3. Small companies prefer ____ to ____ because it is a source of funding where the company is not obligated to make interest payments.a) issuing bonds, borrowing from a bankb) borrowing from a bank, issuing bondsc) stock, shareholdersd) issuing bonds, an IPO4. What is meant by initial public offering (IPO)?a) A firm owned by the people who run it on a day-to-day basis.b) When a firm first sells shares of stock to outside investors.c) Bonds issued by firms that wish to borrow.d) A direct payment from a firm to its shareholders. 5. Which of the following will provide an investor with a legally valid claim of partial ownership of a firm?Question 5 options:a) entitlement to bond interestb) ownership of a treasury bondc) entitlement to dividendsd) ownership of stock6. What term is used to describe a financial contract through which a borrower like a corporation, a city or state, or the federal government agrees to repay the amount that was borrowed and also a rate of interest over a period of time in the future?Question 6 options:a) Stockb) Bondc) Dividendd) Index fund7. Treasury bonds are issued by the federal government through the _____________________.Question 7 options:a) Federal Reserveb) Central Bankc) U.S. Department of the Treasuryd) U.S. Office of the Comptroller of Currency8. What term is used to describe bonds issued by cities that wish to borrow?Question 8 options:a) Certificate of deposit (CD)b) Municipal bondsc) Treasury bondsd) Junk bonds9. The bottom line on investing in individual stocks is: _______________ on average over lengthy periods of time; ________________, especially in the short run; _______________, since stock does need to be sold to turn gains into spendable money.Question 9 options:a) low rate of return; high risk; low liquidityb) moderate rate of return; low risk; high liquidityc) high rate of return; moderate risk; low liquidityd) high rate of return; high risk; liquidity is dependant on the number of shares traded per day for each company stock that you own10. Bonds vary in the rate of return that they offer, depending on the ____ of the borrower.Question 10 options:a) riskinessb) liquidityc) diversificationd) age11. In 2008 the annual rate of return on stocks fell by about _______________.Question 11 options:a) 37%b) 10 %c) 120%d) gained 5%12. Of the following forms of investment, ___ is the most liquid.Question 12 options:a) a bondb) a housec) a mutual fundd) a bank checking account13.The old proverb: "Don't put all your eggs in one basket" is synonymous with which of the following?Question 13 options:a) an average rate of returnb) predicting value of tangible assetsc) diversified investmentsd) a flexible rate of return14.Dividends ____ and capital gains ____.a) require a direct payment to a firm's shareholders, are an increase in the value of the stock between purchase and saleb) are an increase in the value of the stock between purchase and sale, require a direct payment to a firm's shareholdersEvery individual has his/her own preferences for risk. However, older investors tend to be more ____ as they approach retirement, as they have less time for the risks to balance out and translate into high returns.Question 15 options:a) cautiousb) adventurou

When firms are earning profits, they can choose to reinvest some of these profits in equipment, structures, and research and development. To put this into perspective, in 2012, U.S. firms invested in new equipment and structures. Question 1 options: a ) $16 billion b) $160 billion c) $2.2 trillion d) $16 trillion A firm receives money from the sale of its stock Question 2 options: a) every time its stock is traded b) only when its stock is traded in large quantities c only when its stock is traded in small quantities d) only when the company sells its own stock to the public