1) When a business sells its stocks or bonds to investors without going through any type of intermediary or financial institution, this process is known as a(an) _____.

a.initial public offering

b.best-effort arrangement

c.underwriting

d.direct transfer

e.primary market offering

2) Which of the following securities has the highest priority with regard to earnings and assets of a firm?

a.Corporate bonds

b.Preferred stock

c.Common stock

d.American depository receipts (ADRs)

e.Foreign stocks

3) A firm makes investments of $2,000 this year, $4,000 next year, and $2,500 the following year. This form of payment represents a(n) _____.

a.ordinary annuity

b.annuity due

c.uneven cash flow stream

d.lump-sum payment

e.compounded cash flow

4) Which of the following terms refers to the process of converting an exchange that is a not-for-profit organization and is owned by its members, to a stock ownership organization?

a.Privatization

b.Diversification

c.Demutualization

d.Consolidation

e.Flotation

5) Which of the following is considered as a liability in the balance sheet of a firm?

a.Accounts receivable

b.Corporate bonds

c.Retained earnings

d.Common stock

e.Plant and equipment