Question 1

The price an individual investor will pay to purchase a stock in the OTC market is the

Accepted Answer

A)  spread. 
B)  ask price. 
C)  bid price. 
D)  broker price. 
A)  spread. 
B)  ask price. 
C)  bid price. 
D)  broker price. B

Question 2

Direct listings are more common among

Accepted Answer

A)  small firms. 
B)  large firms. 
C)  publicly-traded firms. 
D)  established firms with long track records. 
A)  small firms. 
B)  large firms. 
C)  publicly-traded firms. 
D)  established firms with long track records. A

Question 3

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

Accepted Answer

A) True 
 B)False  True

Question 4

Harry bought 100 shares of stock at a price of $48 a share. He used his 60% margin account to make the purchase. Harry sold his stock after a year for $40 a share. Ignoring margin interest and trading costs, what is Harry's return on investor's equity for this investment?

Accepted Answer

A)  -17% 
B)  -24% 
C)  28% 
D)  -28% 
A)  -17% 
B)  -24% 
C)  28% 
D)  -28%

Question 5

Investment bankers who join together to share the financial risk associated with buying an entire issue of new securities and reselling them to the public is called a(n)

Accepted Answer

A)  selling group. 
B)  tombstone group. 
C)  underwriting syndicate. 
D)  primary market group. 
A)  selling group. 
B)  tombstone group. 
C)  underwriting syndicate. 
D)  primary market group.

Question 6

The majority of bonds trade in the OTC market.

Accepted Answer

A) True 
 B)False

Question 7

The great majority of transactions on the NYSE are executed

Accepted Answer

A)  automatically through electronic technology. 
B)  on the trading floor by brokers known as specialists. 
C)  by dealers known as market makers. 
D)  by auction in trading areas known as pits. 
A)  automatically through electronic technology. 
B)  on the trading floor by brokers known as specialists. 
C)  by dealers known as market makers. 
D)  by auction in trading areas known as pits.

Question 8

Relative to a traditional IPO process, a direct listing

Accepted Answer

A)  can save the issuer millions of dollars in investment banking fees. 
B)  is illegal in the United States. 
C)  is much more costly so rarely used. 
D)  has a much longer road show. 
A)  can save the issuer millions of dollars in investment banking fees. 
B)  is illegal in the United States. 
C)  is much more costly so rarely used. 
D)  has a much longer road show.

Question 9

In dealer markets, the market maker buys securities at the bid price and sells at the ask price.

Accepted Answer

A) True 
 B)False

Question 10

The NYSE Euronext includes exchanges in all of the following cities EXCEPT

Accepted Answer

A)  Amsterdam. 
B)  Brussels. 
C)  Paris. 
D)  Tokyo. 
A)  Amsterdam. 
B)  Brussels. 
C)  Paris. 
D)  Tokyo.

Question 11

Stocks purchased in the secondary market are purchased

Accepted Answer

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

Question 12

The financial markets are becoming more globally integrated.

Accepted Answer

A) True 
 B)False

Question 13

Losses on a stock purchase are limited to the price of the stock, but losses on a short sale are potentially unlimited.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

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

Question 15

Maintenance margin is the

Accepted Answer

A)  minimum amount of loan that can be used for margin trading. 
B)  initial amount of equity required for a margin purchase. 
C)  minimum amount of equity that an investor can have to avoid a margin call. 
D)  amount of additional funds that need to be added to an account to meet minimal equity requirements. 
A)  minimum amount of loan that can be used for margin trading. 
B)  initial amount of equity required for a margin purchase. 
C)  minimum amount of equity that an investor can have to avoid a margin call. 
D)  amount of additional funds that need to be added to an account to meet minimal equity requirements.

Question 16

The Sarbanes-Oxley Act of 2002 focuses on

Accepted Answer

A)  insider trading. 
B)  IPOs. 
C)  accounting and other public disclosures of information. 
D)  regulation of the OTC markets. 
A)  insider trading. 
B)  IPOs. 
C)  accounting and other public disclosures of information. 
D)  regulation of the OTC markets.

Question 17

The minimum initial margin requirement for both long and short positions is set by the Federal Reserve Board and currently is 50%.

