Question 1

In a call market, trading for individual stocks

Accepted Answer

A)  occurs anytime the market is open. 
B)  takes place at specific times. 
C)  takes place at the open and close of the trading day. 
D)  is priced either by auction or by dealers. 
E)  None of these are correct. 
A)  occurs anytime the market is open. 
B)  takes place at specific times. 
C)  takes place at the open and close of the trading day. 
D)  is priced either by auction or by dealers. 
E)  None of these are correct.

Question 2

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
You sell 100 shares short of AMF Corporation when it is selling at $45 per share. Your margin requirement is 60 percent and the commission on the sale is $50 and the broker charges 10 percent annual interest. AMF Corporation paid a $0.50 per share dividend while you were short the stock. After one year, you cover your short sale at $35 per share with a $50 commission for the purchase.
-Refer to Exhibit 3.8. What is your total dollar return on this investment?

Accepted Answer

A)  $1,000 
B)  $900 
C)  $850 
D)  $670 
E)  $520 
A)  $1,000 
B)  $900 
C)  $850 
D)  $670 
E)  $520

Question 3

The member of the New York Stock Exchange who acts as a dealer on assigned stocks is known as a

Accepted Answer

A)  registered trader. 
B)  commission broker. 
C)  registered broker. 
D)  floor broker. 
E)  specialist. 
A)  registered trader. 
B)  commission broker. 
C)  registered broker. 
D)  floor broker. 
E)  specialist.

Question 4

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Kathy Smith has a margin account with a balance of $60,000. Initial margin requirements are 80 percent, and Jackson Industries is currently selling at $40 per share.
-Refer to Exhibit 3.3. What is Kathy's profit if Jackson's price rises to $50?

Accepted Answer

A)  $18,750 
B)  $15,750 
C)  $55,000 
D)  $37,750 
E)  $28,570 
A)  $18,750 
B)  $15,750 
C)  $55,000 
D)  $37,750 
E)  $28,570

Question 5

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 rate of return on the investment?

Accepted Answer

A)  10.48 percent 
B)  12.87 percent 
C)  -13.98 percent 
D)  -24.49 percent 
E)  -15.05 percent 
A)  10.48 percent 
B)  12.87 percent 
C)  -13.98 percent 
D)  -24.49 percent 
E)  -15.05 percent

Question 6

Margin transaction involves borrowing part of the cost of an investment.

Accepted Answer

A) True 
 B)False

Question 7

A corporation wishing to raise funds will normally want the investment banker to use a "best efforts" arrangement rather than a negotiated basis.

Accepted Answer

A) True 
 B)False

Question 8

Negotiation, competitive bids, and best efforts are three forms of underwriting arrangements.

Accepted Answer

A) True 
 B)False

Question 9

A pure auction market is one in which

Accepted Answer

A)  dealers provide liquidity by buying and selling shares of stock for themselves. 
B)  dealers compete against each other to provide the highest bid and lowest asking prices. 
C)  buyers submit bid prices to sellers. 
D)  sellers submit ask prices to buyers. 
E)  buyers and sellers submit bid and ask prices to a central location to be matched. 
A)  dealers provide liquidity by buying and selling shares of stock for themselves. 
B)  dealers compete against each other to provide the highest bid and lowest asking prices. 
C)  buyers submit bid prices to sellers. 
D)  sellers submit ask prices to buyers. 
E)  buyers and sellers submit bid and ask prices to a central location to be matched.

Question 10

Which of the following is NOT a secondary equity market?

Accepted Answer

A)  treasury market 
B)  national exchanges 
C)  regional exchanges 
D)  over-the-counter market 
E)  call market. 
A)  treasury market 
B)  national exchanges 
C)  regional exchanges 
D)  over-the-counter market 
E)  call market.

Question 11

The basic distinction between a primary and a secondary market is that

Accepted Answer

A)  proceeds from sales in the primary market go to the current owner of a security; proceeds in secondary market go to the original owner. 
B)  primary markets involve direct dealings within regional exchanges. 
C)  only new securities are sold in the primary market; only outstanding securities are bought and sold in the secondary market. 
D)  primary markets deal exclusively in bonds; secondary markets deal primarily in common stock. 
E)  primary markets deal exclusively in common stocks; secondary markets deal primarily in bonds. 
A)  proceeds from sales in the primary market go to the current owner of a security; proceeds in secondary market go to the original owner. 
B)  primary markets involve direct dealings within regional exchanges. 
C)  only new securities are sold in the primary market; only outstanding securities are bought and sold in the secondary market. 
D)  primary markets deal exclusively in bonds; secondary markets deal primarily in common stock. 
E)  primary markets deal exclusively in common stocks; secondary markets deal primarily in bonds.

Question 12

Suppose you buy a round lot of DG Solutions stock on 60 percent margin when it is selling at $55 a share. The broker charges a 10 percent annual interest rate and commissions are 3 percent of the total stock value on both the purchase and the sale. If at year end you receive a $1.10 per share dividend and sell the stock for 55 5/8, what is your rate of return on the investment?

