1. . Which of the following is not an advantage of owning debt securities?a. high claim on cash flows of a firmb. highest return of corporate securitiesc. high claim on assets of in liquidationd. none of the above

e. Answer: bf. Difficulty Level: Mediumg. Subject Heading: Characteristics of Bonds

2. . Which of the following is considered to be the most risky?a. U.S. government bondsb. mortgage bondsc. corporate bondsd. common stocks

e. Answer: df. Difficulty Level: Mediumg. Subject Heading: Types of bonds

3. . A speculative (junk) bond issue as rated under Standard & Poor’s would be rated ______ or below:

a. AA-b. BB+ c. CCCd. CC

e. Answer: bf. Difficulty Level: Easyg. Subject Heading: Bond Characteristics

4.Newly created securities are sold in the:a. primary marketb. secondary marketc. third marketd. fourth market

e. Answer: af. Difficulty Level: Easyg. Subject Heading: Issuing Securities

5. . The price for which the owner is willing to sell the security is called the:a. bid priceb. spreadc. ask priced. limit price

e. Answer: cf. Difficulty Level: Easyg. Subject Heading: Securities Trading

6. . ___________________ are comprised of direct costs, the spread, and underpricing.

a. Commission costsb. Flotation costsc. Brokerage commissionsd. none of the above

e. Answer: bf. Difficulty Level: Easyg. Subject Heading: Issuing Securities