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| 1 | |
Which one of the following statements regarding orders is false? |
| | 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 day order expires at the close of the trading day. |
| | E) | None of the above. |
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| 2 | |
The use of the Internet to trade and underwrite securities |
| | A) | is illegal under SEC regulations. |
| | B) | is regulated by the New York Stock Exchange. |
| | C) | decreases underwriting costs for a new security issue. |
| | D) | increases underwriting costs for a new security issue. |
| | E) | is regulated by the National Association of Securities Dealers. |
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| 3 | |
Assume you purchased 500 shares of CSCO at $20 per share. The initial margin is 40%. Your investment was |
| | A) | $3,000 |
| | B) | $5,000 |
| | C) | $4,000 |
| | D) | $9,000 |
| | E) | $7,800 |
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| 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 was made at a stock price of $70? |
| | A) | 29% |
| | B) | 40% |
| | C) | 25% |
| | D) | 33% |
| | E) | none of the above |
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| 5 | |
Assume you sell short 100 shares of Citibank 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 |
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| 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 |
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| 7 | |
A sale by Wal-Mart 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. |
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| 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. |
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| 9 | |
Shares for short transactions |
| | A) | are usually borrowed from other brokers. |
| | B) | are typically shares held by the short seller's broker in street name. |
| | C) | are borrowed from commercial banks. |
| | D) | B and C. |
| | E) | none of the above. |
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| 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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