer

FINRA (Financial Industry Regulatory Authority) is the primary self-regulatory organization (SRO) for the securities industry in the United States. It is responsible for overseeing the conduct of over 3,700 broker-dealer firms, and it has the authority to enforce compliance with its rules and regulations. It plays a significant role in maintaining the integrity and fairness of the securities markets, as well as protecting investors. The other options (SRC, FDIC, OTC, and SIPC) are not directly involved in market regulation.

Question 10

You have just recently started your investment activities for retirement.You were happy to learn from your broker that your investor's account balance would be insured for up to $500,000 through the ________ in the event their brokerage firm goes bankrupt.
A) FDIC
B) FSLIC
C) NCUA
D) SIPC
E) FTC

Accepted Answer

The correct answer is SIPC (Securities Investor Protection Corporation), which is a nonprofit organization established under the Securities Investor Protection Act. SIPC provides insurance coverage for assets in case a broker-dealer goes bankrupt or becomes insolvent. The coverage is up to $500,000, including up to $250,000 for cash claims. SIPC does not cover losses due to market fluctuations or risky investment strategies. The other choices, FDIC, FSLIC, NCUA, and FTC, provide insurance coverage for different types of financial institutions, such as banks, credit unions, and savings and loan associations, but not for investors' accounts or brokerage firms.

Question 11

Most of the bonds that are bought and sold are not transacted on the organized exchanges.They are bought and sold through bond dealers who do not sell many ________ bonds but do trade many ________ bonds in the secondary market.
A) corporate; government
B) government; corporate
C) high par value; corporate
D) government; low par value
E) corporate; firm-specific bonds

Accepted Answer

Most bonds are traded over-the-counter through dealers, and while corporate bonds are commonly traded in this manner, government bonds are more frequently traded on organized exchanges.

Question 12

General Electric is the only stock originally listed and still remaining on the "Big Board." This means that its stock is traded on the
A) NASDAQ.
B) NYSE.
C) Regional.
D) AMEX.
E) International.

Accepted Answer

The "Big Board" refers to the New York Stock Exchange (NYSE), and General Electric is the only stock that was originally listed on the NYSE and still remains there. Therefore, the answer is B.

Question 13

A(n)________ is a marketable document (a receipt)that certifies a bank holds shares of a foreign firm's stock that backs the receipt.
A) FINRA
B) MDR
C) FFS
D) ADR

Accepted Answer

ADR (American Depositary Receipt) is a marketable document that certifies a bank holds shares of a foreign firm's stock that backs the receipt.

Question 14

Gracie Johnson saw the securities announcement for New York Bagel Enterprises that provided the details of the offering and a listing of the underwriting syndicate.She saw the
A) tombstone advertisement.
B) prospectus.
C) initial post.
D) exchange advertisement.
E) underwriter's issue.

Accepted Answer

Gracie Johnson saw the tombstone advertisement which is a type of securities announcement that provides the details of the offering and a listing of the underwriting syndicate. The prospectus is a legal document that provides more detailed information about the offering, while the other options (initial post, exchange advertisement, underwriter's issue) are not commonly used terms in the context of securities announcements.

Question 15

The two types of securities offerings in the primary markets are ________ and ________.
A) seasoned new issues; long-term bonds
B) long-term bonds; government bills and notes
C) initial public offerings; seasoned new issues
D) seasoned new issues; penny stocks
E) initial public offerings; seasoned old issues

Accepted Answer

The two types of securities offerings in the primary markets are initial public offerings (IPOs) and seasoned new issues (SNIs). IPOs are offered by companies going public for the first time, while SNIs are offerings made by companies that have already gone public in the past. Choice A is incorrect because long-term bonds can be a type of seasoned new issue, but not all SNIs are long-term bonds. Choice B is incorrect because government bills and notes are not a type of securities offering made by companies in the primary markets. Choice D is incorrect because penny stocks are not a type of securities offering made by companies in the primary markets. Choice E is incorrect because seasoned old issues are not a recognized type of securities offering in the primary markets.

