Question 1

Assume you sold short 100 shares of common stock at $70 per share.The initial margin is 50%.What would be the maintenance margin if a margin call is made at a stock price of $85

Accepted Answer

A)  40.5%
B)  20.5%
C)  35.5%
D)  23.5% D

Question 2

Which of the following is not required under the CFA Institute Standards of Professional Conduct

Accepted Answer

A)  Knowledge of all applicable laws, rules and regulations
B)  Disclosure of all personal investments, whether or not they may conflict with a client's investments
C)  Disclosure of all conflicts to clients and prospects
D)  Reasonable inquiry into a client's financial situation
E)  All of the options are required under the CFA Institute standards. B

Question 3

You purchased 300 shares of common stock on margin for $60 per share.The initial margin is 60% and the stock pays no dividend.What would your rate of return be if you sell the stock at $45 per share Ignore interest on margin.

Accepted Answer

A)  25.00%
B)  -33.33%
C)  44.31%
D)  -41.67%
E)  -54.22% D

Question 4

You purchased 1,000 shares of common stock on margin at $30 per share.Assume the initial margin is 50% and the stock pays no dividend.What would the maintenance margin be if a margin call is made at a stock price of $24 Ignore interest on margin.

Accepted Answer

A)  0.33
B)  0.375
C)  0.20
D)  0.23
E)  0.25

Question 5

In a "firm commitment," the investment banker

Accepted Answer

A)  buys the stock from the company and resells the issue to the public.
B)  agrees to help the firm sell the stock at a favorable price.
C)  finds the best marketing arrangement for the investment banking firm.
D)  agrees to help the firm sell the stock at a favorable price and finds the best marketing arrangement for the investment banking firm.

Question 6

Which of the following statements regarding the specialist are true

Accepted Answer

A)  Specialists maintain a book listing outstanding unexecuted limit orders.
B)  Specialists earn income from commissions and spreads in stock prices.
C)  Specialists stand ready to trade at quoted bid and ask prices.
D)  Specialists cannot trade in their own accounts.
E)  Specialists maintain a book listing outstanding unexecuted limit orders, earn income from commissions and spreads in stock prices, and stand ready to trade at quoted bid and ask prices.

Question 7

You sold short 100 shares of common stock at $45 per share.The initial margin is 50%.Your initial investment was

Accepted Answer

A)  $4,800.
B)  $12,000.
C)  $2,250.
D)  $7,200.

Question 8

Block transactions are transactions for more than _______ shares and they account for about _____ percent of all trading on the NYSE.

Accepted Answer

A)  1,000; 5
B)  500; 10
C)  100,000; 50
D)  10,000; 30
E)  5,000; 23

Question 9

List three factors that are listing requirements for the New York Stock Exchange.Why does the exchange have such requirements

Accepted Answer

The answer of List three factors that are listing requirements...

Question 10

You purchased 100 shares of IBM common stock on margin at $70 per share.Assume the initial margin is 50% and the maintenance margin is 30%.Below what stock price level would you get a margin call Assume the stock pays no dividend; ignore interest on margin.

Accepted Answer

A)  $21
B)  $50
C)  $49
D)  $80

Question 11

The cost of buying and selling a stock consists of

Accepted Answer

A)  broker's commissions.
B)  dealer's bid-asked spread.
C)  a price concession an investor may be forced to make.
D)  broker's commissions and dealer's bid-asked spread.
E)  broker's commissions, dealer's bid-asked spread, and a price concession an investor may be forced to make.

Question 12

Initial margin requirements are determined by

Accepted Answer

A)  the Securities and Exchange Commission.
B)  the Federal Reserve System.
C)  the New York Stock Exchange.
D)  the Federal Reserve System and the New York Stock Exchange.

Question 13

You purchased 100 shares of common stock on margin for $35 per share.The initial margin is 50% and the stock pays no dividend.What would your rate of return be if you sell the stock at $42 per share Ignore interest on margin.

Accepted Answer

A)  28%
B)  33%
C)  14%
D)  40%
E)  24%

Question 14

You sell short 100 shares of Loser Co.at a market price of $45 per share.Your maximum possible loss is

Accepted Answer

A)  $4,500.
B)  unlimited.
C)  zero.
D)  $9,000.
E)  Cannot tell from the information given

Question 15

Which one of the following statements regarding orders is false

Accepted Answer

A)  A market order is simply an order to buy or sell a stock immediately at the prevailing market price.
B)  A limit-sell order is where investors specify prices at which they are willing to sell a security.
C)  If stock ABC is selling at $50, a limit-buy order may instruct the broker to buy the stock if and when the share price falls below $45.
D)  A market order is an order to buy or sell a stock on a specific exchange (market) .

Question 16

You sold short 100 shares of common stock at $45 per share.The initial margin is 50%.At what stock price would you receive a margin call if the maintenance margin is 35%

Accepted Answer

A)  $50
B)  $65
C)  $35
D)  $40

Question 17

You purchased 100 shares of XON common stock on margin at $60 per share.Assume the initial margin is 50% and the maintenance margin is 30%.Below what stock price level would you get a margin call Assume the stock pays no dividend; ignore interest on margin.

Accepted Answer

A)  $42.86
B)  $50.75
C)  $49.67
D)  $80.34

Question 18

One outcome from the SEC investigation of the "Flash Crash of 2010" was

Accepted Answer

A)  a prohibition of short selling.
B)  higher margin requirements.
C)  approval of new circuit breakers.
D)  establishment of electronic communications networks (ECNs) .
E)  passage of the Sarbanes-Oxley Act.

Question 19

Discuss margin buying of common stocks.Include in your discussion the advantages and disadvantages, the types of margin requirements, how these requirements are met, and who determines these requirements.

Accepted Answer

The answer of Discuss margin buying of common stocks.Include in...

Question 20

Investment bankers

Accepted Answer

A)  act as intermediaries between issuers of stocks and investors.
B)  act as advisors to companies in helping them analyze their financial needs and find buyers for newly issued securities.
C)  accept deposits from savers and lend them out to companies.
D)  act as intermediaries between issuers of stocks and investors and act as advisors to companies in helping them analyze their financial needs and find buyers for newly issued securities.

Exam 3: How Securities Are Traded