1. The rate at which depository institutions effectively lend or borrow funds from each other is the a. federal funds rate b. discount rate c. prime rate d. repo rate 2. The annual dividend per share divided by the prevailing stock price is known as the a. Price-camnings ratio. b. market capitalization of the company. c. Dividend yield. d. offer price of the IPO. 3. Preferred shareholders a typically have the same voting rights as common shareholders. b. do not share the ownership of the firm with common shareholders. c. typically participate in the profits of the firm beyond the stated fixed annual dividend. d. may not receive a dividend every year. 4. If many investors quickly sell an IPO stock in the secondary market, there will be on the stock's price a. upward pressure b. downward pressure no additional pressure d. none of the above * The is the primary regulator of stock markets. 1. Federal Reserve b. US Treasury c. FDIC. d. SEC 6. Commercial paper is a money market security that a. Is issued by the US Treasury. b. Issued usually by well known large creditworthy corporations. c. is a business oriented newspaper Tolong term comorate bond c. d a. Styles 6. Commercial paper is a money market security that Is issued by the US Treasury b. Issued usually by well known large creditworthy corporations. c. is a business oriented newspaper d. Is a long term corporate bond. 7. A requires that dividends cannot be paid on common stock until all current and previously omitted dividends are paid on preferred stock. a. residual claim b. preferred margin c. cumulative provision d. liquidation claim 15 8. Managers of firms may consider a stock repurchase or even a leveraged buyout when they believe their stock by the market, or a secondary stock offering when they believe their stock is by the market. a. undervalued; undervalued b. overvalued; overvalued c. undervalued; overvalued d. overvalued; undervalued c. none of the above 9. A security that can be easily converted into cash with little to no loss in value is a. liquid. 13 Verries Paragraph Styles 9. A security that can be easily converted into cash with little to no loss in value is a. liquid. b. Very risky. c. Provides the highest returns to investors. d. Is guaranteed by all securities we studied. 10. When would a firm most likely call bonds? 2. after interest rates have declined b. if interest rates do not change c. after interest rates increase d. just before the time at which interest rates are expected to decline 11. Treasury bills a. have a maturity of up to five years. b. have an active secondary market. c. are commonly sold at par value. d. commonly offer coupon payments. 12. At any given time, the yield on commercial paper is the yield on a T-bill with the same maturity. a. slightly less than b. slightly higher than cequal to d. A and B both occur with about equal frequency is directly responsible for controlling money supply growth. a. Federal Advisory Council b. FOMC also known as the Federal Open Market Committee. c. Donald Duck. d. President Donald Trump. c. US Treasury 14. Bonds issued by are backed by the federal government a. the Treasury b. AAA-rated corporations c. state governments d. city governments 13. The Styles 15. Which of the following is not a money market security? a Treasury bill b. negotiable certificate of deposit c. common stock d. federal funds 16. The purpose of a lockup provision is to a. keep individual investors from buying and selling stock b. prevent downward pressure on the stock's price. c. increase the number of outstanding shares. d. allocate a larger proportion of stock to institutional investors. 17. Bonds that are not secured by specific property are called aa chattel mortgage. b. open-end mortgage bonds. c. debentures. d. blanket mortgage bonds. 18. When a corporation first decides to issue stock to the public, it engages in a(n) 2. secondary offering. b. initial public offering c. seasoned equity offering. d. none of the above Styles 19. The is a value-weighted index of stock prices of 500 large U.S. firms. a. Dow Jones Industrial Average b. Standard and Poor's 500 c. New York Stock Exchange Index d. Nasdaq 20. The so-called "flight to quality" causes the risk differential between risky and risk-free securities to be a. eliminated. b. reduced c. increased d. unchanged (there is no effect). 21. Municipal general obligation bonds are Municipal revenue bonds are a. supported by the municipal government's ability to tax; supported by the municipal government's ability to tax b. supported by the municipal government's ability to tax; supported by revenue generated from the project c. always subject to federal taxes; always exempt from state and local taxes d. typically zero-coupon bonds: typically zero-coupon bonds 22. Securities with maturities of one year or less are classified as a. capital market instruments. b. money market instruments. c. preferred stock. d. none of the above 23. _securities have been the most active secondary market. a. Treasury b. Zero-coupon corporate c. Junk d. Municipal - 24. Assume that you purchased corporate bonds one year ago that have no protective covenants. Today, it is announced that the firm that issued the bonds plans a leveraged buyout requiring that raise more debt. The market value of your bonds will likely as a result. a rise b. decline e. be zero d. be unaffected 25. Corporate bonds that receive a rating from credit rating agencies are normally placed at yields. a. higher; lower b. lower, lower c. higher; higher d. none of the above 26. The prevailing price per share divided by the firm's earnings per share is known as the a dividend yield b. price-eamings ratio c. fully diluted earnings per share. d. annual dividend. 27. Interest came from Treasury bonds is a exempt from all income tax. b. exempt from federal income tax. c. exempt from state and local taxes. d. subject to all income taxes. 28. A variable rate municipal or corporate bond allows a. investors to benefit from declining rates over time. b. issuers to benefit from rising market interest rates over time. c. investors to benefit from rising market interest rates over time. d. none of the above 29. A protective covenant may a. specify all the rights and obligations of the issuing firm and the bondholders. b. require the firm to retire a certain amount of the bond issue each year. c. restrict the amount of additional debt the firm can issue. Styles 29. A protective covenant may a specify all the rights and obligations of the issuing firm and the bondholders. b. require the firm to retire a certain amount of the bond issuc cach year. c. restrict the amount of additional debt the firm can issue. d. none of the above 30. A(n) is a certificate which represents ownership of a foreign stock a. ADR 1. SEAQ c. Nasdaq d. AMEX 31. A seasoned offering in the stock market is also known as a secondary offering is An IPO of an older management team. b. The sale of additional securities by a firm whose whese securities are already publicly traded c. A municipal bond d. A treasury bond. a. 32. On average, IPOs of firms tend to perform over a period of a year or longer a. well b. poorly c. about the same as the S&P 500 index d. none of the above 33. Investors in Treasury notes and bonds receive interest payments from the Treasury. a. annual b. semiannual c. quarterly d. monthly 34. A firm can best avoid the time lag between registering new securities with the SEC and actually selling them by a use of proxy b. shelf-registration c. use of a margin call. d. use of preemptive rights. 35. The largest organized exchange, listing the largest firms, is the a. New York Stock Exchange. b. American Stock Exchange. c. Midwest Stock Exchange. d. Pacific Stock Exchange. 36. Leveraged buyouts are commonly financed by the issuance of: a. money market securities. b. Treasury bonds. c. Low grade or junk bond corporate bonds. d. municipal bonds