Question 1

Bashaud is interested in purchasing some long-term U.S. Treasury securities. He will most likely need to purchase them through
A) an underwriting exchange.
B) a portfolio auction.
C) the secondary securities market.
D) a money market.
E) an open auction.

Accepted Answer

The answer of Bashaud is interested in purchasing some long-term...

Question 2

Adriann purchased a 10-year bond. After three years paying 5 percent interest, the interest rate drops to 3 percent. Adriann is surprised when the bond issuer recalled her bond shortly after the rate drop. Adrianna had most likely purchased a ________ bond.
A) convertible
B) sinking-fund
C) common
D) serial
E) callable

Accepted Answer

Adriann had most likely purchased a callable bond, which allows the issuer to recall or redeem the bond before its maturity date, typically when interest rates drop, allowing the issuer to refinance the debt at a lower rate.

Question 3

Ashlynn recently purchased a bond from a large corporation. The corporation is using proceeds from the bond sale to help pay for a new research facility. The corporation did not put up any of its assets as collateral, but Ashlynn still went ahead with the purchase since she believes the corporation is trustworthy and reliable. Ashlynn most likely purchased a(n) ________ bond.
A) general obligation
B) investment-grade
C) secured
D) speculative-grade
E) unsecured

Accepted Answer

Ashlynn purchased an unsecured bond, which means the bond is not backed by any specific collateral but rather by the issuer's creditworthiness.

Question 4

Pathways Logistics is considering issuing bonds to help fund the purchase of land for a new production facility. Which statement best represents a potential disadvantage that Pathways should consider before committing to the bond sale?
A) Bonds will increase the company's debt.
B) Bonds can change the firm's ownership.
C) Bond interest payments are not tax deductible.
D) Bond payments are permanent.
E) Bonds will require dividend payments each year.

Accepted Answer

Bonds increase a company's debt because they are a form of borrowing. The company must repay the principal amount of the bonds at maturity and make regular interest payments until then.

Question 5

Your hometown is looking to build a new multi purpose stadium for the local semi pro soccer team. Proceeds from ticket sales go directly to the city. In order to fund the stadium, the city has decided to issue bonds. The bonds can be best classified as a ________ bond.
A) mutual, general obligation
B) municipal, secured
C) callable, revenue
D) municipal, revenue
E) treasury, callable

Accepted Answer

Municipal bonds are issued by local governments or their agencies, and revenue bonds are those that are repaid from the proceeds of the project they finance, such as a stadium. In this case, since the city is issuing the bond to fund a stadium and plans to use ticket sales proceeds to repay the bond, it is best classified as a municipal, revenue bond.

Question 6

Felicia purchased some stock last year. She was disappointed at the end of the year when she realized that she would not have the opportunity to vote in the company election, but she was very pleased when she received a cash payout from the company at the end of the following quarter. Felicia most likely owns ________ stock.
A) preferred
B) treasury
C) common
D) secured
E) convertible

Accepted Answer

Preferred stock typically does not come with voting rights, which explains why Felicia couldn't vote in the company election. However, preferred shareholders are often entitled to receive dividend payments before common shareholders, which aligns with Felicia's experience of receiving a cash payout.

Question 7

Hasan bought 10 shares of stock in a company two years ago. He feels like he hit the jackpot because the company has given him additional shares of stock at the end of four of the last five quarters. This additional stock can be best described as a
A) dividend.
B) split.
C) portfolio.
D) commodity.
E) diversification.

Accepted Answer

The additional shares of stock given to Hasan by the company are best described as a dividend. In this context, it refers to a stock dividend, which is a dividend payment made in the form of additional shares rather than a cash payout.

Question 8

Anatoliy had purchased five shares of stock with a par value of $20 last year. At a financial review, his advisor tells Anatoliy that he now owns 10 shares of stock with a par value of $10. What has most likely occurred in this situation?
A) The company completed a stock split.
B) The company finalized a diversification.
C) The company received a limit order.
D) The company increased its market value.
E) The company approved a dividend payout.

Accepted Answer

The company likely completed a stock split, which is when a company divides its existing shares into multiple shares to boost the liquidity of the shares. In Anatoliy's case, his 5 shares with a par value of $20 each were split into 10 shares with a new par value of $10 each, keeping the total value the same but increasing the number of shares.

