Question 1

A market where securities are are bought from or sold to a market maker is known as a

Accepted Answer

A)  board of exchange. 
B)  exchange floor. 
C)  dealer market. 
D)  broker market. 
A)  board of exchange. 
B)  exchange floor. 
C)  dealer market. 
D)  broker market. C

Question 2

Explain the role of investment bankers and brokerage firms in the issuance of new securities.

Accepted Answer

An investment banker assumes the role of the underwriter and bears the risk of reselling the securities purchased from an issuing corporation. The investment banker earns a profit by reselling at a price higher than the price paid to the issuer. Brokerage firms form a selling group with each firm accepting responsibility for selling a portion of the newly issued securities. The brokerage firms also earn a profit if they can resell the shares at a price higher than their purchase price.

Question 3

Companies offering their stock to the public for the first time usually seek the assistance of

Accepted Answer

A)  prospectors. 
B)  Australian Securities and Investments Commission. 
C)  investment bankers. 
D)  Reserve Bank. 
A)  prospectors. 
B)  Australian Securities and Investments Commission. 
C)  investment bankers. 
D)  Reserve Bank. C

Question 4

Which one of the following statements concerning the primary market is correct?

Accepted Answer

A)  A rights offering is a direct sale of stock to an institution that participates in the primary market. 
B)  The first public sale of a company's stock is called an IPO. 
C)  A transaction in the primary market is between two private shareholders. 
D)  The first public sale of a company's stock in the primary market is called a seasoned new issue. 
A)  A rights offering is a direct sale of stock to an institution that participates in the primary market. 
B)  The first public sale of a company's stock is called an IPO. 
C)  A transaction in the primary market is between two private shareholders. 
D)  The first public sale of a company's stock in the primary market is called a seasoned new issue.

Question 5

Shares and bonds are traded in

Accepted Answer

A)  federal trade commissions. 
B)  capital markets. 
C)  securities and exchange commissions. 
D)  money markets. 
A)  federal trade commissions. 
B)  capital markets. 
C)  securities and exchange commissions. 
D)  money markets.

Question 6

Margin trading will magnify losses on a percentage basis.

Accepted Answer

A) True 
 B)False

Question 7

The purchase of shares with cash in the hope of earning a capital gain is known as taking a

Accepted Answer

A)  long, margined position in the share. 
B)  long position in the share. 
C)  short, margined position in the share. 
D)  short position in the share. 
A)  long, margined position in the share. 
B)  long position in the share. 
C)  short, margined position in the share. 
D)  short position in the share.

Question 8

Insider trading is the use of nonpublic information about a security to gain a profit.

Accepted Answer

A) True 
 B)False

Question 9

Assume the foreign exchange rate for the euro was A$1.00 = .70 euro last month. This month, the exchange rate is A$1.00 = .72 euro. This information indicates that over the past month the

Accepted Answer

A)  euro appreciated relative to the dollar. 
B)  euro depreciated relative to the dollar. 
C)  Australian dollar appreciated relative to all foreign currencies. 
D)  Australian dollar remained unchanged relative to the euro. 
A)  euro appreciated relative to the dollar. 
B)  euro depreciated relative to the dollar. 
C)  Australian dollar appreciated relative to all foreign currencies. 
D)  Australian dollar remained unchanged relative to the euro.

Question 10

Jennifer expects the price of a share to decrease over the next month. Which one of the following strategies would allow Jennifer to earn a profit if the expected decrease actually occurs?

Accepted Answer

A)  Take a long position in the share today. 
B)  Buy the share on margin today. 
C)  Take a long position in the share one month from today. 
D)  Sell the stock share today. 
A)  Take a long position in the share today. 
B)  Buy the share on margin today. 
C)  Take a long position in the share one month from today. 
D)  Sell the stock share today.

Question 11

IPOs are relatively safe investments.

Accepted Answer

A) True 
 B)False

Question 12

The financial markets are becoming more globally integrated.

Accepted Answer

A) True 
 B)False

Question 13

Which one of the following is a major advantage of margin trading?

Accepted Answer

A)  Possibility of increased gains on a dollar basis. 
B)  Interest free loans. 
C)  Increase in potential diversification. 
D)  Increase in potential profits on a percentage basis. 
A)  Possibility of increased gains on a dollar basis. 
B)  Interest free loans. 
C)  Increase in potential diversification. 
D)  Increase in potential profits on a percentage basis.

Question 14

The ASX and NYSE are examples of dealer markets.

Accepted Answer

A) True 
 B)False

Question 15

Shares purchased in the secondary market are purchased

Accepted Answer

A)  from other investors. 
B)  from small, little- known brokerages. 
C)  indirectly through financial institutions. 
D)  directly from the issuing corporation. 
A)  from other investors. 
B)  from small, little- known brokerages. 
C)  indirectly through financial institutions. 
D)  directly from the issuing corporation.

