Deck 4: Securities Markets and Market Indexes

Question 1

A block trade is defined as a transaction involving at least:

A)1,000 shares
B)5,000 shares
C)10,000 shares
D)1 million share

Answer 1

C

Question 2

The original electronic network,started in 1969 for brokers,dealers,exchange specialists and institutional investors only is known as:

A)ReadiMarket
B)National Market System
C)OTC Worldwide
D)lnstinet

Answer 2

D

Question 3

The fastest growing region in the world is:

A)Western Europe.
B)Latin America.
C)Eastern Europe.
D)the Far East.

Answer 3

D

Question 4

NASDAQ stocks:

A)are generally foreign stocks.
B)trade via the Blue Sheets.
C)are not generally listed on organized exchanges.
D)represent less than 1,000 companies.

Question 5

A major appeal for U.S.firms selling bonds in private placements is potential:

A)lower interest expense
B)greater regulatory protection
C)savings from not registering with the SEC or incurring an underwriting spread
D)fewer restrictions on subsequent borrowing activities

Question 6

In a firm commitment underwriting arrangement,the risk of placing the security is typically assumed by the:

A)issuer of the security
B)investment bankers
C)commercial bankers
D)institutional investors

Question 7

NASDAQ tends to list stocks concentrated in this industry: to be concentrated in these two industries:

A)aerospace.
B)energy.
C)technology.
D)telecommunications.

Question 8

Which exchange member is assigned to a specific trading post?

A)Commission broker
B)Floor trader
C)Specialist
D)Dealer

Question 9

The NYSE is now part of a:

A)not-for-profit corporation.
B)a quasi-federal agency.
C)a publicly-owned company.
D)a multinational company.

Question 10

Investment bankers are compensated by:

A)the underwriting spread
B)commissions paid by the buyers of the security
C)commission paid by the sellers of the security
D)guaranteed investment contracts

Question 11

Which of the following statements regarding the Nasdaq Stock Market is not true?

A)It was less affected by the 2000-2002 market decline than the NYSE
B)NASDAQ dealers make a market by standing ready to buy and sell securities
C)Stocks listed on the NYSE may also trade on NASDAQ
D)NASDAQ's electronic trading system provides instantaneous transactions

Question 12

Investment bankers operate in the:

A)primary market
B)secondary market
C)tertiary market
D)fourth market

Question 13

The sale of a new issue of common stock of which there are already shares publicly held is known as:

A)an IPO.
B)a secondary market issue.
C)an EPO.
D)a seasoned new issue.

Question 14

Some OTC stocks are traded through the:

A)Blue Sheets.
B)Red Sheets.
C)Pink Sheets
D)Green Sheets.

Question 15

Automatic Shelf Registration refers to the practice of allowing:

A)well-seasoned issuers to file shelf registration statements with the SEC that become effective immediately,or the filing of a "base prospectus," enabling efficient stock issue
B)well-seasoned issuers to file shelf registration statements with the SEC that become effective immediately,or the filing of a "base prospectus," enabling efficient debt issue
C)well-seasoned issuers to file shelf registration statements with the SEC that become effective immediately,or the filing of a "base prospectus," enabling efficient stock or debt issue
D)well-seasoned issuers to file shelf registration statements with the SEC that become effective immediately upon filing of a "red herring prospectus," enabling efficient stock or bond issue

Question 16

A computerized trading network that matches buy and sell orders electronically entered by customers is a:

A)National Markets System
B)Electronic Communications Network
C)Internet Investment Service
D)Global Investment Network

Question 17

According to its website,NYSE Euronext accounts for nearly what percent of the world's publicly traded equity securities?

A)nearly 25%
B)nearly 33%
C)nearly 40%
D)nearly 50%

Question 18

A type of trading involving a basket of 15 stocks or more and often used in conjunction with arbitrage strategies is called:

A)swapping
B)program trading
C)day trading
D)insider trading

Question 19

Which of the following is not true regarding the NYSE Amex?

A)It specializes in technology and biotech stocks
B)It trades only ETFs
C)It specializes in small- and mid-cap stocks
D)It is an Over-the-Counter (OTC)market

Question 20

The ___________ summarizes information about a new security issue.

A)syndicate offer
B)IPO
C)prospectus
D)shelf rule

Question 21

Europe's leading cross border exchange is:

A)Deutsche Boerse
B)Euromarket
C)London Stock Exchange
D)NYSE Euronext

Question 22

In-house trading refers to:

A)trades made only on the floor of the exchanges
B)direct trades made between OTC dealers
C)trades by fund managers without the use of brokers or exchanges
D)trades made between specialists on the NYSE

Question 23

A large public offering is often handled by a syndicate of investment banking firms,with one lead managing underwriter.

