Some fundamental multiple-choice questions derived from this chapter:
1. What defines a seasoned issue in the context of securities?
A. A new issue from a startup company.
B. An issue from a company with a long and unfavorable reputation.
C. An issue from a company long and favorably known to the investment public, regardless of the security's own age.
D. A bond issued by a government entity.
2. Why do seasoned issues often maintain their price despite a weakening of their investment position?
A. Because they offer higher interest rates than new issues.
B. Due to the inertia and lack of penetration of the typical investor who buys by reputation rather than analysis.
C. Because seasoned issues are always backed by tangible assets.
D. Because they are less volatile in the stock market.
3. According to the document, what is a prudent approach towards buying unseasoned industrial bonds or preferred stocks?
A. They should only be bought on an admittedly speculative basis.
B. They should be bought based on their high yield alone.
C. They are always a safe investment if the price is below 100.
D. They should be avoided under all circumstances.
4. What does the document suggest about the price sector of about 70 to 100 in the context of speculative senior issues?
A. It is the recommended price range for buying seasoned issues.
B. It represents a "range of subjective variation" where an issue might sell due to legitimate differences of opinion on its soundness.
C. It indicates the price range where unseasoned issues offer the best investment opportunities.
D. It is the ideal price range for all types of securities, regardless of their seasoning.
5. Why are unseasoned industrial issues considered to rarely deserve an investment rating, as per the document?
A. They are typically overpriced.
B. They offer too high a yield.
C. They come from companies new to the investment list and are sensitive to adverse developments.
D. They are always from the tech sector, which is volatile.
6. What caution is advised when attempting to take advantage of price discrepancies in unseasoned securities?
A. Only buy when the market is bullish.
B. Avoid buying them entirely due to high risk.
C. Purchase only on a speculative basis when prices are low enough to permit a substantial rise.
D. Buy them based on the recommendations of financial analysts only.
Answers: CBABC C