Question 1

When a firm markets new securities, a preliminary registration statement must be filed with

Accepted Answer

A)  the exchange on which the security will be listed. 
B)  the Securities and Exchange Commission. 
C)  the Federal Reserve. 
D)  all other companies in the same line of business. 
E)  the Federal Deposit Insurance Corporation. 
A)  the exchange on which the security will be listed. 
B)  the Securities and Exchange Commission. 
C)  the Federal Reserve. 
D)  all other companies in the same line of business. 
E)  the Federal Deposit Insurance Corporation.

Question 2

You purchased 100 shares of common stock on margin for $60 per share. The initial margin is 50%, and the stock pays no dividend. What would your rate of return be if you sell the stock at $72 per share? Ignore interest on margin.

Accepted Answer

A)  28% 
B)  33% 
C)  14% 
D)  40% 
E)  24% 
A)  28% 
B)  33% 
C)  14% 
D)  40% 
E)  24%

Question 3

You sold AAPL stock short at $190 per share. Your losses could be minimized by placing a

Accepted Answer

A)  limit-sell order. 
B)  limit-buy order. 
C)  stop-buy order. 
D)  day-order. 
E)  None of the options are correct. 
A)  limit-sell order. 
B)  limit-buy order. 
C)  stop-buy order. 
D)  day-order. 
E)  None of the options are correct.

Question 4

You purchased 1,000 shares of PINS common stock on margin at $19 per share. Assume the initial margin is 50%, and the maintenance margin is 30%. Below what stock price level would you get a margin call? Assume the stock pays no dividend; ignore interest on margin.

Accepted Answer

A)  $12.86 
B)  $15.75 
C)  $19.67 
D)  $13.57 
A)  $12.86 
B)  $15.75 
C)  $19.67 
D)  $13.57

Question 5

What kind of entity will often sell a company via an initial public offering, when the firm gets too big for similar entities to purchase?

Accepted Answer

A)  Underwriter 
B)  Investment banking 
C)  Private Equity 
D)  Broker 
A)  Underwriter 
B)  Investment banking 
C)  Private Equity 
D)  Broker

Question 6

Assume you sold short 100 shares of common stock at $70 per share. The initial margin is 50%. What would be the maintenance margin if a margin call is made at a stock price of $85?

Accepted Answer

A)  40.5% 
B)  20.5% 
C)  35.5% 
D)  23.5% 
A)  40.5% 
B)  20.5% 
C)  35.5% 
D)  23.5%

Question 7

Which of the following is true regarding private placements of primary security offerings?

Accepted Answer

A)  Extensive and costly registration statements are required by the SEC. 
B)  For very large issues, they are better suited than public offerings. 
C)  They trade in secondary markets. 
D)  The shares are sold directly to a small group of institutional or wealthy investors. 
E)  They have greater liquidity than public offerings. 
A)  Extensive and costly registration statements are required by the SEC. 
B)  For very large issues, they are better suited than public offerings. 
C)  They trade in secondary markets. 
D)  The shares are sold directly to a small group of institutional or wealthy investors. 
E)  They have greater liquidity than public offerings.

Question 8

The Securities Act of 1934 I) requires full disclosure of relevant information relating to the issue of new securities.
II. requires registration of new securities.
III. requires issuance of a prospectus detailing financial prospects of the firm.
IV. established the SEC.
V. requires periodic disclosure of relevant financial information.
VI. empowers SEC to regulate exchanges, OTC trading, brokers, and dealers.

Accepted Answer

A)  I, II, and III 
B)  I, II, III, IV, V, and VI 
C)  I, II, and V 
D)  I, II, and IV 
E)  IV, V, and VI 
A)  I, II, and III 
B)  I, II, III, IV, V, and VI 
C)  I, II, and V 
D)  I, II, and IV 
E)  IV, V, and VI

Question 9

The cost of buying and selling a stock consists of

Accepted Answer

A)  broker's commissions. 
B)  dealer's bid-asked spread. 
C)  a price concession an investor may be forced to make. 
D)  broker's commissions and dealer's bid-asked spread. 
E)  broker's commissions, dealer's bid-asked spread, and a price concession an investor may be forced to make. 
A)  broker's commissions. 
B)  dealer's bid-asked spread. 
C)  a price concession an investor may be forced to make. 
D)  broker's commissions and dealer's bid-asked spread. 
E)  broker's commissions, dealer's bid-asked spread, and a price concession an investor may be forced to make.