Accepted Answer

A)  -10.38 percent 
B)  -12.84 percent 
C)  -10.95 percent 
D)  21.84 percent 
E)  28.38 percent 
A)  -10.38 percent 
B)  -12.84 percent 
C)  -10.95 percent 
D)  21.84 percent 
E)  28.38 percent

Question 13

Algorithmic trading is basically creating computer programs to make trading decisions.

Accepted Answer

A) True 
 B)False

Question 14

Investors can leverage their stock transactions with the use of

Accepted Answer

A)  margin orders. 
B)  stop loss orders. 
C)  limit orders. 
D)  market orders. 
E)  specialists. 
A)  margin orders. 
B)  stop loss orders. 
C)  limit orders. 
D)  market orders. 
E)  specialists.

Question 15

The Nasdaq National Market System is an order-driven market.

Accepted Answer

A) True 
 B)False

Question 16

In a negotiated bid, the underwriter carries out the following service(s):

Accepted Answer

A)  origination, risk-bearing, and distribution. 
B)  origination and risk-bearing. 
C)  risk-bearing and distribution. 
D)  origination and distribution. 
E)  risk-bearing and distribution 
A)  origination, risk-bearing, and distribution. 
B)  origination and risk-bearing. 
C)  risk-bearing and distribution. 
D)  origination and distribution. 
E)  risk-bearing and distribution

Question 17

In recent years, there has been a trend toward the consolidation of existing exchanges in developed markets, such as London, Frankfurt, and Paris.

Accepted Answer

A) True 
 B)False

Question 18

Short selling is practiced when an investor borrows part of the cost of the investment,e.g., they are "short" on cash.

Accepted Answer

A) True 
 B)False

Question 19

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 $55 per share and the company paid dividends of $0.85 per share. Assuming that you borrowed 25 percent of cost of the purchase, what is your rate of return?

Accepted Answer

A)  -23.51 percent 
B)  29.35 percent 
C)  23.51 percent 
D)  5.21 percent 
E)  10.06 percent 
A)  -23.51 percent 
B)  29.35 percent 
C)  23.51 percent 
D)  5.21 percent 
E)  10.06 percent

Question 20

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Kathy Smith has a margin account with a balance of $60,000. Initial margin requirements are 80 percent, and Jackson Industries is currently selling at $40 per share.
-Refer to Exhibit 3.3. How many shares of Jackson can Kathy buy?

Accepted Answer

A)  1875 
B)  1500 
C)  1750 
D)  1200 
E)  950 
A)  1875 
B)  1500 
C)  1750 
D)  1200 
E)  950

In a call market, trading for individual stocks

The member of the New York Stock Exchange who acts as a dealer on assigned stocks is known as a

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Kathy Smith has a margin account with a balance of $60,000. Initial margin requirements are 80 percent, and Jackson Industries is currently selling at $40 per share. -Refer to Exhibit 3.3. What is Kathy's profit if Jackson's price rises to $50?

Margin transaction involves borrowing part of the cost of an investment.

A corporation wishing to raise funds will normally want the investment banker to use a "best efforts" arrangement rather than a negotiated basis.

Negotiation, competitive bids, and best efforts are three forms of underwriting arrangements.

A pure auction market is one in which

Which of the following is NOT a secondary equity market?

The basic distinction between a primary and a secondary market is that

Algorithmic trading is basically creating computer programs to make trading decisions.

Investors can leverage their stock transactions with the use of

The Nasdaq National Market System is an order-driven market.

In a negotiated bid, the underwriter carries out the following service(s):

In recent years, there has been a trend toward the consolidation of existing exchanges in developed markets, such as London, Frankfurt, and Paris.

Short selling is practiced when an investor borrows part of the cost of the investment,e.g., they are "short" on cash.

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Kathy Smith has a margin account with a balance of $60,000. Initial margin requirements are 80 percent, and Jackson Industries is currently selling at $40 per share. -Refer to Exhibit 3.3. How many shares of Jackson can Kathy buy?

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 call market, trading for individual stocks

The member of the New York Stock Exchange who acts as a dealer on assigned stocks is known as a

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Kathy Smith has a margin account with a balance of $60,000. Initial margin requirements are 80 percent, and Jackson Industries is currently selling at $40 per share. -Refer to Exhibit 3.3. What is Kathy's profit if Jackson's price rises to $50?

Margin transaction involves borrowing part of the cost of an investment.

A corporation wishing to raise funds will normally want the investment banker to use a "best efforts" arrangement rather than a negotiated basis.

Negotiation, competitive bids, and best efforts are three forms of underwriting arrangements.

A pure auction market is one in which

Which of the following is NOT a secondary equity market?

The basic distinction between a primary and a secondary market is that

Algorithmic trading is basically creating computer programs to make trading decisions.

Investors can leverage their stock transactions with the use of

The Nasdaq National Market System is an order-driven market.

In a negotiated bid, the underwriter carries out the following service(s):

In recent years, there has been a trend toward the consolidation of existing exchanges in developed markets, such as London, Frankfurt, and Paris.

Short selling is practiced when an investor borrows part of the cost of the investment,e.g., they are "short" on cash.

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Kathy Smith has a margin account with a balance of $60,000. Initial margin requirements are 80 percent, and Jackson Industries is currently selling at $40 per share. -Refer to Exhibit 3.3. How many shares of Jackson can Kathy buy?

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