Exam 3: Participating in the Market

Margin accounts are mostly used by:

Companies having the greatest impact on the computation of the Dow Jones Averages and the Standard & Poor's Indexes have the ____________ and the ____________, respectively.

The NYSE sets margin requirements.

Long-term capital gains are taxed at a higher tax rate than dividends.

A stop order is similar to a limit order, except that the order turns into a market order once the stop price is hit.

An investor who is in a 33% tax bracket for normal (ordinary) income buys a stock for $5,000 and sells it for $9,000. How much will her tax obligation be if she holds the stock for: (a) 6 months? (b) 14 months?

The indexes of The New York Stock Exchange, American Exchange, and NASDAQ are all price-weighted.

The Value Line Average is an equal-weighted index.

Assume the following five companies are used in computing an index (there have been no stock splits during this time). Base Period Current Period Shares January 1, 1977 December 31, 2004 A 2,000 \ 2.00 \ 14.00 B 6,000 6.00 18.00 C 5,000 9.00 23.00 D 8,000 10.00 5.00 E 1,000 13.00 40.00 (a) If the index is price-weighted, what will be the value of the index on Dec. 31, 2004? (b) Using the same data from the above table, determine the index value if the index is calculated on a value-weighted basis.

Margin percentages are set by the Board of Governors of the Federal Reserve System.

The amount of taxes paid, divided by taxable income, is called:

If an investor is in a 34% tax bracket and has held a stock for two years, the applicable tax rate that will apply to dividends is:

Good till canceled (GTC) orders expire automatically after a set period of time.

An investor is in a 35% tax bracket for normal (ordinary) income. During the course of the year, he received $5,000 in dividends and had $15,000 capital gains on stock he had held for 19 months. How much will his total tax be on this investment-related income?

The Standard & Poor's Midcap Index is composed of 500 middle-sized firms.

Which of the following are features of margin accounts?

You are said to be long in a security if you purchase the security.

You sell 100 shares of PGD short at a price of $50 per share. How much is your initial margin, given margin requirements of 40%? If the stock declines to $30 per share, what is your percentage gain or loss on the initial equity?

Securities must be kept in the street name of the brokerage if a margin account is used.

The margin requirement is used in selling stock.