Question 1

Including foreign investments in a portfolio

Accepted Answer

A) increases the overall risk of the portfolio. 
B) reduces the potential rate of return. 
C) provides potential benefits from changes in currency values. 
D) limits the diversification amongst industries. 
A) increases the overall risk of the portfolio. 
B) reduces the potential rate of return. 
C) provides potential benefits from changes in currency values. 
D) limits the diversification amongst industries.

Question 2

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 3

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 4

Maintenance margin is the

Accepted Answer

A) minimum amount of loan that can be used for margin trading. 
B) initial amount of equity required for a margin purchase. 
C) minimum amount of equity that an investor can have to avoid a margin call. 
D) amount of additional funds that need to be added to an account to meet minimal equity requirements. 
A) minimum amount of loan that can be used for margin trading. 
B) initial amount of equity required for a margin purchase. 
C) minimum amount of equity that an investor can have to avoid a margin call. 
D) amount of additional funds that need to be added to an account to meet minimal equity requirements.

Question 5

Last week, Seward Company stock was selling at $66 a share when Ryan sold 300 shares of the stock short.Today Ryan bought 300 shares of the same stock at a price of $70.00 share to cover his position.Ignoring trading costs, what is the dollar return on Ryan's investment?

Accepted Answer

A) $1,200 
B) -$400 
C) $400 
D) $-1,200 
A) $1,200 
B) -$400 
C) $400 
D) $-1,200

Question 6

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

Accepted Answer

A) The Federal Reserve sets the minimum margin requirement for margin trading. 
B) If Fred buys $1,000 worth of stock using 60% margin, he will need to pay $400 in cash to make the purchase. 
C) Purchasing stocks on margin is less risky than purchasing stocks by paying cash for the entire purchase. 
D) Margin trading increases the potential profits while lowering the potential losses on a percentage basis. 
A) The Federal Reserve sets the minimum margin requirement for margin trading. 
B) If Fred buys $1,000 worth of stock using 60% margin, he will need to pay $400 in cash to make the purchase. 
C) Purchasing stocks on margin is less risky than purchasing stocks by paying cash for the entire purchase. 
D) Margin trading increases the potential profits while lowering the potential losses on a percentage basis.

Question 7

Justin just made a margin purchase of 100 shares of DEF Corp.for $22.50 per share.The initial margin is 70%.The maintenance margin is 30%.How low can the price of each share of DEF be before Justin will have to add equity to his account?

Accepted Answer

A) $4.73 
B) $5.25 
C) $6.75 
D) $9.64 
A) $4.73 
B) $5.25 
C) $6.75 
D) $9.64

Question 8

American Depositary Receipts represent

Accepted Answer

A) receipts for dollar deposits in foreign banks. 
B) receipts from foreign broker-dealers establishing ownership of foreign stocks. 
C) receipts for the stocks of foreign companies held by banks in the companies' home country. 
D) receipts for shares of foreign companies held by U.S.broker-dealers. 
A) receipts for dollar deposits in foreign banks. 
B) receipts from foreign broker-dealers establishing ownership of foreign stocks. 
C) receipts for the stocks of foreign companies held by banks in the companies' home country. 
D) receipts for shares of foreign companies held by U.S.broker-dealers.

Question 9

Megan bought 200 shares of stock at a price of $10 a share.She used her 70% margin account to make the purchase.Megan sold her stock after a year for $12 a share.Ignoring margin interest and trading costs, what is Megan's return on investor's equity for this investment?

Accepted Answer

A) 67% 
B) 29% 
C) 14% 
D) 10% 
A) 67% 
B) 29% 
C) 14% 
D) 10%

Question 10

The majority of bonds trade in the OTC market.

Accepted Answer

A) True 
 B)False

Question 11

The financial markets are becoming more globally integrated.

Accepted Answer

A) True 
 B)False

Question 12

The purchase of stock with cash in the hope of earning a capital gain is known as taking a

Accepted Answer

A) long position in the stock. 
B) short position in the stock. 
C) long, margined position in the stock. 
D) short, margined position in the stock. 
A) long position in the stock. 
B) short position in the stock. 
C) long, margined position in the stock. 
D) short, margined position in the stock.

