Question 1

An order that specifies the highest buy or lowest sell price is a

Accepted Answer

A) Limit order. 
B) Short sale. 
C) Market order. 
D) Margin call. 
E) Stop loss. 
A) Limit order. 
B) Short sale. 
C) Market order. 
D) Margin call. 
E) Stop loss.

Question 2

Exhibit 4.4
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
You decide to sell 100 shares of Davis Industries short when it is selling at its yearly high of $35. Your broker tells you that your margin requirement is 55 percent and that the commission on the sale is $15. While you are short, Davis pays a $0.75 per share dividend. At the end of one year you buy your Davis shares (cover your short sale) at $30 and are charged a commission of $15 and a 6 percent interest rate.
-Refer to Exhibit 4.4. What is your dollar return on the investment?

Accepted Answer

A) $130.50 
B) $300.50 
C) $100.00 
D) $1,773.75 
E) $3,500.00 
A) $130.50 
B) $300.50 
C) $100.00 
D) $1,773.75 
E) $3,500.00

Question 3

The NYSE is a dealer market.

Accepted Answer

A) True 
 B)False

Question 4

A pure auction market is one in which

Accepted Answer

A) Dealers provide liquidity by buying and selling shares of stock for themselves. 
B) Dealers compete against each other to provide the highest bid and lowest asking prices. 
C) Buyers submit bid prices to sellers. 
D) Sellers submit ask prices to buyers. 
E) Buyers and sellers submit bid and ask prices to a central location to be matched. 
A) Dealers provide liquidity by buying and selling shares of stock for themselves. 
B) Dealers compete against each other to provide the highest bid and lowest asking prices. 
C) Buyers submit bid prices to sellers. 
D) Sellers submit ask prices to buyers. 
E) Buyers and sellers submit bid and ask prices to a central location to be matched.

Question 5

Exhibit 4.7
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Shares of RossCorp stock are selling for $45 per share. Brokerage commissions are 2% for purchases and 2% for sales. The interest rate on margin debt is 6.25% per year. The maintenance margin is 30%.
-Refer to Exhibit 4.7. Assume that you purchase 150 shares of RossCorp stock at $45 each by making a margin deposit of 55%. At what price would you receive a margin call?

Accepted Answer

A) $29.39 
B) $26.48 
C) $50.39 
D) $28.93 
E) $50.10 
A) $29.39 
B) $26.48 
C) $50.39 
D) $28.93 
E) $50.10

Question 6

Which of the following is not a major category of membership in stock exchanges?

Accepted Answer

A) Specialist 
B) Commission broker 
C) Floor broker 
D) Financial analyst 
E) Registered trader 
A) Specialist 
B) Commission broker 
C) Floor broker 
D) Financial analyst 
E) Registered trader

Question 7

Exhibit 4.7
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Shares of RossCorp stock are selling for $45 per share. Brokerage commissions are 2% for purchases and 2% for sales. The interest rate on margin debt is 6.25% per year. The maintenance margin is 30%.
-Refer to Exhibit 4.7. At the end of one year shares of RossCorp stock are selling for $35 per share and the company paid dividends of $0.85 per share. Assuming that you paid the full cost of the purchase, what is your rate of return if you sell RossCorp stock?

Accepted Answer

A) -33.05% 
B) -23.42% 
C) 23.42% 
D) 33.05% 
E) -25.35% 
A) -33.05% 
B) -23.42% 
C) 23.42% 
D) 33.05% 
E) -25.35%

Question 8

A block trade is one which involves a minimum of

Accepted Answer

A) 1,000 shares. 
B) 5,000 shares. 
C) 10,000 shares. 
D) 100,000 shares. 
E) 1,000,000 shares. 
A) 1,000 shares. 
B) 5,000 shares. 
C) 10,000 shares. 
D) 100,000 shares. 
E) 1,000,000 shares.

Question 9

In recent years there has been a trend toward the consolidation of existing exchanges in developed markets, such as London, Frankfurt and Paris.

Accepted Answer

A) True 
 B)False

Question 10

Exhibit 4.7
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Shares of RossCorp stock are selling for $45 per share. Brokerage commissions are 2% for purchases and 2% for sales. The interest rate on margin debt is 6.25% per year. The maintenance margin is 30%.
-Refer to Exhibit 4.7. At the end of one year shares of RossCorp stock are selling for $55 per share and the company paid dividends of $0.85 per share. Assuming that you paid the full cost of the purchase, what is your rate of return if you sell RossCorp stock?

