Student Centre | Instructor Centre | Information Centre | Home

Investments, 4th Canadian Edition, 4/e

Zvi Bodie, Boston University School of Management
Alex Kane, University of California, San Diego
Alan Marcus, Boston College
Stylianos Perrakis, Concordia University
Peter Ryan, University of Ottawa

How Securities are Traded

Multiple Choice Quiz

Prepared by William Lim, University of New Brunswick.


1	The use of the internet to trade and underwrite securities
		A)	is regulated by the Toronto Stock Exchange
		B)	is expected to grow quickly
		C)	is illegal under Ontario Securities Commission rules
		D)	is regulated by the Investment Dealers Association
		E)	increases underwriting costs for a new security issue


2	You purchased BBD stock at $45 per share. The stock is currently selling at $70. Your gains may be protected by placing a
		A)	stop-loss order
		B)	market order
		C)	limit-sell order
		D)	limit-buy order
		E)	none of the above


3	Assume you purchased 100 shares of common stock at $50 per share. The initial margin is 40%. Your initial investment was
		A)	$4,800
		B)	$5000
		C)	$2000
		D)	$9000
		E)	$7800


4	Assume you sold short 200 shares of common stock at $60 per share. The initial margin is 50%. What would be the maintenance margin if a margin call is made at a stock price of $70?
		A)	30%
		B)	40%
		C)	25%
		D)	33%
		E)	none of the above


5	Assume you sell short 100 shares of common stock at $45 per share, with initial margin at 50%. What would be your rate of return if you repurchase the stock at $40 per share? The stock paid no dividends during the period, and you did not remove any money from the account before making the offsetting transaction.
		A)	25%
		B)	22%
		C)	20%
		D)	77%
		E)	none of the above


6	A prompt offering prospectus
		A)	increases transaction costs to the issuing firm
		B)	reduces the underwriters' risk
		C)	makes bought deals more attractive
		D)	A and C
		E)	B and C


7	A sale by Corel of new stock to the public would be
		A)	a seasoned new issue offering
		B)	a short sale
		C)	an initial public offering
		D)	a secondary market transaction
		E)	none of the above


8	You sell short 200 shares of Loser Inc. at a market price of $55 per share. Your maximum possible loss is
		A)	$11,000
		B)	zero
		C)	unlimited
		D)	$22,000
		E)	cannot tell from the given information


9	How many seats are on the Toronto Stock Exchange?
		A)	10
		B)	60
		C)	100
		D)	300
		E)	there are no seats, only shares.


10	Insider trading
		A)	yields only a normal return to insiders
		B)	may yield a prison sentence in Canada if convicted
		C)	levels the playing field between insiders and other investors
		D)	yields abnormally high returns to insiders at other investors' expense
		E)	is legal in Ontario

2003 McGraw-Hill Higher Education
Any use is subject to the Terms of Use and Privacy Policy.
McGraw-Hill Higher Education is one of the many fine businesses of The McGraw-Hill Companies.