Question 1

In a pure auction market, buyers and sellers submit bid-and-ask prices for a given stock to a central location.

Accepted Answer

A) True 
 B)False  True

Question 2

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
You decide to sell 100 shares of Davis Industries short when it is selling at its yearly high of $35. Your broker tells you that your margin requirement is 55 percent and that the commission on the sale is $15. While you are short, Davis pays a $0.75 per share dividend. At the end of one year you buy your Davis shares (cover your short sale) at $30 and are charged a commission of $15 and a 6 percent interest rate.
-Refer to Exhibit 3.4. What is your rate of return on the investment?

Accepted Answer

A)  10.48 percent 
B)  12.87 percent 
C)  13.98 percent 
D)  15.49 percent 
E)  18.87 percent 
A)  10.48 percent 
B)  12.87 percent 
C)  13.98 percent 
D)  15.49 percent 
E)  18.87 percent D

Question 3

Which of the following is NOT a function of the specialist?

Accepted Answer

A)  assists the Federal Reserve in controlling the money supply 
B)  acts as a broker who handles the limit orders or special orders placed with member brokers 
C)  buys and sells securities in order to stabilize the market. 
D)  acts as a dealer in assigned stocks to maintain a fair and orderly market. 
E)  attempts to derive a new equilibrium price using a call-market approach. 
A)  assists the Federal Reserve in controlling the money supply 
B)  acts as a broker who handles the limit orders or special orders placed with member brokers 
C)  buys and sells securities in order to stabilize the market. 
D)  acts as a dealer in assigned stocks to maintain a fair and orderly market. 
E)  attempts to derive a new equilibrium price using a call-market approach. A

Question 4

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
You decide to sell 100 shares of Topgun Enterprises Inc. short when it is selling at its yearly high of $42.25. Your broker tells you that your margin requirement is 60 percent and that the commission on the sale is $20. While you are short, Topgun pays a $0.85 per share dividend. At the end of one year you buy your Topgun shares (cover your short sale) at $44 and are charged a commission of $20 and a 5 percent interest rate.
-Refer to Exhibit 3.5. What is your dollar return on the investment?

Accepted Answer

A)  $384.50 
B)  $432.88 
C)  -$432.88 
D)  -$384.50 
E)  -$950.55 
A)  $384.50 
B)  $432.88 
C)  -$432.88 
D)  -$384.50 
E)  -$950.55

Question 5

Which of the following is NOT a characteristic of shelf registrations? Shelf registrations

Accepted Answer

A)  were introduced by Rule 415. 
B)  allow large firms to register security issues and sell them piecemeal during the following six years. 
C)  provide flexibility and reduce registration fees and expenses. 
D)  are typically used for the sale of straight debentures rather than common stock or convertible issues. 
E)  All of these are correct. 
A)  were introduced by Rule 415. 
B)  allow large firms to register security issues and sell them piecemeal during the following six years. 
C)  provide flexibility and reduce registration fees and expenses. 
D)  are typically used for the sale of straight debentures rather than common stock or convertible issues. 
E)  All of these are correct.

Question 6

The over-the-counter market lists more stocks than the New York Stock Exchange and the American Stock Exchange combined.

Accepted Answer

A) True 
 B)False

Question 7

In a continuous market, trades occur at any time the market is open and stocks are priced either by auction or by dealers.

Accepted Answer

A) True 
 B)False

Question 8

The NYSE has dominated the other U.S. exchanges in trading volume.

Accepted Answer

A) True 
 B)False

Question 9

Rule 415 allows corporations to place securities privately with large, sophisticated institutional investors without extensive registration documents.

Accepted Answer

A) True 
 B)False

Question 10

Secondary equity issues are new shares offered by firms that already have stock outstanding.

Accepted Answer

A) True 
 B)False

Question 11

A market in which prices adjust rapidly to new information is considered to be internally efficient.

Accepted Answer

A) True 
 B)False

Question 12

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Jackie has a margin account with a balance of $150,000. The initial margin deposit is 60 percent and Turtle Industries is currently selling at $50 per share.
-Refer to Exhibit 3.1. How many shares of Turtle can Jackie purchase?

