1. The main function of the investment dealer is to serve as:
a) the middleperson between the firm in need of funds and investors
b) underwriter
c) an advisor to the firm
d) a market maker
2. All of the following are characteristics of private placements except:
a) there are no securities commission filing requirements
b) there is less flexibility for the firm
c) initial costs may be lower than with a public issue
d) the interest rate is usually higher due to lower liquidity
3. The coupon rate on a bond is:
a) the initial or face value of the bond
b) the yield to maturity
c) the rate at which the principal of the bond accrues
d) the stated interest rate of the bond
4. Bonds are rated based on all of the following criteria except:
a) ability to make interest payments
b) consistency of performance
c) debt-equity ratio
d) nominal yield
5. As the owners of the firm, common shareholders:
a) have a primary claim on earnings
b) have the right to vote on all important corporate issues
c) have a legally enforceable right to dividends
d) play a secondary role in financing the firm
6. Dividends may be considered relevant because:
a) they increase the investor's overall return
b) a higher return will be earned than with retained earnings
c) they are preferred by investors in higher tax brackets
d) they resolve uncertainty in the minds of investors
7. All of the following are characteristics of the expansion stage of corporate growth except
a) sales expansion continues, but at a decreasing rate
b) returns on investment decline
c) the asset expansion rate increases
d) the firm is better able to pay higher cash dividends
8. The purchaser or holder of a call option has:
a) the obligation to sell the underlying security
b) the obligation to buy the underlying security
c) the right but not the obligation to sell the underlying security
d) the right but not the obligation to buy the underlying security
9. If a bond with a face value of $1,000, coupon rate and yield to maturity of 8%, and conversion ratio
of 20, sees a drop in the common price to 25, the value of the security will be:
a) $500
b) greater than $1,000
c) less than $1,000
d) $1,000
10. All of the following are characteristics of the 1990s mergers and divestitures except:
a) mergers between entertainment firms was popular
b) mergers between financial services firms was also common
c) the federal government was active in divesting crown corporations
d) high interest rates made mergers more costly than in the 1970s and 1980s