Question 24

The Dow-Jones Industrial Average has historically consisted of high quality stocks that were considered to be:

A)OTC stocks
B)cyclical stock
C)blue-chip stocks
D)defensive stocks

Question 25

Stocks traded on NASDAQ are bought and sold from specialists,who are often affiliated with brokerage firms.

Question 26

A market capitalization-weighted index obtains the current market value of each stock by:

A)using the closing market price.
B)multiplying price times shares outstanding.
C)multiplying price times daily volume.
D)dividing earnings by shares outstanding.

Question 27

In private placements,new securities issues are sold directly to financial institutions.

Question 28

Smaller companies with fewer publicly held shares are more likely to meet the listing requirements of the NYSE.

Question 29

The largest electronic screen-based equity securities market in the U.S.is known as:

A)Pink Sheets
B)Instinet
C)Amex
D)NASDAQ

Question 30

Which of the following statements about NYSE is true?

A)The NYSE is the oldest and most prominent primary market in the U.S.
B)Specialists account for over 50 percent of the seats on the NYSE.
C)The NYSE is the oldest and most prominent secondary market in the U.S.
D)Institutional investors do not trade on the NYSE

Question 31

The yields on corporate bonds issued in the primary market should be___________the yields on similar corporate bonds trading in the secondary market.

A)much less than
B)exactly the same as
C)slightly higher than
D)similar to

Question 32

The price that some seller is trying to sell a stock for is known at the:

A)the bid quote
B)the ask quote
C)the closing price
D)the specialist price

Question 33

The type of bonds with the thinnest secondary market is:

A)agency bonds
B)corporate bonds
C)Treasury bonds
D)municipal bonds

Question 34

The NASDAQ 100 Composite Index is a value-weighted index.

Question 35

The open-outcry system for trading securities is utilized in the:

A)futures market
B)municipal bond market
C)Treasury bond market
D)options market

Question 36

Which of the following limits the usefulness of the S&P 500 Index as a market benchmark?

A)It is too weighted with NYSE stocks to be representative.
B)It is too difficult to calculate for the average investor.
C)Its use of a base year in its calculations affects its performance.
D)Its performance can be greatly affected by a small number of stocks.

Question 37

The difference between the bid and the ask price is known as the:

A)commission
B)premium
C)quote
D)spread

Question 38

A criticism of the Dow-Jones Industrial Average (DJIA)is:

A)it has too few stocks in the average
B)it is a value weighted method
C)it adjusts for even small stock dividends
D)it includes too many risky stocks

Question 39

Most secondary bond trading takes place on:

A)the NYSE
B)the American Stock Exchange
C)the OTC
D)the Philadelphia Exchange

Question 40

A major difference between the Standard & Poor's 500 Index (S&P)and the Dow-Jones Industrial Average (DJIA)is that:

A)the S&P 500 is more dominated by OTC stocks than the DJIA
B)the S&P 500 is more difficult to calculate than the DJIA
C)the DJIA is a price-weighted rather than value-weighted index like the S&P 500
D)the S&P 500 is more stable than the DJIA

Question 41

What is the difference between a price-weighted index and a market-value index?

Question 42

The Dow Jones averages handle stock splits by adjusting the market value of the stocks.

Question 43

What impact does the increasing amount of institutional investing have on securities markets today and what role do you think institutional investors will play in the future?

Question 44

Why do the DJIA and the S&P 500 have a high correlation?

Question 45

How do you think the globalization of the securities markets will impact the NYSE and the Nasdaq? What specific developments do you foresee happening soon for the global marketplace?

Question 46

ECNs offer the advantages of automation,lower costs and anonymity to its members.

Question 47

What are the major similarities and differences between a specialist and a
dealer?

Question 48

What are the major advantages of a private placement for the issuer of securities?

Question 49

The S&P 500 comprises approximately ________________ percent of the market capitalization of all U.S.publicly traded companies.

Question 50

What is the Nasdaq National Market System?

Question 51

What factors does the NYSE consider important in determining if a company should be listed on the exchange?

Question 52

Normal stock exchange hours in the U.S.are 9:30 a.m.to 4 p.m.

Question 53

By 2005,program trading accounted for over 70 percent of total NYSE volume.

Question 54

Prices of stocks traded on the NYSE are determined through supply and demand.

Question 55

What is the difference between a seasoned new issue and an initial public offering?

Question 56

The DJIA is a ______________-weighted index.

Question 57

Orders on Nasdaq come from market makers,ECNs and on-line brokers.

Question 58

An NYSE Euronext market maker awaits news of a major merger involving one of the stocks he/she makes a market in.Why does he/she set the bid-ask spread higher?

Question 59

What is Instinet and what does it offer for investors?

Question 60

All OTC stocks are included in the Nasdaq.