Question 1

The Division of ____ of the SEC assesses possible violations of SEC regulations and can take action against individuals or firms.

Accepted Answer

A) Corporation Finance 
B) Enforcement 
C) Administration 
D) Trading and Markets 
A) Corporation Finance 
B) Enforcement 
C) Administration 
D) Trading and Markets

Question 2

____ offer advice to customers on stocks to buy or sell.

Accepted Answer

A) Full-service brokers 
B) Discount brokers 
C) Floor brokers 
D) Specialists 
E) Market makers 
A) Full-service brokers 
B) Discount brokers 
C) Floor brokers 
D) Specialists 
E) Market makers

Question 3

When investors sell short, they are essentially lending the stock to another investor and will ultimately receive that stock back from the investor to whom they lent it.

Accepted Answer

A) True 
 B)False

Question 4

____ is defined as a computerized response by institutional investors to either buy or sell a large basket of stocks in response to movements in a particular stock index.

Accepted Answer

A) D irect access brokering 
B) E lectronic communication networking 
C) P rogram trading 
D) High-volume  stock trading 
A) D irect access brokering 
B) E lectronic communication networking 
C) P rogram trading 
D) High-volume  stock trading

Question 5

The SEC's ____ reviews the registration statement filed when a firm goes public, corporate filings for annual and quarterly reports, and proxy statements that involve voting for board members or other corporate issues.

Accepted Answer

A) Division of Corporation Finance 
B) Division of Trading and Markets 
C) Division of Enforcement 
D) None of these are correct. 
A) Division of Corporation Finance 
B) Division of Trading and Markets 
C) Division of Enforcement 
D) None of these are correct.

Question 6

The strategy of combining the use of futures or options contracts on a stock index with program trading is known as

Accepted Answer

A) trading with algorithms. 
B) downside insurance. 
C) portfolio insurance. 
D) spread the risk trading. 
A) trading with algorithms. 
B) downside insurance. 
C) portfolio insurance. 
D) spread the risk trading.

Question 7

When a brokerage firm demands more collateral from investors who have borrowed from the brokerage firm to buy stocks, it is making a

Accepted Answer

A) margin call. 
B) short sale. 
C) proxy fight. 
D) hedge. 
A) margin call. 
B) short sale. 
C) proxy fight. 
D) hedge.

Question 8

Which of the following statements about program trading is incorrect?

Accepted Answer

A) It represents a computerized response by institutional investors to either buy or sell a large basket of stocks in response to movements in a particular stock index. 
B) It may involve the purchase of stocks that have become "underpriced." 
C) It may involve the sale of stocks that have become "overpriced." 
D) It is designed to capitalize on Federal Reserve monetary policy announcements. 
E) None of these are correct. 
A) It represents a computerized response by institutional investors to either buy or sell a large basket of stocks in response to movements in a particular stock index. 
B) It may involve the purchase of stocks that have become "underpriced." 
C) It may involve the sale of stocks that have become "overpriced." 
D) It is designed to capitalize on Federal Reserve monetary policy announcements. 
E) None of these are correct.

Question 9

The initial margin is the minimum amount of margin that investors must maintain as a percentage of the stock's value without receiving a margin call.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following statements is incorrect with respect to Regulation Fair Disclosure (FD)?

Accepted Answer

A) It requires firms to disclose relevant information broadly to investors at the same time. 
B) It requires firms to file all relevant information with the SEC before disclosing it to analysts. 
C) Some critics suggest that the regulation has caused firms to disclose less information than before to ensure that they do not violate the regulation. 
D) It prohibits firms from communicating with analysts after a news announcement is made to all investors. 
E) It requires firms to file all relevant information with the SEC before disclosing it to analysts AND i t prohibits firms from communicating with analysts after a news announcement is made to all investors. 
A) It requires firms to disclose relevant information broadly to investors at the same time. 
B) It requires firms to file all relevant information with the SEC before disclosing it to analysts. 
C) Some critics suggest that the regulation has caused firms to disclose less information than before to ensure that they do not violate the regulation. 
D) It prohibits firms from communicating with analysts after a news announcement is made to all investors. 
E) It requires firms to file all relevant information with the SEC before disclosing it to analysts AND i t prohibits firms from communicating with analysts after a news announcement is made to all investors.

Question 11

Under the present margin requirements, at least ____ percent of an investor's invested funds must be paid in cash.

Accepted Answer

A) 20 
B) 30 
C) 40 
D) 50 
E) None of these are correct. 
A) 20 
B) 30 
C) 40 
D) 50 
E) None of these are correct.

Question 12

Karen purchased a stock priced at $33 on margin, paying $23 and borrowing the remainder from a brokerage firm at 15 percent annual interest. The stock pays an annual dividend of $2. If Karen sells the stock after one year at a price of $50, what is her return on the stock?

