Exam 2: Securities Markets and Transactions

The effects of fluctuating foreign exchange rates may I. increase a U. S. investor's rate of return. II. decrease a U. S. investor's rate of return. III. can be avoided by investing in ADRs. IV. can be avoided by investing in mutual funds that specialize in foreign stocks.

Short selling involves the sale of depreciated stock at a price below the amount borrowed on margin.

Which one of the following statements concerning the primary market is correct?

Which of the following can be encountered when investing in foreign markets? I. foreign taxation of dividends II. different accounting standards for financial disclosure III. restrictions on types of investments IV. illiquid markets

Which of the following characteristics apply to trading before and after regular hours? I. Stock prices can vary from one ECN to another ECN. II. Most brokerage firms require individual investors to place only market orders for after-hours trades. III. The NYSE offers after-hours trading at that day's closing prices. IV. After-hours markets tend to be more volatile and less liquid than the regular trading sessions.

Which of the following statements about short selling is (are) true? I. Short selling requires an initial margin deposit. II. Short sellers begin a transaction with a sale and end it with a purchase. III. Short sellers profit when the stock prices rises. IV. Short selling can be a risky strategy.

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

Which of the following are associated with bull markets? I. investor pessimism II. government stimulus III. economic recovery IV. low inflation

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

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. All things equal, the dollar value of European stocks

After hours markets tend to be less volatile and more liquid than the regular trading sessions.

Margin trading requires the borrowing of securities.

American investors can participate in international stock markets by

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

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 Securities Act of 1933 deals mostly with primary markets.

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

Crossing markets are those that

Stocks of many large foreign companies such as trade on the NYSE as well as on exchanges in their own country.

Short selling requires the borrowing of securities.