Exam 2: Securities Markets and Transactions

Assume the foreign exchange rate for the euro was US $1.00 = .70 euro last month.This month, the exchange rate is US $1.00 = .72 euro.All things equal, the dollar value of European stocks

Which of the following statements about short selling is (are)true? I.Short selling requires an initial margin deposit. II.Short sellers begin a transaction with a sale and end it with a purchase. III.Short sellers profit when the stock prices rises. IV.Short selling can be a risky strategy.

Margin trading requires the borrowing of securities.

Emily bought 200 shares of ABC Co.stock for $29.00 per share on 60% margin.Assume she holds the stock for one year and that her interest costs will be $80 over the holding period.Ignoring commissions, what is her percentage return (loss)on invested capital if the stock price went down 10%?

Which of the following are functions of the secondary market? I.Provide liquidity for current stockholders II.Equate the demand and supply of securities III.Provide a market for the dale of new stock by companies that are already public. IV.Provide continuous pricing of securities

Which of the following can be encountered when investing in foreign markets? I.Foreign taxation of dividends II.Different accounting standards for financial disclosure III.Restrictions on types of investments IV.Illiquid markets

Firms that list their stock on an exchange can be delisted for failing to meet the requirements of the exchange.

Jim purchased 100 shares of stock at a price of $32 a share.He utilized his 80% margin account to make the purchase.What is Jim's initial equity in this investment?

Short-term securities are bought and sold in the

It can be argued that an IPO was overpriced when the IPO produces extraordinarily high rates of return on its first day of trading.

Only U.S.corporations can list their stocks on the NYSE.

Which of the following are provisions of the Sarbanes-Oxley Act of 2002? I.An oversight board to monitor the accounting industry. II.Tougher penalties for executives who commit corporate fraud. III.Stricter prohibitions against insider trading. IV.Guidelines for analysts conflicts of interest.

Federal securities laws are designed to protect financial institutions.

The Sarbanes-Oxley Act of 2002 strengthens accounting disclosure requirements and ethical guidelines for financial officers.

The effects of fluctuating foreign exchange rates may I.Increase a U.S.investor's rate of return. II.Decrease a U.S.investor's rate of return. III.Can be avoided by investing in ADRs. IV.Can be avoided by investing in mutual funds that specialize in foreign stocks.

Which of the following are characteristics of short selling? I.borrowing shares of stock from a brokerage firm or other investors II.selling shares of stock you do not own III.betting the stock price will increase IV.limiting losses per share to the price at which the stock was sold

Members of a selling group receive compensation in the form of a discount on the selling price of the security.

Explain the role of investment bankers and brokerage firms in the issuance of new securities.

After hours markets tend to be less volatile and more liquid than the regular trading sessions.

Crossing markets are those that