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Exam 10: Securities Markets: Trading Financial Resources

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Question 81

Multiple Choice

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One drawback of exchange-traded funds (ETFs) is that investors:

A) are not able to buy diversified securities.
B) have to pay brokerage commissions every time they buy or sell shares.
C) are forced to pay higher fees as compared to mutual funds.
D) can buy or sell shares only after the major stock exchanges are closed.

E) B) and C)
F) A) and D)

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Question 82

Multiple Choice

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Which of the following statements is true of credit unions?

A) They are open to individuals who belong to a specific field of membership.
B) They are the most common depository institutions.
C) They are for-profit organizations.
D) They are a much bigger player in financial markets than commercial banks.

E) B) and D)
F) B) and C)

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Question 83

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List any two depository and nondepository institutions and describe their differences.

Richard has been following information about a firm on a financial website. He has noticed that the firm's price-to-earnings ratio (P/E) has been steadily rising. Richard can conclude from this result that the company:

The Federal Reserve System was:

If Carl is a preferred stockholder at Cedia Inc., and Cedia goes out of business, Carl's claim on the firm's assets:

A health and fitness startup company goes for an initial public offering. For assistance, it enters into a firm commitment arrangement with an investment bank. As per the agreement, the investment bank itself will purchase all the shares at a specified price. This will guarantee that the company will receive a fixed amount of new funds. This scenario exemplifies a(n) _____.

Institutional investors amass large pools of financial capital by accepting savings account deposits.

Aaron buys 300 shares in a tobacco company. Within a year, he receives a capital gain on his stocks. This means that:

Jack receives a considerable sum of money by selling his property. He decides to invest this sum in a diversified set of securities. He plans to invest in these securities and retain them for a long time. He is optimistic that eventually the overall market conditions will rise, thus giving him a high return sometime in the future. Jack is using the _____ investment strategy.

Abigail and Pamela both have stocks in the Rondante Group. However, if in the future the company goes out of business, Pamela will have a claim on the assets of the company before Abigail. Also, she is given higher priority when the company pays the dividends to all its stockholders. Unlike Abigail, Pamela is a _____.