Question 1

Exchange traded funds are

Accepted Answer

A)  mutual funds that trade on the Big Board. 
B)  baskets of securities that trade like a single stock. 
C)  index funds that trade on the NYSE. 
D)  groups of securities that trade only on regional exchanges. 
A)  mutual funds that trade on the Big Board. 
B)  baskets of securities that trade like a single stock. 
C)  index funds that trade on the NYSE. 
D)  groups of securities that trade only on regional exchanges.

Question 2

The majority of bonds trade in the OTC market.

Accepted Answer

A) True 
 B)False

Question 3

Diversification is the inclusion of a number of different investment vehicles in a portfolio with the goal of increasing returns or reducing risk.

Accepted Answer

A) True 
 B)False

Question 4

The automated system for trading highly active OTC securities is the

Accepted Answer

A)  Big Board. 
B)  Kansas City Board. 
C)  Chicago Board of Trade. 
D)  Nasdaq. 
A)  Big Board. 
B)  Kansas City Board. 
C)  Chicago Board of Trade. 
D)  Nasdaq.

Question 5

SEC regulations strictly prohibit trading outside the normal hours of 9:30 A.m.to 4:00 P.M.EST.

Accepted Answer

A) True 
 B)False

Question 6

Securities that trade in the over-the-counter market are called unlisted securities.

Accepted Answer

A) True 
 B)False

Question 7

A market maker brings together buyers and sellers in an auction market.

Accepted Answer

A) True 
 B)False

Question 8

Brandon bought 100 shares of stock for $15.00 per share on 70% margin.Assume Brandon holds the stock for one year and that his interest costs will be $45 over the holding period.Gerry also received dividends amounting to $0.30 per share.Ignoring commissions, what is his percentage return on invested capital if he sells the stock for $34 a share?

Accepted Answer

A)  60.0% 
B)  21.9% 
C)  17.6% 
D)  13.3% 
A)  60.0% 
B)  21.9% 
C)  17.6% 
D)  13.3%

Question 9

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.

Question 10

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

Accepted Answer

A)  In general, major foreign markets always tend to underperform the US 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 US 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 11

Short selling requires the borrowing of securities.

Accepted Answer

A) True 
 B)False

Question 12

The income paid to a market maker is referred to as the spread.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following are true concerning the NYSE Amex:
I.Many exchange traded funds are listed there.
II.Its listing requirements are stricter than the New York Stock Exchange.
III.It is a major market for exchange traded funds.
IV.It is a broker rather than a dealer exchange.

Accepted Answer

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

Question 14

Underwriters are responsible for promoting and facilitating the sale of securities.

Accepted Answer

A) True 
 B)False

Question 15

Stocks, bonds and mutual fund shares are bought and sold in the capital market.

Accepted Answer

A) True 
 B)False

Question 16

Federal laws that control the sale of securities are called blue sky laws.

Accepted Answer

A) True 
 B)False

Question 17

Which one of the following statements about margin trading is correct?

Accepted Answer

A)  The Federal Reserve sets the minimum margin requirement for margin trading. 
B)  If Fred buys $1,000 worth of stock using 60% margin, he will need to pay $400 in cash to make the purchase. 
C)  Purchasing stocks on margin is less risky than purchasing stocks by paying cash for the entire purchase. 
D)  Margin trading increases the potential profits while lowering the potential losses on a percentage basis. 
A)  The Federal Reserve sets the minimum margin requirement for margin trading. 
B)  If Fred buys $1,000 worth of stock using 60% margin, he will need to pay $400 in cash to make the purchase. 
C)  Purchasing stocks on margin is less risky than purchasing stocks by paying cash for the entire purchase. 
D)  Margin trading increases the potential profits while lowering the potential losses on a percentage basis.

Question 18

Jennifer expects the price of a stock to decrease over the next month.Which one of the following strategies would allow Jennifer to earn a profit if the expected decrease actually occurs?

Accepted Answer

A)  take a long position in the stock today 
B)  sell the stock short today 
C)  buy the stock on margin today 
D)  take a long position in the stock one month from today 
A)  take a long position in the stock today 
B)  sell the stock short today 
C)  buy the stock on margin today 
D)  take a long position in the stock one month from today

Question 19

The dominant options exchange is the

Accepted Answer

A)  Chicago Board Options Exchange. 
B)  American Stock Exchange. 
C)  Pacific Stock Exchange. 
D)  Philadelphia Options Exchange. 
A)  Chicago Board Options Exchange. 
B)  American Stock Exchange. 
C)  Pacific Stock Exchange. 
D)  Philadelphia Options Exchange.

