Question 1

The divisor in the Dow Jones Industrial Average equals 30.

Accepted Answer

A) True 
 B)False

Question 2

A stop order is similar to a limit order, except that once the set price is reached, the stop order

Accepted Answer

A) is executed after all limit orders at the same price. 
B) becomes a limit order. 
C) goes to the end of the execution cue. 
D) immediately becomes a market order. 
A) is executed after all limit orders at the same price. 
B) becomes a limit order. 
C) goes to the end of the execution cue. 
D) immediately becomes a market order.

Question 3

The index which gives equal weight to every company included, and is therefore not dominated by any single company, is the:

Accepted Answer

A) Dow Jones Composite Average. 
B) Standard & Poor's 400 Index. 
C) The Value Line Average. 
D) American Stock Exchange Index. 
E) Dow Jones World Index. 
A) Dow Jones Composite Average. 
B) Standard & Poor's 400 Index. 
C) The Value Line Average. 
D) American Stock Exchange Index. 
E) Dow Jones World Index.

Question 4

The difference between a cash account and a margin account is:

Accepted Answer

A) a margin account allows the investor up to five days to pay for the entire purchase. 
B) a cash account gives the investor a 2% discount if they pay within 10 days, or the investor has to pay the entire amount within 30 days (2/10 net 30). 
C) a margin account allows the investor to borrow a percentage of the purchase price from the brokerage firm. 
D) a margin account is less risky to the investor. 
E) a cash account requires the stock be kept registered in street name, and a margin account allows the securities to be delivered to the customer. 
A) a margin account allows the investor up to five days to pay for the entire purchase. 
B) a cash account gives the investor a 2% discount if they pay within 10 days, or the investor has to pay the entire amount within 30 days (2/10 net 30). 
C) a margin account allows the investor to borrow a percentage of the purchase price from the brokerage firm. 
D) a margin account is less risky to the investor. 
E) a cash account requires the stock be kept registered in street name, and a margin account allows the securities to be delivered to the customer.

Question 5

The base period for the Standard & Poor's Stock Indexes is 1957-58.

Accepted Answer

A) True 
 B)False

Question 6

Large, established companies make up the Dow Jones Industrial Average.

Accepted Answer

A) True 
 B)False

Question 7

The Value Line Average reflects changes in stock prices, rather than value of shares outstanding.

Accepted Answer

A) True 
 B)False

Question 8

All of the S&P measures are true indexes, in that they are linked to a base value.

Accepted Answer

A) True 
 B)False

Question 9

The margin requirement on stock is currently 30%.

Accepted Answer

A) True 
 B)False

Question 10

A type of index that weighs each company by its total market value as a percentage of the total market value for all firms is:

Accepted Answer

A) an equal-weighted index. 
B) a value-weighted index. 
C) an equally-weighted index. 
D) a price-weighted index. 
A) an equal-weighted index. 
B) a value-weighted index. 
C) an equally-weighted index. 
D) a price-weighted index.

Question 11

Trading through an online broker is generally cheaper than trading through a discount broker.

Accepted Answer

A) True 
 B)False

Question 12

A __________ order sets the price at which an investor is willing to buy or sell and assures the investor that he/she will pay no more or receive no less than the agreed-upon price.

Accepted Answer

A) limit 
B) stop 
C) good 'til canceled 
D) market 
A) limit 
B) stop 
C) good 'til canceled 
D) market

Question 13

When an investor establishes a position in a security,

Accepted Answer

A) they are said to be long if they purchase the security for their account. 
B) they are said to be long if they sell the security for their account. 
C) they are said to be short if they sell the security for their account. 
D) they are said to be short if they purchase the security for their account. 
E) Both a and c 
A) they are said to be long if they purchase the security for their account. 
B) they are said to be long if they sell the security for their account. 
C) they are said to be short if they sell the security for their account. 
D) they are said to be short if they purchase the security for their account. 
E) Both a and c

Question 14

Novice investors should consider using full-service brokers.