Accepted Answer

A) 18.08% 
B) 23.51% 
C) 22.32% 
D) 14.96% 
E) 19.28% 
A) 18.08% 
B) 23.51% 
C) 22.32% 
D) 14.96% 
E) 19.28%

Question 11

Exhibit 4.3
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Kathy Smith has a margin account with a balance of $60,000. Initial margin requirements are 80 percent, and Jackson Industries is currently selling at $40 per share.
-Refer to Exhibit 4.3. What is Kathy's profit if Jackson's price rises to $50?

Accepted Answer

A) $18,750 
B) $15,750 
C) $55,000 
D) $37,750 
E) $28,570 
A) $18,750 
B) $15,750 
C) $55,000 
D) $37,750 
E) $28,570

Question 12

Exhibit 4.5
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
You decide to sell 100 shares of Topgun Enterprises Inc. short when it is selling at its yearly high of $42.25. Your broker tells you that your margin requirement is 60 percent and that the commission on the sale is $20. While you are short, Topgun pays a $0.85 per share dividend. At the end of one year you buy your Topgun shares (cover your short sale) at $44 and are charged a commission of $20 and a 5 percent interest rate.
-Refer to Exhibit 4.5. What is your rate of return on the investment?

Accepted Answer

A) 10.48% 
B) 12.87% 
C) -13.98% 
D) -24.49% 
E) -15.05% 
A) 10.48% 
B) 12.87% 
C) -13.98% 
D) -24.49% 
E) -15.05%

Question 13

Which of the following statements about a market is true?

Accepted Answer

A) It is not necessary for the market to have a physical location. 
B) The market does not necessarily own the goods or services involved. 
C) A market can deal in any variety of goods and services. 
D) All of the above 
E) None of the above 
A) It is not necessary for the market to have a physical location. 
B) The market does not necessarily own the goods or services involved. 
C) A market can deal in any variety of goods and services. 
D) All of the above 
E) None of the above

Question 14

A pure auction market is also referred to as a quote-driven market.

Accepted Answer

A) True 
 B)False

Question 15

A market is a means through which buyers and sellers are brought together to aid in the transfer of goods and/or services.

Accepted Answer

A) True 
 B)False

Question 16

Suppose you purchase 200 shares of Best Hat Corporation at $52 a share by making a margin deposit of 50%. If the maintenance margin is 30%, at what price will you receive a margin call?

Accepted Answer

A) $37.14 
B) $37.95 
C) $38.23 
D) $38.76 
E) $39.42 
A) $37.14 
B) $37.95 
C) $38.23 
D) $38.76 
E) $39.42

Question 17

Exhibit 4.6
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
You decide to sell short 200 shares of XCorp stock at a price of $75. Your margin deposit is 65 percent. Commission on the sale is 1.25%. While you are short, the stock pays a $1.75 per share dividend. Interest on margin debt is 5.25% per year.
-Refer to Exhibit 4.6. Suppose at the end of one year XCorp is selling at $90 per share and you cover your short position at this price. What is your rate of return on the investment? (Assume a 1.25% commission on the purchase.)

Accepted Answer

A) -40.64% 
B) -25.53% 
C) 5.21% 
D) 72.7% 
E) -71.2% 
A) -40.64% 
B) -25.53% 
C) 5.21% 
D) 72.7% 
E) -71.2%

Question 18

In a call market, trading for individual stocks

Accepted Answer

A) Occurs anytime the market is open. 
B) Takes place at specific times. 
C) Takes place at the open and close of the trading day. 
D) All of the above. 
E) None of the above. 
A) Occurs anytime the market is open. 
B) Takes place at specific times. 
C) Takes place at the open and close of the trading day. 
D) All of the above. 
E) None of the above.

Question 19

The basic distinction between a primary and a secondary market is

Accepted Answer

A) proceeds from sales in the primary market go to the current owner of a security; proceeds in secondary market go to the original owner. 
B) primary markets involve direct dealings within regional exchanges. 
C) only new securities are sold in the primary market; only outstanding securities are bought and sold in the secondary market. 
D) primary markets deal exclusively in bonds; secondary markets deal primarily in common stock. 
E) None of the above. 
A) proceeds from sales in the primary market go to the current owner of a security; proceeds in secondary market go to the original owner. 
B) primary markets involve direct dealings within regional exchanges. 
C) only new securities are sold in the primary market; only outstanding securities are bought and sold in the secondary market. 
D) primary markets deal exclusively in bonds; secondary markets deal primarily in common stock. 
E) None of the above.