Question 9

Rasheed is considering purchasing stock in a few companies. He wants to start by researching whether the stock for any of the companies is underpriced at this time. Rasheed's best course of action would be to review the ________ for each stock.
A) maturity value
B) par value
C) dividend value
D) book value
E) market value

Accepted Answer

Book value can help determine if a stock is underpriced by comparing it to the stock's current market price. It represents the net asset value of a company and can indicate whether a stock is potentially undervalued.

Question 10

Carina is considering the purchase of stock in a company. She tells her broker about her interest. At this point the broker must provide Carina with a
A) strategy.
B) portfolio.
C) speculation.
D) disclosure.
E) prospectus.

Accepted Answer

A prospectus is a legal document that provides details about an investment offering for sale to the public, which the broker must provide to Carina to inform her about the stock she is interested in.

Question 11

Neelima has been working in the financial industry for more than 20 years. She helps regulate the different United States Stock Exchanges. Which federal agency does Neelima most likely work for?
A) The Securities and Exchange Commission
B) The Federal Reserve
C) The Federal Deposit Insurance Corporation
D) The Consumer Financial Protection Bureau
E) The Department of the Treasury

Accepted Answer

The Securities and Exchange Commission (SEC) is the federal agency responsible for regulating the securities industry, including the United States Stock Exchanges. Its primary mission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation.

Question 12

Rocky's broker has played a huge role in helping him with his investments. The broker has helped complete research and provided advice to Rocky. In addition, he executes trades and completes all of Rocky's tax planning. Rocky's broker can be best described as a(n) ________ broker.
A) inside
B) discount
C) portfolio
D) traditional
E) asset

Accepted Answer

A traditional broker offers a wide range of services including research, advice, trade execution, and tax planning, which matches the description of Rocky's broker.

Question 13

Liorit has been monitoring a specific stock for the past month. He calls his broker and tells him to buy 20 shares when he feels the price is most optimum. This can be best described as a ________ order.
A) market
B) discount
C) discretionary
D) limit
E) speculative

Accepted Answer

A discretionary order allows the broker to buy or sell shares at the best possible price when they feel the time is right, which matches the scenario described.

Question 14

Eevi has been researching and monitoring a company all day and logs into the E-Trade app on her phone to purchase 100 shares shortly before the market closes for the day. Eevi's purchase was most likely facilitated by a(n) ________ broker.
A) traditional
B) discount
C) on-demand
D) full-service
E) speculation

Accepted Answer

Eevi's use of the E-Trade app, an online platform, to purchase shares indicates she used a discount broker, which typically offers lower fees by providing fewer services than a full-service broker and operates online, allowing for self-directed trading.

Question 15

Aqib thinks one of the stocks he owns might be dropping, but he's not confident enough to sell it yet. He calls his broker and requests that she sell the stock if it drops more than 10 percent during the day. This can be best described as a ________ order.
A) market
B) limit
C) speculation
D) discretionary
E) discount

Accepted Answer

A limit order allows an investor to set a specific price at which they would like to buy or sell a stock. In this case, Aqib is setting a condition for the sale based on the stock's price dropping more than 10 percent, which aligns with the concept of a limit order.

Question 16

Marcela is a professional investor and is preparing to research the general movement of U.S. stock prices. As she sits down to her computer, which website would most likely provide Marcela with a picture of the total stock market?
A) NASDAQ Composite Index
B) Wilshire 5000
C) Security Exchange Commission
D) Standard & Poor's 500
E) Dow Jones Industrial Average

Accepted Answer

The Wilshire 5000 is considered the most comprehensive index, representing the total market by including almost all publicly-traded companies headquartered in the U.S.

Question 17

Aeron owns shares of a mutual fund and decides to purchase additional shares. After making the purchase he notices that he was charged a 3 percent commission. Aeron's mutual fund can best be described as a(n) _______ fund.
A) exchange-traded
B) hybrid
C) load
D) asset
E) no-load

Accepted Answer

A mutual fund that charges a commission for buying or selling shares is known as a load fund. The 3 percent commission Aeron was charged indicates that he purchased shares of a load fund.

Question 18

Ofelia purchased shares of an investment fund over her lunch hour. She was pleased by the low fees that she paid and the fact that there wasn't a minimum investment requirement. Ofelia's investment was most likely a(n)
A) mutual fund.
B) unsecured bond.
C) exchange-traded fund.
D) commodity.
E) stock.

Accepted Answer

Exchange-Traded Funds (ETFs) are known for their low fees and no minimum investment requirements, making them accessible to a wide range of investors, including those who may not have large amounts of capital to invest. This contrasts with mutual funds, which often have minimum investment requirements, and other investment options like bonds, commodities, and stocks, which may have different fee structures and investment thresholds.