Question 10

You sold short 200 shares of common stock at $60 per share. The initial margin is 60%. Your initial investment was

Accepted Answer

A)  $4,800. 
B)  $12,000. 
C)  $5,600. 
D)  $7,200. 
A)  $4,800. 
B)  $12,000. 
C)  $5,600. 
D)  $7,200.

Question 11

Which of the following orders instructs the broker to buy at or above a specified price?

Accepted Answer

A)  Limit-buy order 
B)  Discretionary order 
C)  Limit-sell order 
D)  Stop-buy order 
E)  Market order 
A)  Limit-buy order 
B)  Discretionary order 
C)  Limit-sell order 
D)  Stop-buy order 
E)  Market order

Question 12

Investment bankers

Accepted Answer

A)  act as intermediaries between issuers of stocks and investors. 
B)  act as advisors to companies in helping them analyze their financial needs and find buyers for newly-issued securities. 
C)  accept deposits from savers and lend them out to companies. 
D)  act as intermediaries between issuers of stocks and investors and act as advisors to companies in helping them analyze their financial needs and find buyers for newly-issued securities. 
A)  act as intermediaries between issuers of stocks and investors. 
B)  act as advisors to companies in helping them analyze their financial needs and find buyers for newly-issued securities. 
C)  accept deposits from savers and lend them out to companies. 
D)  act as intermediaries between issuers of stocks and investors and act as advisors to companies in helping them analyze their financial needs and find buyers for newly-issued securities.

Question 13

The process of marketing a public offering is usually referred to as ____________.

Accepted Answer

A)  Underwriting 
B)  Investment banking 
C)  Brokerage 
D)  Discounting 
E)  IPO 
A)  Underwriting 
B)  Investment banking 
C)  Brokerage 
D)  Discounting 
E)  IPO

Question 14

You purchased 1,000 shares of common stock on margin at $30 per share. Assume the initial margin is 50%, and the stock pays no dividend. What would the maintenance margin be if a margin call is made at a stock price of $24? Ignore interest on margin.

Accepted Answer

A)  0.33 
B)  0.375 
C)  0.20 
D)  0.23 
E)  0.25 
A)  0.33 
B)  0.375 
C)  0.20 
D)  0.23 
E)  0.25

Question 15

Which of the following orders instructs the broker to sell at or above a specified price?

Accepted Answer

A)  Limit-buy order 
B)  Discretionary order 
C)  Limit-sell order 
D)  Stop-buy order 
E)  Market order 
A)  Limit-buy order 
B)  Discretionary order 
C)  Limit-sell order 
D)  Stop-buy order 
E)  Market order

Question 16

You want to buy 100 shares of Hotstock Inc. at the best possible price as quickly as possible. You would most likely place a

Accepted Answer

A)  stop-loss order. 
B)  stop-buy order. 
C)  market order. 
D)  limit-sell order. 
E)  limit-buy order. 
A)  stop-loss order. 
B)  stop-buy order. 
C)  market order. 
D)  limit-sell order. 
E)  limit-buy order.

Question 17

Who purchased the NYSE in 2013?

Accepted Answer

A)  International Exchange 
B)  NYSE Hybrid Market 
C)  Designated Order Turnaround 
D)  NYSE Euronext 
A)  International Exchange 
B)  NYSE Hybrid Market 
C)  Designated Order Turnaround 
D)  NYSE Euronext

Question 18

You purchased 100 shares of common stock on margin at $40 per share. Assume the initial margin is 50%, and the stock pays no dividend. What would the maintenance margin be if a margin call is made at a stock price of $25? Ignore interest on margin.