Accepted Answer

TR UE
Explanation: The importance of exp

Question 15

Performance in the bond market is usually gauged by:

Accepted Answer

A) indexes and averages. 
B) interest rate movements. 
C) yield curve changes. 
D) B and C 
A) indexes and averages. 
B) interest rate movements. 
C) yield curve changes. 
D) B and C

Question 16

Which of the following is NOT a characteristic of the Dow Jones Industrial Average?

Accepted Answer

A) It includes only very high quality common stock 
B) It generally follows the trend of the market 
C) The companies included comprise over 25% of the companies listed on the New York Stock Exchange 
D) It is a value-weighted average 
E) Dividends require adjustments to the divisor 
A) It includes only very high quality common stock 
B) It generally follows the trend of the market 
C) The companies included comprise over 25% of the companies listed on the New York Stock Exchange 
D) It is a value-weighted average 
E) Dividends require adjustments to the divisor

Question 17

The Dow Jones Industrial Average is not the most accurate market measure, because of its blue-chip stock composition, and its bias toward high-priced stocks.

Accepted Answer

A) True 
 B)False

Question 18

A ____________ requires full payment for the purchase of securities, while a _____________ allows the investor to borrow a portion of the purchase price from the brokerage firm.

Accepted Answer

A) money market account; cash account 
B) cash account; charge account 
C) cash account; margin account 
D) type 5 account; a type 2 account 
A) money market account; cash account 
B) cash account; charge account 
C) cash account; margin account 
D) type 5 account; a type 2 account

Question 19

If you short a stock and the price goes up, your net equity value will go up.

Accepted Answer

A) True 
 B)False

Question 20

You buy 100 shares of stock at $50 per share on margin of 40 percent. If the price of the stock declines to $35, what is your percentage loss?

Accepted Answer

75% loss
Explanation

Exam 3: Participating in the Market

The divisor in the Dow Jones Industrial Average equals 30.

A stop order is similar to a limit order, except that once the set price is reached, the stop order

The index which gives equal weight to every company included, and is therefore not dominated by any single company, is the:

The difference between a cash account and a margin account is:

The base period for the Standard & Poor's Stock Indexes is 1957-58.

Large, established companies make up the Dow Jones Industrial Average.

The Value Line Average reflects changes in stock prices, rather than value of shares outstanding.

All of the S&P measures are true indexes, in that they are linked to a base value.

The margin requirement on stock is currently 30%.

A type of index that weighs each company by its total market value as a percentage of the total market value for all firms is:

Trading through an online broker is generally cheaper than trading through a discount broker.

A __________ order sets the price at which an investor is willing to buy or sell and assures the investor that he/she will pay no more or receive no less than the agreed-upon price.

When an investor establishes a position in a security,

Novice investors should consider using full-service brokers.

Performance in the bond market is usually gauged by:

Which of the following is NOT a characteristic of the Dow Jones Industrial Average?

The Dow Jones Industrial Average is not the most accurate market measure, because of its blue-chip stock composition, and its bias toward high-priced stocks.

A ____________ requires full payment for the purchase of securities, while a _____________ allows the investor to borrow a portion of the purchase price from the brokerage firm.

If you short a stock and the price goes up, your net equity value will go up.

You buy 100 shares of stock at $50 per share on margin of 40 percent. If the price of the stock declines to $35, what is your percentage loss?

The Investment Setting

Security Markets

Investment Companies: Mutual Funds, Exchange-Traded Funds, Closed-End Funds, and Unit Investment Trusts

Economic Activity

Industry Analysis

Valuation of the Individual Firm

Financial Statement Analysis

Efficient Markets and Anomalies

Behavioral Finance and Technical Analysis

Bond and Fixed-Income Fundamentals

Principles of Bond Valuation and Investment

Convertible Securities and Warrants

Put and Call Options

Commodities and Financial Futures

Stock Index Futures and Options

A Basic Look at Portfolio Management and Capital Market Theory

Duration and Bond Portfolio Management

International Securities Markets

Investments in Real Assets

Alternative Investments: Private Equity and Hedge Funds

Measuring Risks and Returns of Portfolio Managers

A Comprehensive Analysis for Real Estate Investment Decisions

The Makeup of Institutional Investors

Filters

A requires full payment for the purchase of securities, while a _ allows the investor to borrow a portion of the purchase price from the brokerage firm.