Question 16

A rights offering is the

Accepted Answer

A)  sale of securities directly to a select group of investors. 
B)  offering of new securities to current shareholders on a pro- rata basis. 
C)  sale of newly issued shares of stock to the general public. 
D)  initial offering of securities to the public. 
A)  sale of securities directly to a select group of investors. 
B)  offering of new securities to current shareholders on a pro- rata basis. 
C)  sale of newly issued shares of stock to the general public. 
D)  initial offering of securities to the public.

Question 17

Which one of the following statements about foreign investments is true?

Accepted Answer

A)  In general, major foreign markets always tend to underperform the Australian market. 
B)  Foreign markets include equity securities only. 
C)  Investing in foreign markets will always produce higher returns because of exchange rate fluctuations. 
D)  Investing in foreign markets may involve specific risks not encountered with domestic securities. 
A)  In general, major foreign markets always tend to underperform the Australian market. 
B)  Foreign markets include equity securities only. 
C)  Investing in foreign markets will always produce higher returns because of exchange rate fluctuations. 
D)  Investing in foreign markets may involve specific risks not encountered with domestic securities.

Question 18

If an investor does not respond to a margin call, the broker will

Accepted Answer

A)  notify Reserve Bank so they can cover the call. 
B)  sell some of the investor's holdings to cover the margin call. 
C)  sell all of the investor's holdings and close their brokerage account. 
D)  sell enough of the investor's holdings that the margin account can be closed. 
A)  notify Reserve Bank so they can cover the call. 
B)  sell some of the investor's holdings to cover the margin call. 
C)  sell all of the investor's holdings and close their brokerage account. 
D)  sell enough of the investor's holdings that the margin account can be closed.

Question 19

Underwriters are responsible for promoting and facilitating the sale of securities.

Accepted Answer

A) True 
 B)False

Question 20

Diversification is the inclusion of a number of different investment vehicles in a portfolio with the goal of increasing returns or reducing risk.

Accepted Answer

A) True 
 B)False

A market where securities are are bought from or sold to a market maker is known as a

Explain the role of investment bankers and brokerage firms in the issuance of new securities.

Companies offering their stock to the public for the first time usually seek the assistance of

Which one of the following statements concerning the primary market is correct?

Shares and bonds are traded in

Margin trading will magnify losses on a percentage basis.

The purchase of shares with cash in the hope of earning a capital gain is known as taking a

Insider trading is the use of nonpublic information about a security to gain a profit.

Assume the foreign exchange rate for the euro was A$1.00 = .70 euro last month. This month, the exchange rate is A$1.00 = .72 euro. This information indicates that over the past month the

Jennifer expects the price of a share to decrease over the next month. Which one of the following strategies would allow Jennifer to earn a profit if the expected decrease actually occurs?

IPOs are relatively safe investments.

The financial markets are becoming more globally integrated.

Which one of the following is a major advantage of margin trading?

The ASX and NYSE are examples of dealer markets.

Shares purchased in the secondary market are purchased

A rights offering is the

Which one of the following statements about foreign investments is true?

If an investor does not respond to a margin call, the broker will

Underwriters are responsible for promoting and facilitating the sale of securities.

Diversification is the inclusion of a number of different investment vehicles in a portfolio with the goal of increasing returns or reducing risk.

The Investment Environment

Investment Information and Securities 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 2: Markets and Transactions

A market where securities are are bought from or sold to a market maker is known as a

Explain the role of investment bankers and brokerage firms in the issuance of new securities.

Companies offering their stock to the public for the first time usually seek the assistance of

Which one of the following statements concerning the primary market is correct?

Shares and bonds are traded in

Margin trading will magnify losses on a percentage basis.

The purchase of shares with cash in the hope of earning a capital gain is known as taking a

Insider trading is the use of nonpublic information about a security to gain a profit.

Assume the foreign exchange rate for the euro was A$1.00 = .70 euro last month. This month, the exchange rate is A$1.00 = .72 euro. This information indicates that over the past month the

Jennifer expects the price of a share to decrease over the next month. Which one of the following strategies would allow Jennifer to earn a profit if the expected decrease actually occurs?

IPOs are relatively safe investments.

The financial markets are becoming more globally integrated.

Which one of the following is a major advantage of margin trading?

The ASX and NYSE are examples of dealer markets.

Shares purchased in the secondary market are purchased

A rights offering is the

Which one of the following statements about foreign investments is true?

If an investor does not respond to a margin call, the broker will

Underwriters are responsible for promoting and facilitating the sale of securities.

Diversification is the inclusion of a number of different investment vehicles in a portfolio with the goal of increasing returns or reducing risk.

The Investment Environment

Investment Information and Securities 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