Accepted Answer

A)  5,000 
B)  3,000 
C)  1,800 
D)  1,200 
E)  750 
A)  5,000 
B)  3,000 
C)  1,800 
D)  1,200 
E)  750

Question 13

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Heidi Talbott has a margin account with a balance of $50,000. The initial margin deposit is 50 percent, and RC Industries is currently selling at $50 per share.
-Refer to Exhibit 3.2. How many shares of RC can Heidi buy?

Accepted Answer

A)  2,500 
B)  2,000 
C)  1,000 
D)  500 
E)  250 
A)  2,500 
B)  2,000 
C)  1,000 
D)  500 
E)  250

Question 14

You purchased 75 shares of Basket Company for $42 a share. One share of the stock is currently trading between $52 and $53, and you placed a stop loss order at $47. If the stock price drops to $40 a share, what is your return on this investment?

Accepted Answer

A)  8.7 percent 
B)  9.2 percent 
C)  10.3 percent 
D)  11.9 percent 
E)  12.8 percent 
A)  8.7 percent 
B)  9.2 percent 
C)  10.3 percent 
D)  11.9 percent 
E)  12.8 percent

Question 15

Suppose you buy a round lot of Altman Industries stock on 50 percent margin when it is selling at $35 a share. The broker charges a 10 percent annual interest rate and commissions are 5 percent of the total stock value on both the purchase and the sale. If at year end you receive a $1.00 per share dividend and sell the stock for $42.63, what is your rate of return on the investment?

Accepted Answer

A)  15.58 percent 
B)  11.84 percent 
C)  14.74 percent 
D)  21.84 percent 
E)  28.38 percent 
A)  15.58 percent 
B)  11.84 percent 
C)  14.74 percent 
D)  21.84 percent 
E)  28.38 percent

Question 16

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Shares of RossCorp stock are selling for $45 per share. Brokerage commissions are 2 percent for purchases and 2 percent for sales. The interest rate on margin debt is 6.25 percent per year. The maintenance margin is 30 percent.
-Refer to Exhibit 3.7. At the end of one year, shares of RossCorp stock are selling for $35 per share and the company paid dividends of $0.85 per share. Assuming that you paid the full cost of the purchase, what is your rate of return if you sell RossCorp stock?

Accepted Answer

A)  -33.05 percent 
B)  -23.42 percent 
C)  23.42 percent 
D)  33.05 percent 
E)  -25.35 percent 
A)  -33.05 percent 
B)  -23.42 percent 
C)  23.42 percent 
D)  33.05 percent 
E)  -25.35 percent

Question 17

The NYSE is a dealer market.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following statements about a market is true?

Accepted Answer

A)  It is not necessary for the market to have a physical location. 
B)  The market does not necessarily own the goods or services involved. 
C)  A market can deal in any variety of goods and services. 
D)  Both buyers and sellers benefit from the existence of a market. 
E)  All of these are correct. 
A)  It is not necessary for the market to have a physical location. 
B)  The market does not necessarily own the goods or services involved. 
C)  A market can deal in any variety of goods and services. 
D)  Both buyers and sellers benefit from the existence of a market. 
E)  All of these are correct.

Question 19

The primary market is where issues are traded between current and potential owners.

Accepted Answer

A) True 
 B)False

Question 20

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Heidi Talbott has a margin account with a balance of $50,000. The initial margin deposit is 50 percent, and RC Industries is currently selling at $50 per share.
-Refer to Exhibit 3.2. If the maintenance margin is 25 percent, to what price can RC Industries stock price fall before Heidi receives a margin call?

Accepted Answer

A)  $21.75 
B)  $23.33 
C)  $32.00 
D)  $33.33 
E)  $22.22 
A)  $21.75 
B)  $23.33 
C)  $32.00 
D)  $33.33 
E)  $22.22

In a pure auction market, buyers and sellers submit bid-and-ask prices for a given stock to a central location.

Which of the following is NOT a function of the specialist?

Which of the following is NOT a characteristic of shelf registrations? Shelf registrations

The over-the-counter market lists more stocks than the New York Stock Exchange and the American Stock Exchange combined.

In a continuous market, trades occur at any time the market is open and stocks are priced either by auction or by dealers.

The NYSE has dominated the other U.S. exchanges in trading volume.

