S-12 Securities Products and Markets 1

Question 1

Which type of security represents ownership in a corporation and entitles the holder to a share of profits through dividends?

Accepted Answer

Common stock

Answer

Common stock represents equity ownership in a corporation and may pay dividends declared by the board of directors.

Question 2

A municipal bond issued to finance a specific revenue-generating project and repaid solely from that project's revenues is called a:

Accepted Answer

Revenue bond

Answer

Revenue bonds are backed only by income generated from the specific project they finance, such as a toll road or utility, not by the issuer's taxing power.

Question 3

Which market is characterized by investors trading securities among themselves rather than with the issuing company?

Accepted Answer

Secondary market

Answer

The secondary market is where previously issued securities are bought and sold between investors, with no proceeds going to the issuing company.

Question 4

A bond that can be redeemed by the issuer before its stated maturity date is known as a:

Accepted Answer

Callable bond

Answer

A callable bond gives the issuer the right to redeem the bond prior to maturity, typically when interest rates decline.

Question 5

What does the term 'market capitalization' of a publicly traded company represent?

Accepted Answer

Total value of all outstanding shares

Answer

Market capitalization equals the current share price multiplied by the total number of outstanding shares, representing the market's total valuation of the company.

S-12 Test Practice Test

S-12 Test Practice Test

S-12 Securities Products and Markets 1