Question 16

Securities include both ________ and ________.
A) stocks; mutual funds
B) bonds; mutual funds
C) real estate; stocks
D) stocks; bonds
E) bonds; money market funds

Accepted Answer

Securities refer to tradable financial instruments such as stocks and bonds. Therefore, the best choice is D, as it includes both stocks and bonds as securities, while the other options only include one type of security or include non-securities such as real estate. Money market funds are also a type of security, but they are not listed as an option.

Question 17

Securities that are less frequently traded,along with many new and high-tech stocks,are relegated to the
A) NYSE.
B) AMEX.
C) ADR market.
D) OTC market.

Accepted Answer

Securities that are less frequently traded and new/high-tech stocks are usually traded over the counter (OTC) rather than on established exchanges like the NYSE or AMEX.

Question 18

Securities are generally sold in the primary markets with the help of a(n)________ serving as a(n)________.
A) individual investor; underwriter
B) corporation; investment banker
C) regulatory commission; individual investor
D) underwriter; regulatory commission
E) investment banker; underwriter

Accepted Answer

Investment bankers often serve as underwriters in the primary markets, helping companies issue new securities to the public. They play a crucial role in determining the price of the securities, buying them from the issuer, and then selling them to investors.

Question 19

Patti DeVry has been trading stocks in the over-the-counter market.When she wants to sell her stocks she will specify the ________ price and when she wants to purchase stocks she will specify the ________ price.
A) ask on offer; bid
B) bid; ask on offer
C) starting; minimum
D) ask; minimum
E) bid; minimum

Accepted Answer

The answer of Patti DeVry has been trading stocks in...

Question 20

You and your spouse have decided to incorporate bonds into your newly-formed retirement portfolio.You will most likely purchase them
A) directly from a bond dealer.
B) with your broker acting as intermediary.
C) directly from the issuing institution.
D) with an underwriter acting as intermediary.

Accepted Answer

Bonds are typically purchased through brokers who act as intermediaries between buyers and sellers, facilitating the transaction and providing access to the bond market.

Quiz 11: Investment Basics

ABC Corporation is selling additional shares of common stock.Although ABC Corporation has already sold shares of stock in the public equity markets,these are new shares of stock,and have never been sold or traded previously.This is called a(n)

The difference between an organized exchange and an over-the-counter market is that the transactions that occur on an organized exchange and the over-the-counter transactions .

All of the following are true about the American Stock Exchange except

Jordan has a few thousand dollars to invest.He wants to find newly issued stock of a fast- growing new company.He will contact an underwriter and attempt to purchase the shares in the ________ market.

The two major organized stock exchanges in the Unites States are the and the .

Acting upon assumed good advice,your brother buys stock in I-Link,an upcoming communications firm.Since this is the first time I-Link is trading its stock,your brother will be involved in a(n)

ABC Corporation is selling additional shares of common stock.These are new shares of stock,and have never been sold or traded previously.The selling of these shares would take place in the ________ market.

Jeffery is an underwriter and sells shares on the market for his job.However,in his personal investment life,he will purchase his stocks through the market.

Much of the day-to-day regulation of the market is left to the securities industry and is performed by the exchanges and the

You have just recently started your investment activities for retirement.You were happy to learn from your broker that your investor's account balance would be insured for up to $500,000 through the ________ in the event their brokerage firm goes bankrupt.

Most of the bonds that are bought and sold are not transacted on the organized exchanges.They are bought and sold through bond dealers who do not sell many bonds but do trade many bonds in the secondary market.

General Electric is the only stock originally listed and still remaining on the "Big Board." This means that its stock is traded on the

A(n) ________ is a marketable document (a receipt) that certifies a bank holds shares of a foreign firm's stock that backs the receipt.

Gracie Johnson saw the securities announcement for New York Bagel Enterprises that provided the details of the offering and a listing of the underwriting syndicate.She saw the

The two types of securities offerings in the primary markets are and .

Securities include both and .

Securities that are less frequently traded,along with many new and high-tech stocks,are relegated to the

Securities are generally sold in the primary markets with the help of a(n) serving as a(n) .

Patti DeVry has been trading stocks in the over-the-counter market.When she wants to sell her stocks she will specify the price and when she wants to purchase stocks she will specify the price.

You and your spouse have decided to incorporate bonds into your newly-formed retirement portfolio.You will most likely purchase them