Question 1

A sale by IBM of new stock to the public would be a(n)

Accepted Answer

A) short sale. 
B) seasoned equity offering. 
C) private placement. 
D) secondary-market transaction. 
A) short sale. 
B) seasoned equity offering. 
C) private placement. 
D) secondary-market transaction.

Question 2

You purchased 100 shares of IBM common stock on margin at $70 per share.Assume the initial margin is 50%, and the maintenance margin is 30%.Below what stock price level would you get a margin call? Assume the stock pays no dividend; ignore interest on margin.

Accepted Answer

A) $21 
B) $50 
C) $49 
D) $80 
A) $21 
B) $50 
C) $49 
D) $80

Question 3

Which of the following orders instructs the broker to sell at or above a specified price?

Accepted Answer

A) Limit-buy order 
B) Discretionary order 
C) Limit-sell order 
D) Stop-buy order 
A) Limit-buy order 
B) Discretionary order 
C) Limit-sell order 
D) Stop-buy order

Question 4

Investment bankers

Accepted Answer

A) act as intermediaries between issuers of stocks and investors. 
B) act as advisors to companies in helping them analyze their financial needs and find buyers for newly-issued securities. 
C) accept deposits from savers and lend them out to companies. 
D) act as intermediaries between issuers of stocks and investors and act as advisors to companies in helping them analyze their financial needs and find buyers for newly-issued securities. 
A) act as intermediaries between issuers of stocks and investors. 
B) act as advisors to companies in helping them analyze their financial needs and find buyers for newly-issued securities. 
C) accept deposits from savers and lend them out to companies. 
D) act as intermediaries between issuers of stocks and investors and act as advisors to companies in helping them analyze their financial needs and find buyers for newly-issued securities.

Question 5

Assume you purchased 200 shares of GE common stock on margin at $70 per share from your broker.If the initial margin is 55%, how much did you borrow from the broker?

Accepted Answer

A) $6,000 
B) $4,000 
C) $7,700 
D) $7,000 
E) $6,300 
A) $6,000 
B) $4,000 
C) $7,700 
D) $7,000 
E) $6,300

Question 6

Restrictions on trading involving insider information apply to the following, except

Accepted Answer

A) corporate officers. 
B) corporate directors. 
C) major stockholders. 
D) All of the individuals. 
A) corporate officers. 
B) corporate directors. 
C) major stockholders. 
D) All of the individuals.

Question 7

Assume you sell short 100 shares of common stock at $30 per share, with initial margin at 50%.What would be your rate of return if you repurchase the stock at $35 per share? The stock paid no dividends during the period, and you did not remove any money from the account before making the offsetting transaction.

Accepted Answer

A) -33.33% 
B) -25.63% 
C) -57.14% 
D) -77.23% 
A) -33.33% 
B) -25.63% 
C) -57.14% 
D) -77.23%

Question 8

Bonds are traded

Accepted Answer

A) on exchanges 
B) Over-the counter 
C) On a venture exchange 
D) NYSE 
A) on exchanges 
B) Over-the counter 
C) On a venture exchange 
D) NYSE

Question 9

The preliminary prospectus is referred to as a(n)

Accepted Answer

A) red herring. 
B) indenture. 
C) greenmail. 
D) tombstone. 
A) red herring. 
B) indenture. 
C) greenmail. 
D) tombstone.

Question 10

The trading of stock that was previously issued takes place

Accepted Answer

A) in the secondary market. 
B) in the primary market. 
C) usually with the assistance of an investment banker. 
D) in the secondary and primary markets. 
A) in the secondary market. 
B) in the primary market. 
C) usually with the assistance of an investment banker. 
D) in the secondary and primary markets.

Question 11

In a "firm commitment," the investment banker

Accepted Answer

A) buys the stock from the company and resells the issue to the public. 
B) agrees to help the firm sell the stock at a favorable price. 
C) finds the best marketing arrangement for the investment-banking firm. 
D) agrees to help the firm sell the stock at a favorable price and finds the best marketing arrangement for the investment-banking firm. 
A) buys the stock from the company and resells the issue to the public. 
B) agrees to help the firm sell the stock at a favorable price. 
C) finds the best marketing arrangement for the investment-banking firm. 
D) agrees to help the firm sell the stock at a favorable price and finds the best marketing arrangement for the investment-banking firm.

Question 12

When a firm markets new securities, a preliminary registration statement must be filed with

Accepted Answer

A) the exchange on which the security will be listed. 
B) the Securities and Exchange Commission. 
C) the Federal Reserve. 
D) all other companies in the same line of business. 
A) the exchange on which the security will be listed. 
B) the Securities and Exchange Commission. 
C) the Federal Reserve. 
D) all other companies in the same line of business.

Question 13

You want to buy 100 shares of Hotstock Inc.at the best possible price as quickly as possible.You would most likely place a

Accepted Answer

A) stop-loss order. 
B) stop-buy order. 
C) market order. 
D) limit-sell order. 
A) stop-loss order. 
B) stop-buy order. 
C) market order. 
D) limit-sell order.

