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Exam 17: Financial Markets

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Question 21

Multiple Choice

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The ownership in a company is represented by ________________ and those who are legally recognized as having ownership in a company are called _____________.

A) ownership of the shares with voting rights; shareholders
B) shares with voting rights; stockholders
C) ownership of stock; stockholders
D) ownership of shares in the company's stock; shareholders

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Question 22

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Which of the following is not an ironclad rule in the financial markets?

A) borrowing from a bank works better for large, well-known corporations
B) banks fund small business loans and large firms issue bonds to raise money
C) a bank can monitor a large established firm's better than a new small business
D) relatively large and well-known firms typically never borrow from banks

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Question 23

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Briefly discuss how the price of a company's stock will be determined. Briefly describe the two main motivations for purchasing stock and indentify which of these motivations will have the greatest effect on the market.

In the investment industry, the principle of _______________ supports investing in a wide range of companies to reduce the level of risk.

Treasury bonds are issued by the federal government through the _____________________ .

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.

List the four main methods available to a textile manufacturer that needs to raise the financial capital they need to pay for the purchase and installation of solar panel equipment to generate electricity to run its large, existing textile plant.

A mutual fund that seeks to imitate the overall behaviour of the stock market is called ____________________ .

How has the widespread adoption of debit cards as the preferred method of payment for consumer purchases likely affected bank administration costs?

Stock markets often experience a frenzy of buying or selling when investors are ___________________ by following the current trend in a very actively traded company.

In order to be classified as a _______________, a firm must be owned by the people who run it on a day-to-day basis.

The old proverb: "Don't put all your eggs in one basket" is synonymous with which of the following?

Michael purchased 5,000 shares of IMAGoldMiner Inc. in May for $0.55 each. He purchased 5,000 more at $0.75 cents in June and another 5,000 for $1.02 in July. In October, IMAGoldMiner began production at its new gold mine and Michael was able to sell 5,000 shares at $2.05, another 5,000 at $3.25 and the remaining 5000 at $4.50. In this instance, Michael

________________ are a form of _______ bonds that offer relatively high interest rates to compensate for their relatively high chance of default.

The City of Washington needs to upgrade its levies and its water drainage systems. The cost will exceed the amount of tax revenue the City expects to receive over the next 10 years. How will the City be able to raise the funds needed to finance this upgrade?

Briefly describe what is meant by the term "diversification" with respect to the investment industry. Identify and briefly explain two investment vehicles that offer investors a convenient way to diversify their investments.

A ________________ operates directly between a saver with financial assets to invest and an entity who will receive those assets in exchange for paying a ________________ .

Riley and Sue paid 30% down for a house valued at $135,000 in 2013. If they sell the house in 2017 for $140,000, what will the value of their equity be?

Which of the following is a feature that typically distinguishes a savings account from a checking account?

Which of the following would be the least likely method for firms to raise the financial capital they need to pay for new equipment?