Question 19

Kaoru wanted to retire early so he placed his free money in high-risk stocks. Unfortunately, the country entered a recession and the stock market dropped significantly. Kaoru lost most of the money he had invested. What option would have most likely insulated Kaoru from the market crash?
A) asset portfolios
B) underwriting
C) futures contracts
D) diversification
E) institutional investments

Accepted Answer

Diversification is the strategy of spreading investments across various financial assets to reduce exposure to any single asset or risk. This approach could have helped Kaoru mitigate the losses from the market crash by not having all his money tied up in high-risk stocks.

Question 20

Mortimer is preparing an agreement to buy a large amount of oranges at their current prices. Due to an early freeze in Florida, he believes prices will soon increase significantly. Mortimer is most likely participating in
A) exchange trading.
B) asset allocation.
C) commodity trading.
D) buying and holding
E) sinking-fund trading.

Accepted Answer

Mortimer is engaging in commodity trading because he is buying a large amount of oranges (a commodity) with the expectation that their prices will increase due to external factors (an early freeze in Florida).

Quiz 15: Pricing and Distribution

Bashaud is interested in purchasing some long-term U.S. Treasury securities. He will most likely need to purchase them through

Adriann purchased a 10-year bond. After three years paying 5 percent interest, the interest rate drops to 3 percent. Adriann is surprised when the bond issuer recalled her bond shortly after the rate drop. Adrianna had most likely purchased a ________ bond.

Pathways Logistics is considering issuing bonds to help fund the purchase of land for a new production facility. Which statement best represents a potential disadvantage that Pathways should consider before committing to the bond sale?

Your hometown is looking to build a new multi purpose stadium for the local semi pro soccer team. Proceeds from ticket sales go directly to the city. In order to fund the stadium, the city has decided to issue bonds. The bonds can be best classified as a ________ bond.

Hasan bought 10 shares of stock in a company two years ago. He feels like he hit the jackpot because the company has given him additional shares of stock at the end of four of the last five quarters. This additional stock can be best described as a

Anatoliy had purchased five shares of stock with a par value of $20 last year. At a financial review, his advisor tells Anatoliy that he now owns 10 shares of stock with a par value of $10. What has most likely occurred in this situation?

Rasheed is considering purchasing stock in a few companies. He wants to start by researching whether the stock for any of the companies is underpriced at this time. Rasheed's best course of action would be to review the ________ for each stock.

Carina is considering the purchase of stock in a company. She tells her broker about her interest. At this point the broker must provide Carina with a

Neelima has been working in the financial industry for more than 20 years. She helps regulate the different United States Stock Exchanges. Which federal agency does Neelima most likely work for?

Rocky's broker has played a huge role in helping him with his investments. The broker has helped complete research and provided advice to Rocky. In addition, he executes trades and completes all of Rocky's tax planning. Rocky's broker can be best described as a(n) ________ broker.

Liorit has been monitoring a specific stock for the past month. He calls his broker and tells him to buy 20 shares when he feels the price is most optimum. This can be best described as a ________ order.

Eevi has been researching and monitoring a company all day and logs into the E-Trade app on her phone to purchase 100 shares shortly before the market closes for the day. Eevi's purchase was most likely facilitated by a(n) ________ broker.

Aqib thinks one of the stocks he owns might be dropping, but he's not confident enough to sell it yet. He calls his broker and requests that she sell the stock if it drops more than 10 percent during the day. This can be best described as a ________ order.

Marcela is a professional investor and is preparing to research the general movement of U.S. stock prices. As she sits down to her computer, which website would most likely provide Marcela with a picture of the total stock market?

Aeron owns shares of a mutual fund and decides to purchase additional shares. After making the purchase he notices that he was charged a 3 percent commission. Aeron's mutual fund can best be described as a(n) _______ fund.

Ofelia purchased shares of an investment fund over her lunch hour. She was pleased by the low fees that she paid and the fact that there wasn't a minimum investment requirement. Ofelia's investment was most likely a(n)

Kaoru wanted to retire early so he placed his free money in high-risk stocks. Unfortunately, the country entered a recession and the stock market dropped significantly. Kaoru lost most of the money he had invested. What option would have most likely insulated Kaoru from the market crash?

Mortimer is preparing an agreement to buy a large amount of oranges at their current prices. Due to an early freeze in Florida, he believes prices will soon increase significantly. Mortimer is most likely participating in