Exam 4: Organization and Functioning of Securities Markets

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.)

A continuous market that has price continuity requires depth of buyers and sellers.

Exhibit 4.2 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Heidi Talbott has a margin account with a balance of $50,000. The initial margin deposit is 50 percent, and RC Industries is currently selling at $50 per share. -Refer to Exhibit 4.2. If the maintenance margin is 25 percent, to what price can RC Industries stock price fall before Heidi receives a margin call?

The US secondary market with the largest number of issues traded is the:

The primary market is where issues are traded between current and potential owners.

Which of the following is not a function of the specialist?

Suppose you buy a round lot of Altman Industries stock on 50% margin when it is selling at $35 a share. The broker charges a 10 percent annual interest rate and commissions are 5 percent of the total stock value on both the purchase and the sale. If at year end you receive a $1.00 per share dividend and sell the stock for $42.63, what is your rate of return on the investment?

Short selling is practiced when an investor borrows part of the cost of the investment,e.g., they are "short" on cash.

A corporation wishing to raise funds will normally want the investment banker to use a "best efforts" arrangement rather than a negotiated basis.

A block house is a brokerage firm that buys and sells blocks of stock for institutions.

All of the following are characteristics of a dealer market except:

A market where prices adjust rapidly to new information is considered to be internally efficient.

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

Which of the following is not a characteristic of shelf registrations? Shelf registrations:

Initial public offerings (IPOs) involve selling of bonds to the public for the first time.

The NYSE is a dealer market.

Exhibit 4.1 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Jackie has a margin account with a balance of $150,000. The initial margin deposit is 60 percent and Turtle Industries is currently selling at $50 per share. -Refer to Exhibit 4.1. If the maintenance margin is 25 percent, to what price can Turtle Industries fall before Jackie receives a margin call?

A block trade is one which involves a minimum of

Exhibit 4.2 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Heidi Talbott has a margin account with a balance of $50,000. The initial margin deposit is 50 percent, and RC Industries is currently selling at $50 per share. -Refer to Exhibit 4.2. What is Heidi's profit if RC's price rises to $80?

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