Question 20

Exhibit 4.3
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Kathy Smith has a margin account with a balance of $60,000. Initial margin requirements are 80 percent, and Jackson Industries is currently selling at $40 per share.
-Refer to Exhibit 4.3. How many shares of Jackson can Kathy buy?

Accepted Answer

A) 1875 
B) 1500 
C) 1750 
D) 1200 
E) None of the above 
A) 1875 
B) 1500 
C) 1750 
D) 1200 
E) None of the above

An order that specifies the highest buy or lowest sell price is a

The NYSE is a dealer market.

A pure auction market is one in which

Which of the following is not a major category of membership in stock exchanges?

A block trade is one which involves a minimum of

In recent years there has been a trend toward the consolidation of existing exchanges in developed markets, such as London, Frankfurt and Paris.

Which of the following statements about a market is true?

A pure auction market is also referred to as a quote-driven market.

A market is a means through which buyers and sellers are brought together to aid in the transfer of goods and/or services.

Suppose you purchase 200 shares of Best Hat Corporation at $52 a share by making a margin deposit of 50%. If the maintenance margin is 30%, at what price will you receive a margin call?

In a call market, trading for individual stocks

The basic distinction between a primary and a secondary market is

Exhibit 4.3 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Kathy Smith has a margin account with a balance of $60,000. Initial margin requirements are 80 percent, and Jackson Industries is currently selling at $40 per share. -Refer to Exhibit 4.3. How many shares of Jackson can Kathy buy?

The Investment Setting

The Asset Allocation Decision

Selecting Investments in a Global Market

Security-Market Indexes

Efficient Capital Markets

An Introduction to Portfolio Management

An Introduction to Asset Pricing Models

Multifactor Models of Risk and Return

Analysis of Financial Statements

Introduction to Security Valuation

Macroanalysis and Microvaluation of the Stock Market

Industry Analysis

Company Analysis and Stock Valuation

Technical Analysis

Equity Portfolio Management Strategies

Bond Fundamentals

The Analysis and Valuation of Bonds

Bond Portfolio Management Strategies

An Introduction to Derivative Markets and Securities

Forward and Futures Contracts

Option Contracts

Swap Contracts, Convertible Securities, and Other Embedded Derivatives

Professional Money Management, Alternative Assets, and Industry Ethics

Evaluation of Portfolio Performance

Filters

Exam 4: Organization and Functioning of Securities Markets

An order that specifies the highest buy or lowest sell price is a

The NYSE is a dealer market.

A pure auction market is one in which

Which of the following is not a major category of membership in stock exchanges?

A block trade is one which involves a minimum of

In recent years there has been a trend toward the consolidation of existing exchanges in developed markets, such as London, Frankfurt and Paris.

Which of the following statements about a market is true?

A pure auction market is also referred to as a quote-driven market.

A market is a means through which buyers and sellers are brought together to aid in the transfer of goods and/or services.

Suppose you purchase 200 shares of Best Hat Corporation at $52 a share by making a margin deposit of 50%. If the maintenance margin is 30%, at what price will you receive a margin call?

In a call market, trading for individual stocks

The basic distinction between a primary and a secondary market is

Exhibit 4.3 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Kathy Smith has a margin account with a balance of $60,000. Initial margin requirements are 80 percent, and Jackson Industries is currently selling at $40 per share. -Refer to Exhibit 4.3. How many shares of Jackson can Kathy buy?

The Investment Setting

The Asset Allocation Decision

Selecting Investments in a Global Market

Security-Market Indexes

Efficient Capital Markets

An Introduction to Portfolio Management

An Introduction to Asset Pricing Models

Multifactor Models of Risk and Return

Analysis of Financial Statements

Introduction to Security Valuation

Macroanalysis and Microvaluation of the Stock Market

Industry Analysis

Company Analysis and Stock Valuation

Technical Analysis

Equity Portfolio Management Strategies

Bond Fundamentals

The Analysis and Valuation of Bonds

Bond Portfolio Management Strategies

An Introduction to Derivative Markets and Securities

Forward and Futures Contracts

Option Contracts

Swap Contracts, Convertible Securities, and Other Embedded Derivatives

Professional Money Management, Alternative Assets, and Industry Ethics

Evaluation of Portfolio Performance

Filters