Accepted Answer

A) 27.60 percent 
B) 82.61 percent 
C) 76.09 percent 
D) 58.70 percent 
E) None of these are correct. 
A) 27.60 percent 
B) 82.61 percent 
C) 76.09 percent 
D) 58.70 percent 
E) None of these are correct.

Question 13

It is not illegal for investors to take positions in a stock based on inside information that they received from an insider at the company, although it would be illegal for the insider to take a position based on that information.

Accepted Answer

A) True 
 B)False

Question 14

Mark uses his own funds to purchase a stock priced at $70. He thinks he can sell the stock for $100 after one year. What is Mark's estimated return on the stock?

Accepted Answer

A) 30.00 percent 
B) - 42.86 percent 
C) - 30.00 percent 
D) 42.86 percent 
E) None of these are correct. 
A) 30.00 percent 
B) - 42.86 percent 
C) - 30.00 percent 
D) 42.86 percent 
E) None of these are correct.

Question 15

The SEC's Division of Trading and Markets assesses possible violations of the SEC's regulations and can take action against individuals or firms.

Accepted Answer

A) True 
 B)False

Question 16

A market order is an order to buy or sell a stock at the best possible price.

Accepted Answer

A) True 
 B)False

Question 17

A ____ is a trading platform on a computer website that allows investors to trade stocks without the use of a broker.

Accepted Answer

A) direct access broker 
B) program trader 
C) market maker 
D) communication network 
A) direct access broker 
B) program trader 
C) market maker 
D) communication network

Question 18

A trading halt prevents a stock from experiencing a loss in response to news.

Accepted Answer

A) True 
 B)False

Question 19

International trading of stocks has been facilitated by reductions in

Accepted Answer

A) transaction costs. 
B) information costs. 
C) exchange rate risk. 
D) transaction costs AND information costs. 
A) transaction costs. 
B) information costs. 
C) exchange rate risk. 
D) transaction costs AND information costs.

Question 20

When investors place a limit order, they can place it for the day only.

Accepted Answer

A) True 
 B)False

Exam 12: Market Microstructure and Strategies

The Division of ____ of the SEC assesses possible violations of SEC regulations and can take action against individuals or firms.

____ offer advice to customers on stocks to buy or sell.

When investors sell short, they are essentially lending the stock to another investor and will ultimately receive that stock back from the investor to whom they lent it.

____ is defined as a computerized response by institutional investors to either buy or sell a large basket of stocks in response to movements in a particular stock index.

The SEC's ____ reviews the registration statement filed when a firm goes public, corporate filings for annual and quarterly reports, and proxy statements that involve voting for board members or other corporate issues.

The strategy of combining the use of futures or options contracts on a stock index with program trading is known as

When a brokerage firm demands more collateral from investors who have borrowed from the brokerage firm to buy stocks, it is making a

Which of the following statements about program trading is incorrect?

The initial margin is the minimum amount of margin that investors must maintain as a percentage of the stock's value without receiving a margin call.

Which of the following statements is incorrect with respect to Regulation Fair Disclosure (FD)?

Under the present margin requirements, at least ____ percent of an investor's invested funds must be paid in cash.

Karen purchased a stock priced at $33 on margin, paying $23 and borrowing the remainder from a brokerage firm at 15 percent annual interest. The stock pays an annual dividend of $2. If Karen sells the stock after one year at a price of $50, what is her return on the stock?

It is not illegal for investors to take positions in a stock based on inside information that they received from an insider at the company, although it would be illegal for the insider to take a position based on that information.

Mark uses his own funds to purchase a stock priced at $70. He thinks he can sell the stock for $100 after one year. What is Mark's estimated return on the stock?

The SEC's Division of Trading and Markets assesses possible violations of the SEC's regulations and can take action against individuals or firms.

A market order is an order to buy or sell a stock at the best possible price.

A ____ is a trading platform on a computer website that allows investors to trade stocks without the use of a broker.

A trading halt prevents a stock from experiencing a loss in response to news.

International trading of stocks has been facilitated by reductions in

When investors place a limit order, they can place it for the day only.

Role of Financial Markets and Institutions

Determination of Interest Rates

Structure of Interest Rates

Functions of the Fed

Monetary Policy

Money Markets

Bond Markets

Bond Valuation and Risk

Mortgage Markets

Stock Offerings and Investor Monitoring

Stock Valuation and Risk

Financial Futures Markets

Options Markets

Swap Markets

Foreign Exchange Derivative Markets

Commercial Bank Operations

Bank Regulation

Bank Management

Bank Performance

Thrift Operations

Finance Company Operations

Mutual Fund Operations

Securities Operations

Insurance and Pension Fund Operations

Pension Fund Operations

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