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Which of the following is not an example of capital market securities?
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All but one of the following is associated with characteristics of common stock?
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Chapter 10 Test Questions
| Question | Answer |
|---|---|
| Which of the following is not an example of capital market securities? | commercial paper |
| All but one of the following is associated with characteristics of common stock? | cumulative dividends |
| Investors with 30 per cent of the voting stock of a corporation, interested in a seat on the board of directors, had better have _____ voting privileges. | cumulative |
| The term shareholder equity implies | an ownership claim |
| All but one of the following are terms associated with common stock... | contractual |
| Security exchanges provide a valuable function in that they... | increase the marketability of securities |
| A shareholder in a troubled corporation is not likely to lose his/her... | house |
| In a board of directors election for five directors and straight voting, a majority group of shareholders will elect: | five directors |
| The sale of securities to the public via an investment banker by a new corporation raising funds is called | an initial public offering |
| The New York Stock Exchange is an _________ market. | auction, exchange, and secondary (all of the above) |
| Which of the four secondary markets listed below involves considerable costs and no third party? | direct search |
| The NASDAQ system provides price input capability for | dealers |
| The secondary markets for capital market securities have facilitated economic growth in our country because... | they help provide marketability for capital market claims, they have increased investors' willingness to buy capital market claims and they make people more willing to invest because they can more easily diversify thier risk |
| The capital market is allocationally effcient if.. | funds are channeled to thier most productive use and only if informational and operational market efficiencies are high |
| Regulators provide a valuable function for the capital markets because they: | try to keep the market participants honest, try to prevent excessive sqeculation from destabilizing the market and make sure all pertinent information about publicly traded securities is disclosed |
| Which of the following is not true about American Depository Receipts (ADR)? | decreases the foreign firm's U.S liquidity (and potentially total global issuer liquidity) |
| The globalizaiton of the equity markets has led to: | Electronically linking equity dealer and exchange markets, electronically linking international markets has created 24 hour trading opportunities for some stocks and U.S stock exchanges have extended thier normal trading hours (all of the above) |
| The household sector is the largest surplus sector and invests in the capital market... | directly by purchasing stocks and bonds and both directly (owning stocks) and indirectly (pension fund reserves, etc.) |
| A stock purchased at $40 at the beginning of the year paid $10 in dividends and was sold for a net price of $42 at the end of the year. The total annual return is; | 30 per cent |
| Sampson Corp, through its invest. banker, recently sold an 200,000 issue of stock to the public, grossing $7.4 mil. Issuing expenses paid by Sampson totaled $200,000 and the underwriters spread was $3/sh. Samp. Corp was able to net how much in the deal? | $6.6 million |
| The underwriter's spread (%) is | directly related to the riskiness of the issue |
| Which of the four secondary markets listed below involves considerable costs and no third party? | brokered |
| Which of the four secondary markets listed below minimizes price risk, but search costs are often high? | dealer |
| Which of the four secondary markets listed below has low search costs, price risk, and the expense of a bid/ask spread? | auction |
| The bid-ask spread for equity securities... | is large (%) for very small and very large transactions |
| The bid-ask spread for equity securities tends to be _______ for more fequently traded stocks and ______ for stocks which ahve more traders with inside information. | less; more |
| The over-the-counter market trades _____ stocks than exchanges, and exchanges tend to list ________ companies. | more; larger |
| All but one of the following are reasons for not listing a stock on an exchange. | having a large number of public shareholders |
| All but on the following is associated with the over-the-counter market for stocks? | auction markets |
| A broker seeking to purchase an OTC stock.... | must find a dealer in the stock, must find the most favorable price of the stock and might use a level 2 NASDAQ monitor |
| The daily pick sheets of the OTC market were replaced.. | by the NASDAQ system |
| All but one of the following are three major sources of active bids and offerings in a stock issue at a stock trading post on an exchange? | limit price orders held by floor brokers |
| An order to the NYSE to buy or sell at the best price available is called: | a market order |
| Advances in technology and competition have created all but one of the following in equity markets: | higher transaction costs |
| Which of the following is true about secondary markets? | all of the above |
| In response to competition from foreign stock exchanges, U.S stock exchanges have | expanded electronic after-hour trading for stocks |
| The primary federal regular of stock markets... | is the Securities and Exchange Commission |
| The federal legislation that made the SEC responsible for the broad oversight of securities market was.. | Securities Act of 1933, Securities Exchange Act of 1935 and the Investment Company Act of 1940 |
| What is the value of a stock expected to pay a constant $5 dividend each year forever, if the market required rate of return is 18%? | $28 |
| What is the price of a stock, now priced at $20, which promises to pay $3 dividend for one year and offer an 18 per cent total return? | $20 |
| Ace Corp is selling an IPO of stock. They expect to pay the new shares equivalent of $3 dividend/sh and expect the stock to be priced at $40 in 4 yrs. the market required rate of return is estimated to be 18 per cent. What is the value of the stock today? | $28.70 |
| What is the estimated value of a stock, which paid a $5 dividend last year, expects dividends to grow at 6 per cent, and requires a 20 per cent return? | $37.86 |
| A stock, currently trading at $50 expects to pay a $4.50 dividend this year. The dividends and stock price has been growing at 8 per cent for 10 years. What is the expected total return on the stock this year? | 17 per cent |
| Investors in well diversified stock portfolios are concerned about ________ risk. | systematic |
| Stocks with beta values of one | has had price variability similar to the market |
| The security market line represents... | the rate of return for each unit of risk |
| Using the security market line, calculate the required rate of return on a stock when the risk-free rate is 7%, the return on the market portfolio is 15% and the beta is 1.5? | 19% |
| When constructing a stock market index, two items below are needed to start the index? | the starting date and the base index value |
| At the beginning of year one, the stock market index had a value of 225.4. Two years latet the value was 298. What was the average annual rate of return on the index portfolio? | 15% |
| Stocks XX, YY and ZZ currently priced at $35, $65 and $72, repectively, comprise a price-weighted index with a base value of 100. One year later the stocks above were valued at $40, $69 and $87. What was the value of the index at the end of year one? | 114 |
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callieco