Question 1

Assume that the S&P 500 composite stock index is 995.50. This means that

Accepted Answer

A)  the share prices of the shares in the index have risen 995.50 times since 1941. 
B)  the average share in the index is selling for $99.55. 
C)  an investor would have to pay $995.50 to purchase one share of each of the shares represented in the index. 
D)  the market values of the shares in the index increased by a factor of 99.55 since the 1941-1943 base period. 
A)  the share prices of the shares in the index have risen 995.50 times since 1941. 
B)  the average share in the index is selling for $99.55. 
C)  an investor would have to pay $995.50 to purchase one share of each of the shares represented in the index. 
D)  the market values of the shares in the index increased by a factor of 99.55 since the 1941-1943 base period.

Question 2

Which one of the following is considered a financial rather than a general newspaper?

Accepted Answer

A)  The Age. 
B)  The Herald Sun. 
C)  The Australian Financial Review. 
D)  The Australian. 
A)  The Age. 
B)  The Herald Sun. 
C)  The Australian Financial Review. 
D)  The Australian.

Question 3

If the market moves rapidly, an online trader may experience difficulty placing a trade.

Accepted Answer

A) True 
 B)False

Question 4

Investing online is usually less expensive than traditional methods.

Accepted Answer

A) True 
 B)False

Question 5

Brokerage firms are not allowed to make specific buy or sell recommendations to their clients.

Accepted Answer

A) True 
 B)False

Question 6

A stop- loss order is activated once the stock reaches the specified price.

Accepted Answer

A) True 
 B)False

Question 7

Whose responsibility is it to determine if a client can pay for the securities they purchase?

Accepted Answer

A)  The floor broker who places the trade on the floor of the exchange. 
B)  The dealer who acts as the seller in the trade. 
C)  The broker in charge of churning. 
D)  The stockbroker who opens the account for the client. 
A)  The floor broker who places the trade on the floor of the exchange. 
B)  The dealer who acts as the seller in the trade. 
C)  The broker in charge of churning. 
D)  The stockbroker who opens the account for the client.

Question 8

Which one of the following statements about limit orders is correct?

Accepted Answer

A)  The trade may be executed only at the limit price or better at any time prior to expiration or cancellation of the order. 
B)  The execution of the trade will occur prior to the close of trading on the day the trade is placed. 
C)  The execution will occur at the regular open on the day following the day the trade is placed. 
D)  The trade will be executed at the market price at the end of the third business day, if not executed previously at the limit price. 
A)  The trade may be executed only at the limit price or better at any time prior to expiration or cancellation of the order. 
B)  The execution of the trade will occur prior to the close of trading on the day the trade is placed. 
C)  The execution will occur at the regular open on the day following the day the trade is placed. 
D)  The trade will be executed at the market price at the end of the third business day, if not executed previously at the limit price.

Question 9

Charting is the technique of

Accepted Answer

A)  monitoring a stock based on the underlying economic conditions. 
B)  plotting the performance of a security over time. 
C)  sorting through databases of securities to select one based on certain parameters. 
D)  determining the amount of money that must be saved based on a given financial goal. 
A)  monitoring a stock based on the underlying economic conditions. 
B)  plotting the performance of a security over time. 
C)  sorting through databases of securities to select one based on certain parameters. 
D)  determining the amount of money that must be saved based on a given financial goal.

Question 10

An individual can sort shares by dividend rates, growth rates, and price/earnings ratios using screening tools on the Internet.

Accepted Answer

A) True 
 B)False

Question 11

The basic function of stockbrokers is to execute client orders at the best possible price.

Accepted Answer

A) True 
 B)False

Question 12

Which one of the following statements about stockbrokers is correct?

Accepted Answer

A)  Stockbrokers act as dealers in the securities they trade. 
B)  Stockbrokers must be licensed by the Australian Securities and Investments Commission. 
C)  Stockbrokers execute trades on the floor of the Australian Securities Exchange on behalf of account executives. 
D)  Stockbrokers are regulated by financial consultants. 
A)  Stockbrokers act as dealers in the securities they trade. 
B)  Stockbrokers must be licensed by the Australian Securities and Investments Commission. 
C)  Stockbrokers execute trades on the floor of the Australian Securities Exchange on behalf of account executives. 
D)  Stockbrokers are regulated by financial consultants.

Question 13

On October 12, Kevin placed a day order to purchase 100 shares of ABC stock at $21 a share. During the day, the shares sold at prices ranging from $21.01 to $22.49. Over the following month the shares sold in a range of $21.60 to $23.05. On December 2, the market declined radically and the price of ABC shares dropped to $19.94. Which one of the following statements is correct concerning Kevin's order?

Accepted Answer

A)  The order was executed at $19.94. 
B)  The order was executed at $21.01 per share. 
C)  The order was executed at $22.49. 
D)  The order was never executed. 
A)  The order was executed at $19.94. 
B)  The order was executed at $21.01 per share. 
C)  The order was executed at $22.49. 
D)  The order was never executed.

Question 14

Bond yields are

Accepted Answer

A)  quoted as annual rates of return and assume the bond is purchased today at the stated price and sold one year from today. 
B)  stated as a percentage of the maturity value and assume the bond is held to maturity. 
C)  stated as an annual rate of return and assume the bond is purchased today and held until maturity. 
D)  quoted as the average monthly rate of return and assume the bond is purchased today at the quoted price and held for twelve months. 
A)  quoted as annual rates of return and assume the bond is purchased today at the stated price and sold one year from today. 
B)  stated as a percentage of the maturity value and assume the bond is held to maturity. 
C)  stated as an annual rate of return and assume the bond is purchased today and held until maturity. 
D)  quoted as the average monthly rate of return and assume the bond is purchased today at the quoted price and held for twelve months.