Question 20

Joseph bought 100 shares of stock at a price of $24 a share.He used his 70% margin account to make the purchase.Joseph sold his stock after a year for $20 a share.Ignoring margin interest and trading costs, what is Joseph's return on investor's equity for this investment?

Accepted Answer

A)  -17% 
B)  -24% 
C)  24% 
D)  -56% 
A)  -17% 
B)  -24% 
C)  24% 
D)  -56%

Exchange traded funds are

The majority of bonds trade in the OTC market.

Diversification is the inclusion of a number of different investment vehicles in a portfolio with the goal of increasing returns or reducing risk.

The automated system for trading highly active OTC securities is the

SEC regulations strictly prohibit trading outside the normal hours of 9:30 A.m.to 4:00 P.M.EST.

Securities that trade in the over-the-counter market are called unlisted securities.

A market maker brings together buyers and sellers in an auction market.

A rights offering is the

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

Short selling requires the borrowing of securities.

The income paid to a market maker is referred to as the spread.

Which of the following are true concerning the NYSE Amex: I.Many exchange traded funds are listed there. II.Its listing requirements are stricter than the New York Stock Exchange. III.It is a major market for exchange traded funds. IV.It is a broker rather than a dealer exchange.

Underwriters are responsible for promoting and facilitating the sale of securities.

Stocks, bonds and mutual fund shares are bought and sold in the capital market.

Federal laws that control the sale of securities are called blue sky laws.

Which one of the following statements about margin trading is correct?

Jennifer expects the price of a stock to decrease over the next month.Which one of the following strategies would allow Jennifer to earn a profit if the expected decrease actually occurs?

The dominant options exchange is the

Joseph bought 100 shares of stock at a price of $24 a share.He used his 70% margin account to make the purchase.Joseph sold his stock after a year for $20 a share.Ignoring margin interest and trading costs, what is Joseph's return on investor's equity for this investment?

The Investment Environment

Investment Information and Securities Transactions

Return and Risk

Modern Portfolio Concepts

Common Stocks

Analyzing Common Stocks

Stock Valuation

Market Efficiency, Behavioral Finance, and Technical Analysis

Fixed-Income Securities

Bond Valuation

Mutual Funds: Professionally Managed Portfolios

Managing Your Own Portfolios

Options: Puts and Calls

Commodities and Financial Futures

Filters

Exam 2: Securities Markets and Transactions

Exchange traded funds are

The majority of bonds trade in the OTC market.

Diversification is the inclusion of a number of different investment vehicles in a portfolio with the goal of increasing returns or reducing risk.

The automated system for trading highly active OTC securities is the

SEC regulations strictly prohibit trading outside the normal hours of 9:30 A.m.to 4:00 P.M.EST.

Securities that trade in the over-the-counter market are called unlisted securities.

A market maker brings together buyers and sellers in an auction market.

A rights offering is the

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

Short selling requires the borrowing of securities.

The income paid to a market maker is referred to as the spread.

Which of the following are true concerning the NYSE Amex: I.Many exchange traded funds are listed there. II.Its listing requirements are stricter than the New York Stock Exchange. III.It is a major market for exchange traded funds. IV.It is a broker rather than a dealer exchange.

Underwriters are responsible for promoting and facilitating the sale of securities.

Stocks, bonds and mutual fund shares are bought and sold in the capital market.

Federal laws that control the sale of securities are called blue sky laws.

Which one of the following statements about margin trading is correct?

Jennifer expects the price of a stock to decrease over the next month.Which one of the following strategies would allow Jennifer to earn a profit if the expected decrease actually occurs?

The dominant options exchange is the

Joseph bought 100 shares of stock at a price of $24 a share.He used his 70% margin account to make the purchase.Joseph sold his stock after a year for $20 a share.Ignoring margin interest and trading costs, what is Joseph's return on investor's equity for this investment?

The Investment Environment

Investment Information and Securities Transactions

Return and Risk

Modern Portfolio Concepts

Common Stocks

Analyzing Common Stocks

Stock Valuation

Market Efficiency, Behavioral Finance, and Technical Analysis

Fixed-Income Securities

Bond Valuation

Mutual Funds: Professionally Managed Portfolios

Managing Your Own Portfolios

Options: Puts and Calls

Commodities and Financial Futures

Filters