Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

The NYSE and AMEX are examples of dealer markets.

Accepted Answer

A) True 
 B)False

Question 3

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 4

Which of the following practices is prohibited by the Insider Trading and Fraud Act of 1988.

Accepted Answer

A)  the use of nonpublic information to make profitable stock transactions 
B)  selling of stock by officers of the company 
C)  the granting of stock options to corporate executives in lieu of salaries 
D)  private sales of stock between executives of the company 
A)  the use of nonpublic information to make profitable stock transactions 
B)  selling of stock by officers of the company 
C)  the granting of stock options to corporate executives in lieu of salaries 
D)  private sales of stock between executives of the company

Question 5

Companies offering their stock to the public for the first time usually seek the assistance of

Accepted Answer

A)  investment bankers. 
B)  the Securities and Exchange Commission. 
C)  the Federal Reserve Bank. 
D)  prospectors. 
A)  investment bankers. 
B)  the Securities and Exchange Commission. 
C)  the Federal Reserve Bank. 
D)  prospectors.

Question 6

Margin trading will magnify losses on a percentage basis.

Accepted Answer

A) True 
 B)False

Question 7

The document that describes the issuer of a security's management and financial position is known as a

Accepted Answer

A)  balance sheet. 
B)  10-K report. 
C)  prospectus. 
D)  red herring. 
A)  balance sheet. 
B)  10-K report. 
C)  prospectus. 
D)  red herring.

Question 8

A brokerage firm may set a higher margin requirement than that set by the Federal Reserve Board.

Accepted Answer

A) True 
 B)False

Question 9

The price an individual investor will pay to purchase a stock in the OTC market is the

Accepted Answer

A)  spread. 
B)  ask price. 
C)  bid price. 
D)  broker price. 
A)  spread. 
B)  ask price. 
C)  bid price. 
D)  broker price.

Question 10

Jessica purchased 200 shares of stock at $38 using her 70% margin account. Her maintenance margin is 40%. Jessica has no other securities in her account. At what price will she receive a margin call?

Accepted Answer

A)  $26.60 
B)  $19.00 
C)  $11.40 
D)  $7.60 
A)  $26.60 
B)  $19.00 
C)  $11.40 
D)  $7.60

Question 11

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

Accepted Answer

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

Question 12

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 13

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

Accepted Answer

A) True 
 B)False

Question 14

Short-term securities are bought and sold in the

Accepted Answer

A)  capital market. 
B)  primary market. 
C)  money market. 
D)  stock market. 
A)  capital market. 
B)  primary market. 
C)  money market. 
D)  stock market.

Question 15

When a person sells a common stock short, she or he is betting that the price of the stock will fall.

Accepted Answer

A) True 
 B)False

Question 16

IPO activity tends to peak when stock prices

Accepted Answer

A)  have fallen sharply. 
B)  have risen sharply. 
C)  are volatile and unstable. 
D)  Stock prices have relatively little influence on IPO activity. 
A)  have fallen sharply. 
B)  have risen sharply. 
C)  are volatile and unstable. 
D)  Stock prices have relatively little influence on IPO activity.

Question 17

Assume the foreign exchange rate for the euro was U.S. $1.00 = .70 euro last month. This month, the exchange rate is U.S. $1.00 = .72 euro. This information indicates that over the past month the

Accepted Answer

A)  U.S. dollar remained unchanged relative to the euro. 
B)  U.S. dollar appreciated relative to all foreign currencies. 
C)  euro appreciated relative to the dollar. 
D)  euro depreciated relative to the dollar. 
A)  U.S. dollar remained unchanged relative to the euro. 
B)  U.S. dollar appreciated relative to all foreign currencies. 
C)  euro appreciated relative to the dollar. 
D)  euro depreciated relative to the dollar.

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

An act explicitly defining and prohibiting insider trading was passed in

Accepted Answer

A)  1934. 
B)  1975. 
C)  1988. 
D)  2002. 
A)  1934. 
B)  1975. 
C)  1988. 
D)  2002.

Question 20

Which of the following are associated with bear markets?
I. investor pessimism
II. rising profits
III. economic slowdown
IV. rising security prices

Accepted Answer

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

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

The NYSE and AMEX are examples of dealer markets.

A rights offering is the

Which of the following practices is prohibited by the Insider Trading and Fraud Act of 1988.

Companies offering their stock to the public for the first time usually seek the assistance of

Margin trading will magnify losses on a percentage basis.

The document that describes the issuer of a security's management and financial position is known as a

A brokerage firm may set a higher margin requirement than that set by the Federal Reserve Board.

The price an individual investor will pay to purchase a stock in the OTC market is the

Jessica purchased 200 shares of stock at $38 using her 70% margin account. Her maintenance margin is 40%. Jessica has no other securities in her account. At what price will she receive a margin call?

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

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.

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

Short-term securities are bought and sold in the

When a person sells a common stock short, she or he is betting that the price of the stock will fall.

IPO activity tends to peak when stock prices

Assume the foreign exchange rate for the euro was U.S. $1.00 = .70 euro last month. This month, the exchange rate is U.S. $1.00 = .72 euro. This information indicates that over the past month the

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?

An act explicitly defining and prohibiting insider trading was passed in

Which of the following are associated with bear markets? I. investor pessimism II. rising profits III. economic slowdown IV. rising security prices

The Investment Environment

Investment Information and Securities Transactions

Return and Risk

Modern Portfolio Concepts

Common Stocks

Analyzing Common Stocks

Stock Valuation

Market Efficiency and Behavioral Finance

Fixed-Income Securities

Bond Valuation

Mutual Funds and Exchange-Traded Funds

Managing Your Own Portfolio

Options: Puts and Calls

Futures Markets and Securities

Filters

Exam 2: Securities Markets and Transactions

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

The NYSE and AMEX are examples of dealer markets.

A rights offering is the

Which of the following practices is prohibited by the Insider Trading and Fraud Act of 1988.

Companies offering their stock to the public for the first time usually seek the assistance of

Margin trading will magnify losses on a percentage basis.

The document that describes the issuer of a security's management and financial position is known as a

A brokerage firm may set a higher margin requirement than that set by the Federal Reserve Board.

The price an individual investor will pay to purchase a stock in the OTC market is the

Jessica purchased 200 shares of stock at $38 using her 70% margin account. Her maintenance margin is 40%. Jessica has no other securities in her account. At what price will she receive a margin call?

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

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.

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

Short-term securities are bought and sold in the

When a person sells a common stock short, she or he is betting that the price of the stock will fall.

IPO activity tends to peak when stock prices

Assume the foreign exchange rate for the euro was U.S. $1.00 = .70 euro last month. This month, the exchange rate is U.S. $1.00 = .72 euro. This information indicates that over the past month the

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?

An act explicitly defining and prohibiting insider trading was passed in

Which of the following are associated with bear markets? I. investor pessimism II. rising profits III. economic slowdown IV. rising security prices

The Investment Environment

Investment Information and Securities Transactions

Return and Risk

Modern Portfolio Concepts

Common Stocks

Analyzing Common Stocks

Stock Valuation

Market Efficiency and Behavioral Finance

Fixed-Income Securities

Bond Valuation

Mutual Funds and Exchange-Traded Funds

Managing Your Own Portfolio

Options: Puts and Calls

Futures Markets and Securities

Filters