Question 15

Which of the following is published yearly by publicly- held corporations and provided free to their shareholders and other investors?

Accepted Answer

A)  Back- office reports. 
B)  Brokerage reports. 
C)  Annual reports. 
D)  Red herrings. 
A)  Back- office reports. 
B)  Brokerage reports. 
C)  Annual reports. 
D)  Red herrings.

Question 16

Investors who are aware of current economic, political, and market events tend to make better investment decisions.

Accepted Answer

A) True 
 B)False

Question 17

An individual investor who wishes to borrow money to buy stocks must open a

Accepted Answer

A)  margin account. 
B)  signature account. 
C)  joint account. 
D)  custodial account. 
A)  margin account. 
B)  signature account. 
C)  joint account. 
D)  custodial account.

Question 18

Which one of the following is the LEAST important when selecting a stockbroker?

Accepted Answer

A)  Getting referrals from personal acquaintances with similar investment objectives. 
B)  Knowing the stockbroker personally. 
C)  Considering the services offered and the related costs. 
D)  Selecting a stockbroker who best understands your investment goals. 
A)  Getting referrals from personal acquaintances with similar investment objectives. 
B)  Knowing the stockbroker personally. 
C)  Considering the services offered and the related costs. 
D)  Selecting a stockbroker who best understands your investment goals.

Question 19

Many day traders are also margin traders.

Accepted Answer

A) True 
 B)False

Question 20

Ryan bought a stock three years ago for $6 a share. Today, June 22, the stock is selling for $72 a share. Ryan is afraid that the price will fall and does not want to lose his profits so he places a stop- loss order to sell at $70. The stock sells between $71 and $75 throughout the remainder of the day on June 22. On the morning of June 23, the stock opens at $9 a share based on rumors of a possible bankruptcy due to inappropriate accounting procedures. Which one of the following statements is true concerning this situation?

Accepted Answer

A)  Ryan still owns his shares of stock since his order was never executed at the $70 price. 
B)  Ryan's stock was sold for $9 a share causing him to lose most of his profits. 
C)  Ryan received a call from the specialist asking him what he wanted to do about his order. 
D)  Ryan was able to sell his stock for $70 a share thereby protecting his profits. 
A)  Ryan still owns his shares of stock since his order was never executed at the $70 price. 
B)  Ryan's stock was sold for $9 a share causing him to lose most of his profits. 
C)  Ryan received a call from the specialist asking him what he wanted to do about his order. 
D)  Ryan was able to sell his stock for $70 a share thereby protecting his profits.

Assume that the S&P 500 composite stock index is 995.50. This means that

Which one of the following is considered a financial rather than a general newspaper?

If the market moves rapidly, an online trader may experience difficulty placing a trade.

Investing online is usually less expensive than traditional methods.

Brokerage firms are not allowed to make specific buy or sell recommendations to their clients.

A stop- loss order is activated once the stock reaches the specified price.

Whose responsibility is it to determine if a client can pay for the securities they purchase?

Which one of the following statements about limit orders is correct?

Charting is the technique of

An individual can sort shares by dividend rates, growth rates, and price/earnings ratios using screening tools on the Internet.

The basic function of stockbrokers is to execute client orders at the best possible price.

Which one of the following statements about stockbrokers is correct?

Bond yields are

Which of the following is published yearly by publicly- held corporations and provided free to their shareholders and other investors?

Investors who are aware of current economic, political, and market events tend to make better investment decisions.

An individual investor who wishes to borrow money to buy stocks must open a

Which one of the following is the LEAST important when selecting a stockbroker?

Many day traders are also margin traders.

The Investment Environment

Markets and Transactions

Return and Risk

Modern Portfolio Concepts

Shares

Analysing Shares

Share Valuation

Technical Analysis, Market Efficiency and Behavioural Finance

Fixed-Income Securities

Bond Valuation

Managed Funds: Professionally Managed Portfolios

Managing Your Own Portfolio

Options: Puts and Calls

Commodities and Financial Futures

Filters

Exam 3: Investment Information and Securities Transactions

Assume that the S&P 500 composite stock index is 995.50. This means that

Which one of the following is considered a financial rather than a general newspaper?

If the market moves rapidly, an online trader may experience difficulty placing a trade.

Investing online is usually less expensive than traditional methods.

Brokerage firms are not allowed to make specific buy or sell recommendations to their clients.

A stop- loss order is activated once the stock reaches the specified price.

Whose responsibility is it to determine if a client can pay for the securities they purchase?

Which one of the following statements about limit orders is correct?

Charting is the technique of

An individual can sort shares by dividend rates, growth rates, and price/earnings ratios using screening tools on the Internet.

The basic function of stockbrokers is to execute client orders at the best possible price.

Which one of the following statements about stockbrokers is correct?

Bond yields are

Which of the following is published yearly by publicly- held corporations and provided free to their shareholders and other investors?

Investors who are aware of current economic, political, and market events tend to make better investment decisions.

An individual investor who wishes to borrow money to buy stocks must open a

Which one of the following is the LEAST important when selecting a stockbroker?

Many day traders are also margin traders.

The Investment Environment

Markets and Transactions

Return and Risk

Modern Portfolio Concepts

Shares

Analysing Shares

Share Valuation

Technical Analysis, Market Efficiency and Behavioural Finance

Fixed-Income Securities

Bond Valuation

Managed Funds: Professionally Managed Portfolios

Managing Your Own Portfolio

Options: Puts and Calls

Commodities and Financial Futures

Filters