Rule 415 allows corporations to place securities privately with large, sophisticated institutional investors without extensive registration documents.

Secondary equity issues are new shares offered by firms that already have stock outstanding.

A market in which prices adjust rapidly to new information is considered to be internally efficient.

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Jackie has a margin account with a balance of $150,000. The initial margin deposit is 60 percent and Turtle Industries is currently selling at $50 per share. -Refer to Exhibit 3.1. How many shares of Turtle can Jackie purchase?

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Heidi Talbott has a margin account with a balance of $50,000. The initial margin deposit is 50 percent, and RC Industries is currently selling at $50 per share. -Refer to Exhibit 3.2. How many shares of RC can Heidi buy?

You purchased 75 shares of Basket Company for $42 a share. One share of the stock is currently trading between $52 and $53, and you placed a stop loss order at $47. If the stock price drops to $40 a share, what is your return on this investment?

The NYSE is a dealer market.

Which of the following statements about a market is true?

The primary market is where issues are traded between current and potential owners.

The Investment Setting

The Investment Setting: Part A

Asset Allocation and Security Selection

Asset Allocation and Security Selection: Part A

Security Market Indexes and Index Funds

Efficient Capital Markets, Behavioral Finance, and Technical Analysis

An Introduction to Portfolio Management

An Introduction to Portfolio Management: Part A

An Introduction to Portfolio Management: Part B

Asset Pricing Models

Equity Valuation

The Top-Down Approach to Market, Industry, and Company Analysis

The Practice of Fundamental Investing

Equity Portfolio Management Strategies

Bond Fundamentals and Valuation

Bond Analysis and Portfolio Management Strategies

An Introduction to Derivative Markets and Securities

Forward, Futures, and Swap Contracts

Option Contracts

Professional Money Management, Alternative Assets, and Industry Ethics

Evaluation of Portfolio Performance

Filters

Exam 3: Organization and Functioning of Securities Markets

In a pure auction market, buyers and sellers submit bid-and-ask prices for a given stock to a central location.

Which of the following is NOT a function of the specialist?

Which of the following is NOT a characteristic of shelf registrations? Shelf registrations

The over-the-counter market lists more stocks than the New York Stock Exchange and the American Stock Exchange combined.

In a continuous market, trades occur at any time the market is open and stocks are priced either by auction or by dealers.

The NYSE has dominated the other U.S. exchanges in trading volume.

Rule 415 allows corporations to place securities privately with large, sophisticated institutional investors without extensive registration documents.

Secondary equity issues are new shares offered by firms that already have stock outstanding.

A market in which prices adjust rapidly to new information is considered to be internally efficient.

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Jackie has a margin account with a balance of $150,000. The initial margin deposit is 60 percent and Turtle Industries is currently selling at $50 per share. -Refer to Exhibit 3.1. How many shares of Turtle can Jackie purchase?

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Heidi Talbott has a margin account with a balance of $50,000. The initial margin deposit is 50 percent, and RC Industries is currently selling at $50 per share. -Refer to Exhibit 3.2. How many shares of RC can Heidi buy?

You purchased 75 shares of Basket Company for $42 a share. One share of the stock is currently trading between $52 and $53, and you placed a stop loss order at $47. If the stock price drops to $40 a share, what is your return on this investment?

The NYSE is a dealer market.

Which of the following statements about a market is true?

The primary market is where issues are traded between current and potential owners.

The Investment Setting

The Investment Setting: Part A

Asset Allocation and Security Selection

Asset Allocation and Security Selection: Part A

Security Market Indexes and Index Funds

Efficient Capital Markets, Behavioral Finance, and Technical Analysis

An Introduction to Portfolio Management

An Introduction to Portfolio Management: Part A

An Introduction to Portfolio Management: Part B

Asset Pricing Models

Equity Valuation

The Top-Down Approach to Market, Industry, and Company Analysis

The Practice of Fundamental Investing

Equity Portfolio Management Strategies

Bond Fundamentals and Valuation

Bond Analysis and Portfolio Management Strategies

An Introduction to Derivative Markets and Securities

Forward, Futures, and Swap Contracts

Option Contracts

Professional Money Management, Alternative Assets, and Industry Ethics

Evaluation of Portfolio Performance

Filters