Accepted Answer

A)  0.33 
B)  0.55 
C)  0.20 
D)  0.23 
E)  0.25 
A)  0.33 
B)  0.55 
C)  0.20 
D)  0.23 
E)  0.25

Question 19

You sold short 150 shares of common stock at $27 per share. The initial margin is 45%. Your initial investment was

Accepted Answer

A)  $4,800.60. 
B)  $12,000.25. 
C)  $2,250.75. 
D)  $1,822.50. 
A)  $4,800.60. 
B)  $12,000.25. 
C)  $2,250.75. 
D)  $1,822.50.

Question 20

In a "firm commitment," the investment banker

Accepted Answer

A)  buys the stock from the company and resells the issue to the public. 
B)  agrees to help the firm sell the stock at a favorable price. 
C)  finds the best marketing arrangement for the investment-banking firm. 
D)  agrees to help the firm sell the stock at a favorable price and finds the best marketing arrangement for the investment-banking firm. 
A)  buys the stock from the company and resells the issue to the public. 
B)  agrees to help the firm sell the stock at a favorable price. 
C)  finds the best marketing arrangement for the investment-banking firm. 
D)  agrees to help the firm sell the stock at a favorable price and finds the best marketing arrangement for the investment-banking firm.

Exam 3: How Securities Are Traded

When a firm markets new securities, a preliminary registration statement must be filed with

You purchased 100 shares of common stock on margin for $60 per share. The initial margin is 50%, and the stock pays no dividend. What would your rate of return be if you sell the stock at $72 per share? Ignore interest on margin.

You sold AAPL stock short at $190 per share. Your losses could be minimized by placing a

You purchased 1,000 shares of PINS common stock on margin at $19 per share. Assume the initial margin is 50%, and the maintenance margin is 30%. Below what stock price level would you get a margin call? Assume the stock pays no dividend; ignore interest on margin.

What kind of entity will often sell a company via an initial public offering, when the firm gets too big for similar entities to purchase?

Assume you sold short 100 shares of common stock at $70 per share. The initial margin is 50%. What would be the maintenance margin if a margin call is made at a stock price of $85?

Which of the following is true regarding private placements of primary security offerings?

The cost of buying and selling a stock consists of

You sold short 200 shares of common stock at $60 per share. The initial margin is 60%. Your initial investment was

Which of the following orders instructs the broker to buy at or above a specified price?

Investment bankers

The process of marketing a public offering is usually referred to as ____________.

You purchased 1,000 shares of common stock on margin at $30 per share. Assume the initial margin is 50%, and the stock pays no dividend. What would the maintenance margin be if a margin call is made at a stock price of $24? Ignore interest on margin.

Which of the following orders instructs the broker to sell at or above a specified price?

You want to buy 100 shares of Hotstock Inc. at the best possible price as quickly as possible. You would most likely place a

Who purchased the NYSE in 2013?

You purchased 100 shares of common stock on margin at $40 per share. Assume the initial margin is 50%, and the stock pays no dividend. What would the maintenance margin be if a margin call is made at a stock price of $25? Ignore interest on margin.

You sold short 150 shares of common stock at $27 per share. The initial margin is 45%. Your initial investment was

In a "firm commitment," the investment banker

The Investment Environment

Asset Classes and Financial Instruments

Mutual Funds and Other Investment Companies

Risk, Return, and the Historical Record

Capital Allocation to Risky Assets

Efficient Diversification

Index Models

The Capital Asset Pricing Model

Arbitrage Pricing Theory and Multifactor Models of Risk and Return

The Efficient Market Hypothesis

Behavioral Finance and Technical Analysis

Empirical Evidence on Security Returns

Bond Prices and Yields

The Term Structure of Interest Rates

Managing Bond Portfolios

Macroeconomic and Industry Analysis

Equity Valuation Models

Financial Statement Analysis

Options Markets: Introduction

Option Valuation

Futures Markets

Futures, Swaps, and Risk Management

Portfolio Performance Evaluation

International Diversification

Hedge Funds

The Theory of Active Portfolio Management

Investment Policy and the Framework of the Cfa Institute

Filters