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| 1 | |
A limit buy order is an order to buy stock that is executed _______________. |
| | A) | immediately at the best available price |
| | B) | immediately, at the current market price |
| | C) | at the lowest available price |
| | D) | when the stock can be obtained at or below a specified price |
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| 2 | |
Trading of already-issued stock takes place in the _______________. |
| | A) | primary market |
| | B) | secondary market |
| | C) | dealer market |
| | D) | auction market |
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| 3 | |
Which of the following statements is true of specialists on the NYSE? |
| | A) | An NYSE-listed stock can be assigned to more than one specialist. |
| | B) | When maintaining a fair and orderly market in a stock, a specialist functions as a broker for that stock. |
| | C) | When matching trades, a specialist must use the highest offered purchase price and the lowest offered selling price. |
| | D) | Specialists are prohibited from buying or selling stock for their own portfolios. |
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| 4 | |
An investor sells short 200 shares of stock at $15 per share. The initial margin requirement is 60%. The investor earns no interest on funds in the margin account and no dividends are paid. What is the investors rate of return after one year if the short sale is covered at $12 per share? |
| | A) | 20.0% |
| | B) | -20.0% |
| | C) | 33.3% |
| | D) | -33.3% |
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| 5 | |
Which of the following statements is (are) true about initial public offerings? |
| | A) | An IPO is a secondary market transaction in the stock of a company that was formerly privately owned. |
| | B) | Both short-term and long-term performance of IPOs has substantially exceeded returns for comparable companies. |
| | C) | Underpricing of IPOs is generally a substantial part of the issue cost. |
| | D) | Both (B) and (C) are true statements about IPOs. |
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| 6 | |
You sold short ABC stock at $50 per share. The current market price of the stock is $53. The most effective way to limit your potential losses is to place a _______________. |
| | A) | limit-buy order |
| | B) | limit-sell order |
| | C) | stop-buy order |
| | D) | stop-loss order |
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| 7 | |
The Nasdaq Stock Market is a _______________. |
| | A) | primary dealer market |
| | B) | secondary dealer market |
| | C) | secondary auction market |
| | D) | secondary brokered market |
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| 8 | |
Which of the following is not a provision of the Sarbanes-Oxley Act? |
| | A) | Creation of a Public Company Accounting Oversight Board. |
| | B) | Auditors prohibited from providing other services to their audit clients. |
| | C) | Full disclosure of relevant information related to the issuance of new securities. |
| | D) | Certification of financial reports by a company's CEO and CFO. |
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| 9 | |
Which of the following statements is (are) true about electronic communication networks? |
| | A) | ECNs are private computer networks directly linking buyers and sellers of securities. |
| | B) | ECNs allow for automatic "crossing" of orders so that the bid-ask spread can be eliminated. |
| | C) | ECNs have been very successful in expanding the volume of trades in Nasdaq-listed stocks that take place on the networks. |
| | D) | All of the above statements are true about ECNs. |
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| 10 | |
You sold short 200 shares of XYZ common stock at $40 per share. The initial margin requirement was 60%. Your initial investment was _______________. |
| | A) | $3,200 |
| | B) | $4,800 |
| | C) | $6,000 |
| | D) | $8,000 |
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| 11 | |
Suppose you purchase 400 shares of MLP common stock on margin at $25 per share. The initial margin is 60% and the maintenance margin is 30%. You will get a margin call if the stock price falls below _______________. (Assume the stock pays no dividends and ignore interest on the margin loan.) |
| | A) | $7.50 |
| | B) | $16.72 |
| | C) | $21.43 |
| | D) | $14.29 |
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| 12 | |
Suppose you sell short 500 shares of stock that is currently selling for $40 per share. The initial margin requirement is 70% and your broker requires a 30% maintenance margin. What is the percentage margin in your account if the stock price increases to $60? (You earn no interest on the funds in your margin account and the firm does not pay any dividends). |
| | A) | 13.3% |
| | B) | 20.0% |
| | C) | 46.7% |
| | D) | 11.8% |
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| 13 | |
You are bullish on Norton, Inc., common stock which currently has a market price of $30 per share. You decide to invest $8,000 of your own money and you borrow $7,000 from your broker in order to buy 500 shares of Norton stock. The broker charges 10% interest on the loan. In one year, you sell the stock for $35. Your rate of return was: |
| | A) | 16.7% |
| | B) | 22.5% |
| | C) | 31.3% |
| | D) | 12.0% |
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| 14 | |
Which of the following statements is true about bond trading? |
| | A) | Most trading of bonds on the New York Stock Exchange represents primary market transactions. |
| | B) | Corporate bond trading is very active, although not as active as trading in common stock. |
| | C) | In order for a company to list its bonds on the New York Stock Exchange bond trading system, each bond must be registered with the exchange. |
| | D) | The majority of bond trading occurs in the over-the-counter market. |
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| 15 | |
In a(n) _______________, investment bankers purchase securities from the issuing company at a price equal to the public offering price less a spread, and then resell the securities at the public offering price. |
| | A) | auction market |
| | B) | shelf registration |
| | C) | firm commitment |
| | D) | private placement |
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