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Multiple Choice Quiz
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1

The use of the Internet to trade and underwrite securities
A)is regulated by the New York Stock Exchange.
B)is expected to grow quickly.
C)is illegal under SEC rules.
D)is regulated by the National Association of Securities Dealers .
E)increases underwriting costs for a new security issue.
2

You purchased CBS 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 investment was
A)$3,000
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 prices of $70?
A)29%
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

Shelf registration
A)increases transaction costs to the issuing firm.
B)allows firms to register securities for sale for a two year period.
C)is a way of placing issues in the primary market.
D)A and C
E)B and C
7

A sale by Microsoft of new stock to the public would be a(n)
A)short sale.
B)initial public offering.
C)secondary market transaction.
D)seasoned new issue offering.
E)none of the above.
8

You sell short 200 shares of Bad Co. 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

A finalized registration statement for new securities approved by the SEC is called
A)the prospectus.
B)a red herring.
C)a firm commitment.
D)a best-efforts agreement.
E)the preliminary statement.
10

Assume you purchased 100 shares of common stock at $50 per share using 2,500 of your own money. The initial margin requirement is 50%. If the maintenance margin is 30%, at what prince would you get a margin call?
A)$26.14
B)$50.00
C)$35.71
D)$77.12
E)$78.00





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