Question 13

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 14

The preliminary version of a prospectus is called a red herring.

Accepted Answer

A) True 
 B)False

Question 15

Most commodity futures are traded on the NYSE Amex.

Accepted Answer

A) True 
 B)False

Question 16

The NYSE and AMEX are examples of dealer markets.

Accepted Answer

A) True 
 B)False

Question 17

Dollar-denominated debt securities issued by foreign corporations and traded in U.S.markets are called

Accepted Answer

A) ADRs. 
B) Yankee bonds. 
C) ETFs. 
D) global bonds. 
A) ADRs. 
B) Yankee bonds. 
C) ETFs. 
D) global bonds.

Question 18

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 19

Exchange traded funds are

Accepted Answer

A) mutual funds that trade on the Big Board. 
B) baskets of securities that trade like a single stock. 
C) index funds that trade on the NYSE. 
D) groups of securities that trade only on regional exchanges. 
A) mutual funds that trade on the Big Board. 
B) baskets of securities that trade like a single stock. 
C) index funds that trade on the NYSE. 
D) groups of securities that trade only on regional exchanges.

Question 20

Market makers in dealer markets

Accepted Answer

A) bring sellers and buyers together by matching offers. 
B) earn commissions paid by the sellers of securities. 
C) buy securities at a bid price and hope to resell them at a higher offer price. 
D) all of the above. 
A) bring sellers and buyers together by matching offers. 
B) earn commissions paid by the sellers of securities. 
C) buy securities at a bid price and hope to resell them at a higher offer price. 
D) all of the above.

Including foreign investments in a portfolio

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

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

Maintenance margin is the

Last week, Seward Company stock was selling at $66 a share when Ryan sold 300 shares of the stock short.Today Ryan bought 300 shares of the same stock at a price of $70.00 share to cover his position.Ignoring trading costs, what is the dollar return on Ryan's investment?

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

Justin just made a margin purchase of 100 shares of DEF Corp.for $22.50 per share.The initial margin is 70%.The maintenance margin is 30%.How low can the price of each share of DEF be before Justin will have to add equity to his account?

American Depositary Receipts represent

Megan bought 200 shares of stock at a price of $10 a share.She used her 70% margin account to make the purchase.Megan sold her stock after a year for $12 a share.Ignoring margin interest and trading costs, what is Megan's return on investor's equity for this investment?

The majority of bonds trade in the OTC market.

The financial markets are becoming more globally integrated.

The purchase of stock with cash in the hope of earning a capital gain is known as taking a

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

The preliminary version of a prospectus is called a red herring.

Most commodity futures are traded on the NYSE Amex.

The NYSE and AMEX are examples of dealer markets.

Dollar-denominated debt securities issued by foreign corporations and traded in U.S.markets are called

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

Exchange traded funds are

Market makers in dealer markets

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

Including foreign investments in a portfolio

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

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

Maintenance margin is the

Last week, Seward Company stock was selling at $66 a share when Ryan sold 300 shares of the stock short.Today Ryan bought 300 shares of the same stock at a price of $70.00 share to cover his position.Ignoring trading costs, what is the dollar return on Ryan's investment?

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

Justin just made a margin purchase of 100 shares of DEF Corp.for $22.50 per share.The initial margin is 70%.The maintenance margin is 30%.How low can the price of each share of DEF be before Justin will have to add equity to his account?

American Depositary Receipts represent

Megan bought 200 shares of stock at a price of $10 a share.She used her 70% margin account to make the purchase.Megan sold her stock after a year for $12 a share.Ignoring margin interest and trading costs, what is Megan's return on investor's equity for this investment?

The majority of bonds trade in the OTC market.

The financial markets are becoming more globally integrated.

The purchase of stock with cash in the hope of earning a capital gain is known as taking a

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

The preliminary version of a prospectus is called a red herring.

Most commodity futures are traded on the NYSE Amex.

The NYSE and AMEX are examples of dealer markets.

Dollar-denominated debt securities issued by foreign corporations and traded in U.S.markets are called

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

Exchange traded funds are

Market makers in dealer markets

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