Question 14

In a typical underwriting arrangement, the investment-banking firm I) sells shares to the public via an underwriting syndicate.
II) purchases the securities from the issuing company.
III) assumes the full risk that the shares may not be sold at the offering price.
IV) agrees to help the firm sell the issue to the public but does not actually purchase the securities.

Accepted Answer

A) I, II, and III 
B) I, III, and IV 
C) I and IV 
D) II and III 
A) I, II, and III 
B) I, III, and IV 
C) I and IV 
D) II and III

Question 15

You want to purchase GM stock at $40 from your broker using as little of your own money as possible.If initial margin is 50% and you have $4,000 to invest, how many shares can you buy?

Accepted Answer

A) 100 shares 
B) 200 shares 
C) 50 shares 
D) 500 shares 
A) 100 shares 
B) 200 shares 
C) 50 shares 
D) 500 shares

Question 16

The finalized registration statement for new securities approved by the SEC is called

Accepted Answer

A) a red herring. 
B) the preliminary statement. 
C) the prospectus. 
D) a best-efforts agreement. 
A) a red herring. 
B) the preliminary statement. 
C) the prospectus. 
D) a best-efforts agreement.

Question 17

A purchase of a new issue of stock takes place

Accepted Answer

A) in the secondary market. 
B) in the primary market. 
C) usually with the assistance of an investment banker. 
D) in the secondary and primary markets. 
E) in the primary market and usually with the assistance of an investment banker. 
A) in the secondary market. 
B) in the primary market. 
C) usually with the assistance of an investment banker. 
D) in the secondary and primary markets. 
E) in the primary market and usually with the assistance of an investment banker.

Question 18

Shelf registration

Accepted Answer

A) is a way of placing issues in the primary market. 
B) allows firms to register securities for sale over a two-year period. 
C) increases transaction costs to the issuing firm. 
D) is a way of placing issues in the primary market and allows firms to register securities for sale over a two-year period. 
A) is a way of placing issues in the primary market. 
B) allows firms to register securities for sale over a two-year period. 
C) increases transaction costs to the issuing firm. 
D) is a way of placing issues in the primary market and allows firms to register securities for sale over a two-year period.

Question 19

The secondary market consists of

Accepted Answer

A) transactions on the AMEX. 
B) transactions in the OTC market. 
C) transactions through the investment banker. 
D) transactions on the AMEX and in the OTC market. 
A) transactions on the AMEX. 
B) transactions in the OTC market. 
C) transactions through the investment banker. 
D) transactions on the AMEX and in the OTC market.

Question 20

You purchased JNJ stock at $50 per share.The stock is currently selling at $65.Your gains may be protected by placing a

Accepted Answer

A) stop-buy order. 
B) limit-buy order. 
C) market order. 
D) limit-sell order. 
A) stop-buy order. 
B) limit-buy order. 
C) market order. 
D) limit-sell order.

Exam 3: How Securities Are Traded

A sale by IBM of new stock to the public would be a(n)

You purchased 100 shares of IBM common stock on margin at $70 per share.Assume the initial margin is 50%, and the maintenance margin is 30%.Below what stock price level would you get a margin call? Assume the stock pays no dividend; ignore interest on margin.

Which of the following orders instructs the broker to sell at or above a specified price?

Investment bankers

Assume you purchased 200 shares of GE common stock on margin at $70 per share from your broker.If the initial margin is 55%, how much did you borrow from the broker?

Restrictions on trading involving insider information apply to the following, except

Bonds are traded

The preliminary prospectus is referred to as a(n)

The trading of stock that was previously issued takes place

In a "firm commitment," the investment banker

When a firm markets new securities, a preliminary registration statement must be filed with

You want to buy 100 shares of Hotstock Inc.at the best possible price as quickly as possible.You would most likely place a

You want to purchase GM stock at $40 from your broker using as little of your own money as possible.If initial margin is 50% and you have $4,000 to invest, how many shares can you buy?

The finalized registration statement for new securities approved by the SEC is called

A purchase of a new issue of stock takes place

Shelf registration

The secondary market consists of

You purchased JNJ stock at $50 per share.The stock is currently selling at $65.Your gains may be protected by placing a

The Investment Environment

Financial Markets, Asset Classes and Financial Instruments

Mutual Funds and Other Investment Companies

Risk, Return, and the Historical Record

Capital Allocation to Risky Assets

Optimal Risky Portfolios

Index Models

The Capital Asset Pricing Model

Arbitrage Pricing Theory and Multifactor Models of Risk and Return

The Efficient Market Hypothesis

Behavioural Finance and Technical Analysis

Empirical Evidence on Security Returns

Bond Prices and Yields

The Term Structure of Interest Rates

Managing Bond Portfolios

Macroeconomic and Industry Analysis

Equity Valuation Models

Financial Statement Analysis

Options Markets: Introduction

Option Valuation

Futures Markets

Futures, Swaps, and Risk Management

Portfolio Performance Evaluation

International Diversification

Hedge Funds

The Theory of Active Portfolio Management

Investment Policy and the Framework of the Cfa Institute

Filters