Question 1

An order book displays the following information:
$\begin{array}{cccc}
\text { Buy Orders}& \text { Sell Orders}\
\hline \text { Shares }\quad \text { Price } & \text { Shares } \quad \text { Price } \
100 \quad  \$ 18.07& 100 \quad  \$ 18.11 \
500 \quad  \$ 18.06 & 500 \quad  \$ 18.12 \
300 \quad  \$ 18.05 & 100 \quad  \$ 18.12
\end{array}$

You place an order to sell 100 shares. At what price will your order be executed?

Accepted Answer

A) $18.05 
B) $18.06 
C) $18.07 
D) $18.11 
E) $18.12

Question 2

A firm that specializes in arranging financing for companies is called a(n):

Accepted Answer

A) floor broker. 
B) investment banking firm. 
C) investment dealer. 
D) private broker. 
E) marketing firm.

Question 3

An index has a market value of $695,200 at the beginning of the period and $735,000 at the end of the period. If you want the beginning index value to be 100, what is the ending index value?

Accepted Answer

A) 104.73 
B) 105.42 
C) 105.72 
D) 105.89 
E) 106.72

Question 4

Which of the following are common sources of venture capital?
I. private individuals
II. NASDAQ
III. university endowment funds
IV. insurance companies

Accepted Answer

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

Question 5

NASDAQ dealers post which one of the following in addition to their bid and ask prices?

Accepted Answer

A) commission rates 
B) front-end load charges 
C) number of shares they will commit to buy or sell 
D) total trades for the day 
E) trading fees

Question 6

Which one of the following statements concerning the NYSE is correct?

Accepted Answer

A) The NYSE was created based on the Walnut Tree Agreement. 
B) The average daily trading volume on the NYSE in 2007 was approximately one billion shares. 
C) The NYSE and NASDAQ merged in 2007. 
D) The NYSE is part of a firm that also operates a stock exchange in Amsterdam. 
E) The NYSE merged with NASDAQ in 2007.

Question 7

You want to sell shares of stock at the current price. Which type of order should you place?

Accepted Answer

A) limit 
B) post 
C) market 
D) short 
E) stop

Question 8

ML Underwriters paid an issuer $37,694,528 as IPO proceeds. The IPO offered 1.86 million shares of which 1.835 million were sold at an offer price of $21.85 a share. The underwriting spread was 7.25%. What type of underwriting was this?

Accepted Answer

A) best efforts 
B) variable 
C) firm commitment 
D) plain vanilla 
E) stand-by

Question 9

The financing provided for new ventures that are frequently high-risk investments is referred to as "venture ________".

Accepted Answer

A) capital 
B) leverage 
C) risk funds 
D) funding 
E) investing

Question 10

Stocks which are listed on the NYSE can:

Accepted Answer

A) never be listed on any other exchange. 
B) only be dual listed on a regional exchange. 
C) only be dual listed on Instinet. 
D) only be dual listed on the Archipelago Exchange. 
E) also be listed on NASDAQ.

Question 11

Moonlight is offering 1,100 shares in a Dutch auction IPO. The following bids have been received:
$$\begin{array} { c c c } 
\text { Bidder } & \text { Ouantity } & \text { Price } \
\text { A } & 200 & \$ 18 \
\text { B } & 100 & 18 \
\text { C } & 400 & 17 \
\text { D } & 400 & 16 \
\text { E } & 200 & 16
\end{array}$$
How much will Moonlight receive from this offering if the underwriter's fee is 6.5%?

Accepted Answer

A) $12,905.75 
B) $13,440.60 
C) $15,184.25 
D) $16,456.00 
E) $19,095.30

Question 12

Juno Markets is offering 900 shares in a Dutch auction IPO. The following bids have been received:
$$\begin{array} { c c c } 
\text { Bidder } & \text { Ouantity } & \text { Price } \
\text { A } & 100 & \$ 18 \
\text { B } & 300 & 18 \
\text { C } & 400 & 16 \
\text { D } & 200 & 15 \
\text { E } & 800 & 14
\end{array}$$
How much will Bidder B have to spend to purchase all of the shares that have been allocated to him?

Accepted Answer

A) $4,050.00 
B) $4,212.00 
C) $4,800.00 
D) $5,200.00 
E) $5,700.00

Question 13

Sam placed a limit order to sell 500 shares of stock at $14 a share. Which of the following does Sam know for sure?
I. His order will execute but the time of execution is unknown.
II. His order may never execute.
III. He will receive exactly $7,000 if his order executes.
IV. He could receive more, but not less, than $14 a share.

Accepted Answer

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

Question 14

The off-exchange market in which exchange-listed securities trade is referred to as the ________ market.

Accepted Answer

A) independent 
B) secondary 
C) fourth 
D) third 
E) primary

Question 15

After the trigger point is reached, a stop-loss order will be executed at the:

Accepted Answer

A) trigger price. 
B) stop price. 
C) trigger price or better. 
D) stop price or better. 
E) market price.

Question 16

DT Metals is offering 700 shares in a Dutch auction IPO. The following bids have been received:
$$\begin{array} { c c c } 
\text { Bidder } & \text { Ouantity } & \text { Price } \
\text { A } & 100 & \$ 24 \
\text { B } & 200 & 22 \
\text { C } & 200 & 22 \
\text { D } & 300 & 21 \
\text { E } & 600 & 20
\end{array}$$
What will the gross proceeds be for this offering?

Accepted Answer

A) $12,000 
B) $12,600 
C) $13,200 
D) $13,300 
E) $14,700

Question 17

A private equity fund:
I. is set up as a limited partnership
II. usually uses a 2/20 fee structure
III. places no constraints on manager compensation
IV. typically has a stated life of 7 to 10 years

Accepted Answer

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

Question 18

Which one of the following statements related to the NYSE Hybrid market is correct?

Accepted Answer

A) Floor brokers operate both electronically and in person. 
B) The Hybrid system replaces the market specialists. 
C) The automated system works better than the specialist for stocks with minimal liquidity. 
D) The automated system will only replace the specialist in times of market duress. 
E) Investors can automatically trade an unlimited number of shares.

Question 19

When the issuer assumes the risk for any shares the underwriters cannot sell, the underwriting is known as a ________ underwriting.

Accepted Answer

A) Dutch auction 
B) partial 
C) firm commitment 
D) best efforts 
E) pro-rata

Question 20

The document that must be prepared in order to receive approval for a stock offering is called a(n):

Accepted Answer

A) tombstone. 
B) prospectus. 
C) offering agreement. 
D) regulatory report. 
E) offering paper.

Exam 5: The Stock Market

A firm that specializes in arranging financing for companies is called a(n) :