Exam 3: Organization and Functioning of Securities Markets

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 dollar return on the investment?

The individual placing a limit order specifies the buy or sell price.

Which of the following is NOT a characteristic of a good market for goods and services?

If transaction prices are volatile, but long-term prices are stable, this is referred to as price continuity.

The over-the-counter market includes all stocks not listed on one of the major exchanges but constitutes a lesser dollar value than the New York and American Exchanges combined.

A block trade is one which involves a minimum of

Suppose you purchase 200 shares of Best Hat Corporation at $52 a share by making a margin deposit of 50 percent. If the maintenance margin is 30 percent, at what price will you receive a margin call?

Trading in the secondary markets for U.S. Government and municipal bonds

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. If the maintenance margin is 25 percent, to what price can Jackson Industries fall before Kathy receives a margin call?

All of the following are advantages of secondary markets EXCEPT that they

The value of the stocks traded in the over-the-counter market is greater than the combined values of the stocks traded on the New York Stock Exchange and the American Stock Exchange combined.

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 annual rate of return on this investment?

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. What is Jackie's profit/loss if Turtle's price after one year is $40?

A market is a means through which buyers and sellers are brought together to aid in the transfer of goods and/or services.

Which of the following is an underwriting function?

Which of the following is NOT a major category of membership in stock exchanges?

Only the stocks of large companies are traded in the primary market.

When an investor borrows part of the investment cost it is known as

Municipal bonds are sold using the following method or methods:

The U.S. secondary market with the largest number of issues traded is the