Accepted Answer

A) True 
 B)False

Question 18

ECNs are

Accepted Answer

A)  publicly owned auction markets for listed stocks. 
B)  networks that transact trades between institutional investors. 
C)  facilities used by market makers for trading unlisted securities. 
D)  part of the third market which trades listed securities between individual investors. 
A)  publicly owned auction markets for listed stocks. 
B)  networks that transact trades between institutional investors. 
C)  facilities used by market makers for trading unlisted securities. 
D)  part of the third market which trades listed securities between individual investors.

Question 19

Which of the following are associated with bear markets?
I. investor pessimism
II. rising profits
III. economic slowdown
IV. rising security prices

Accepted Answer

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

Question 20

A rights offering is the

Accepted Answer

A)  initial offering of securities to the public. 
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)  sale of securities directly to a select group of investors. 
A)  initial offering of securities to the public. 
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)  sale of securities directly to a select group of investors.

The price an individual investor will pay to purchase a stock in the OTC market is the

Direct listings are more common among

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

Harry bought 100 shares of stock at a price of $48 a share. He used his 60% margin account to make the purchase. Harry sold his stock after a year for $40 a share. Ignoring margin interest and trading costs, what is Harry's return on investor's equity for this investment?

Investment bankers who join together to share the financial risk associated with buying an entire issue of new securities and reselling them to the public is called a(n)

The majority of bonds trade in the OTC market.

The great majority of transactions on the NYSE are executed

Relative to a traditional IPO process, a direct listing

In dealer markets, the market maker buys securities at the bid price and sells at the ask price.

The NYSE Euronext includes exchanges in all of the following cities EXCEPT

Stocks purchased in the secondary market are purchased

The financial markets are becoming more globally integrated.

Losses on a stock purchase are limited to the price of the stock, but losses on a short sale are potentially unlimited.

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

Maintenance margin is the

The Sarbanes-Oxley Act of 2002 focuses on

The minimum initial margin requirement for both long and short positions is set by the Federal Reserve Board and currently is 50%.

ECNs are

Which of the following are associated with bear markets? I. investor pessimism II. rising profits III. economic slowdown IV. rising security prices

A rights offering is the

The Investment Environment

Investment Information and Securities Transactions

Return and Risk

Modern Portfolio Concepts

Common Stocks

Analyzing Common Stocks

Stock Valuation

Market Efficiency and Behavioral Finance

Fixed-Income Securities

Bond Valuation

Mutual Funds and Exchange-Traded Funds

Managing Your Own Portfolio

Options: Puts and Calls

Futures Markets and Securities

Filters

Exam 2: Securities Markets and Transactions

The price an individual investor will pay to purchase a stock in the OTC market is the

Direct listings are more common among

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

Harry bought 100 shares of stock at a price of $48 a share. He used his 60% margin account to make the purchase. Harry sold his stock after a year for $40 a share. Ignoring margin interest and trading costs, what is Harry's return on investor's equity for this investment?

Investment bankers who join together to share the financial risk associated with buying an entire issue of new securities and reselling them to the public is called a(n)

The majority of bonds trade in the OTC market.

The great majority of transactions on the NYSE are executed

Relative to a traditional IPO process, a direct listing

In dealer markets, the market maker buys securities at the bid price and sells at the ask price.

The NYSE Euronext includes exchanges in all of the following cities EXCEPT

Stocks purchased in the secondary market are purchased

The financial markets are becoming more globally integrated.

Losses on a stock purchase are limited to the price of the stock, but losses on a short sale are potentially unlimited.

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

Maintenance margin is the

The Sarbanes-Oxley Act of 2002 focuses on

The minimum initial margin requirement for both long and short positions is set by the Federal Reserve Board and currently is 50%.

ECNs are

Which of the following are associated with bear markets? I. investor pessimism II. rising profits III. economic slowdown IV. rising security prices

A rights offering is the

The Investment Environment

Investment Information and Securities Transactions

Return and Risk

Modern Portfolio Concepts

Common Stocks

Analyzing Common Stocks

Stock Valuation

Market Efficiency and Behavioral Finance

Fixed-Income Securities

Bond Valuation

Mutual Funds and Exchange-Traded Funds

Managing Your Own Portfolio

Options: Puts and Calls

Futures Markets and Securities

Filters