Question 1

Capital markets deal exclusively in stock. Money markets deal exclusively in debt instruments.

Accepted Answer

A) True 
 B)False

Question 2

The NYSE has listing requirements that include a minimum
I. number of outstanding shares.
II. amount of pre-tax earnings.
III. market value of publicly held shares.
IV. number of shareholders owning 100 shares or more.

Accepted Answer

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

Question 3

The governmental agency that oversees the capital markets is the

Accepted Answer

A)  Federal Trade Commission. 
B)  Federal Reserve. 
C)  Securities and Exchange Commission. 
D)  Fair Trade and Banking Agency.

Question 4

Explain the role of investment bankers and brokerage firms in the issuance of new securities.

Accepted Answer

The answer of Explain the role of investment bankers and...

Question 5

Investment bankers who join together to share the financial risk associated with buying an entire issue of new securities and reselling them to the public is called a(n)

Accepted Answer

A)  selling group. 
B)  tombstone group. 
C)  underwriting syndicate. 
D)  primary market group.

Question 6

There are many differences between broker markets and dealer markets. These differences include such things as membership, location, regulation, and several other characteristics. Discuss at least five key differences between these two markets.

Accepted Answer

The answer of There are many differences between broker markets...

Question 7

Underwriters are responsible for promoting and facilitating the sale of securities.

Accepted Answer

A) True 
 B)False

Question 8

Losses on a stock purchase are limited to the price of the stock, but losses on a short sale are potentially unlimited.

Accepted Answer

A) True 
 B)False

Question 9

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.

Question 10

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%

Question 11

Only U.S. corporations can list their stocks on the NYSE.

Accepted Answer

A) True 
 B)False

Question 12

A brokerage firm may set a lower margin requirement than that set by the Federal Reserve Board.

Accepted Answer

A) True 
 B)False

Question 13

The over-the-counter (OTC) market is a

Accepted Answer

A)  centrally located auction market. 
B)  telecommunications network connecting dealers. 
C)  market solely for institutional traders. 
D)  geographically dispersed auction market.

Question 14

A market where securities are are bought from or sold to a market maker is known as a

Accepted Answer

A)  broker market. 
B)  dealer market. 
C)  exchange floor. 
D)  board of exchange.

Question 15

Which one of the following statements about foreign investments is true?

Accepted Answer

A)  In general, major foreign markets always tend to underperform the U.S. market. 
B)  Investing in foreign markets may involve specific risks not encountered with domestic securities. 
C)  Investing in foreign markets will always produce higher returns because of exchange rate fluctuations. 
D)  Foreign markets include equity securities only.

Question 16

ECNs are

Accepted Answer

A)  publicly owned auction markets for listed stocks. 
B)  privately owned networks that transact trades between institutional investors. 
C)  facilities used by market makers for trading unlisted securities. 
D)  part of the third market which trades listed securities between individual investors.

Question 17

Stocks purchased in the secondary market are purchased

Accepted Answer

A)  directly from the issuing corporation. 
B)  from other investors. 
C)  from small, little-known brokerages. 
D)  indirectly through financial institutions.

Question 18

A market maker brings together buyers and sellers in an auction market.

Accepted Answer

A) True 
 B)False

Question 19

Michael purchased 1000 shares of stock at a price of $16 a share. He utilized his 50% margin account to make the purchase. What is Michael's initial equity in this investment?

Accepted Answer

A)  -$16,000 
B)  $16,000 
C)  $8.000 
D)  -$8,000

Question 20

Which one of the following is a major advantage of margin trading?

Accepted Answer

A)  increase in potential diversification 
B)  increase in potential profits on a percentage basis 
C)  possibility of increased gains on a dollar basis 
D)  interest free loans

Exam 2: Securities Markets and Transactions

Capital markets deal exclusively in stock. Money markets deal exclusively in debt instruments.

The NYSE has listing requirements that include a minimum I. number of outstanding shares. II. amount of pre-tax earnings. III. market value of publicly held shares. IV. number of shareholders owning 100 shares or more.

The governmental agency that oversees the capital markets is the

Explain the role of investment bankers and brokerage firms in the issuance of new securities.

Investment bankers who join together to share the financial risk associated with buying an entire issue of new securities and reselling them to the public is called a(n)

There are many differences between broker markets and dealer markets. These differences include such things as membership, location, regulation, and several other characteristics. Discuss at least five key differences between these two markets.

Underwriters are responsible for promoting and facilitating the sale of securities.

Losses on a stock purchase are limited to the price of the stock, but losses on a short sale are potentially unlimited.

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

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?

Only U.S. corporations can list their stocks on the NYSE.

A brokerage firm may set a lower margin requirement than that set by the Federal Reserve Board.

The over-the-counter (OTC) market is a

A market where securities are are bought from or sold to a market maker is known as a

Which one of the following statements about foreign investments is true?

ECNs are

Stocks purchased in the secondary market are purchased

A market maker brings together buyers and sellers in an auction market.

Michael purchased 1000 shares of stock at a price of $16 a share. He utilized his 50% margin account to make the purchase. What is Michael's initial equity in this investment?

Which one of the following is a major advantage of margin trading?