Question 1

Compare and contrast the functions and responsibilities of an NYSE designated market maker (DMM) with those of an OTC dealer.

Accepted Answer

DMMs must maintain a fair and orderly ma

Question 2

What are two methods of investing in stocks without a broker?

Accepted Answer

Automatic dividend r

Question 3

The main provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 was establishing stiffer penalties for insider trading.

Accepted Answer

A) True 
 B)False

Question 4

The short interest ratio indicates the number of days it would take for short sellers to cover all the shares sold short.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following regulations mandates greater corporate responsibility, such as holding a firm's executives responsible for the accuracy of the firm's financial statements?

Accepted Answer

A)  Reg FD 
B)  Dodd-Frank 
C)  FINRA 
D)  Sarbanes Oxley 
A)  Reg FD 
B)  Dodd-Frank 
C)  FINRA 
D)  Sarbanes Oxley

Question 6

Most short sales are executed by the broker acting as the "lender" of the security sold.

Accepted Answer

A) True 
 B)False

Question 7

Which statement regarding fees by full-service brokers is not true?

Accepted Answer

A)  Commissions vary by product. 
B)  The more complicated the transaction, the higher the commission. 
C)  The commission on many bonds is already built into the trade. 
D)  There is no commission on U.S. Treasury securities. 
A)  Commissions vary by product. 
B)  The more complicated the transaction, the higher the commission. 
C)  The commission on many bonds is already built into the trade. 
D)  There is no commission on U.S. Treasury securities.

Question 8

What is the actual margin when the stock price is $56?
A)65.9%
B)75.9%
C)79.9% 
D 80.9%

Accepted Answer

The answer of What is the actual margin when the...

Question 9

The Securities Investor Protection Corporation (SIPC) insures customer accounts at member brokers against brokerage failure for:

Accepted Answer

A)  securities totaling $100,000. 
B)  securities totaling $250,000. 
C)  securities totaling $500,000. 
D)  securities totaling $1,000,000. 
A)  securities totaling $100,000. 
B)  securities totaling $250,000. 
C)  securities totaling $500,000. 
D)  securities totaling $1,000,000.

Question 10

The NYSE is:

Accepted Answer

A)  a free agent market. 
B)  an agency auction market. 
C)  a negotiated market. 
D)  a dealer market. 
A)  a free agent market. 
B)  an agency auction market. 
C)  a negotiated market. 
D)  a dealer market.

Question 11

What is the difference between gains and losses on long positions vs. short sales?

Accepted Answer

On long positions, the potential gain is

Question 12

What costs and risks are incurred in using a margin account that are not present in a cash account?

Accepted Answer

There is the cost of interest

Question 13

The law that requires that all new issues being offered for public sale to be registered with the SEC is the:

Accepted Answer

A)  Securities Act of 1933. 
B)  Securities Exchange Act of 1934. 
C)  Maloney Act of 1936. 
D)  Securities Investor Protection Act of 1970. 
A)  Securities Act of 1933. 
B)  Securities Exchange Act of 1934. 
C)  Maloney Act of 1936. 
D)  Securities Investor Protection Act of 1970.

Question 14

Ms. Brown sold short 100 shares at $78 per share. The price has declined to $69. The stock's outlook is mixed, so she would like to cover her short position if the stock moves up as much as $1, but hold if it continues down. Ms. Brown should place a:

Accepted Answer

A)  sell stop order at $70. 
B)  buy stop order at $70. 
C)  sell limit order at $70. 
D)  buy limit order at $70. 
A)  sell stop order at $70. 
B)  buy stop order at $70. 
C)  sell limit order at $70. 
D)  buy limit order at $70.

Question 15

What are the advantages to investors of keeping their securities in street name?

Accepted Answer

Investors don't have

Question 16

Negotiated commissions are the norm for institutional investors; whereas most individual investors pay specified commissions set by the brokerage firm.

Accepted Answer

A) True 
 B)False

Question 17

A trading halt on the NYSE occurs:

Accepted Answer

A)  only when the SEC officially declares one is necessary. 
B)  when the market declines more than 10 percent during the day. 
C)  to allow a company to announce important news or where there is a significant order imbalance between buyers and sellers in a security. 
D)  any time designated market makers exhaust their capital. 
A)  only when the SEC officially declares one is necessary. 
B)  when the market declines more than 10 percent during the day. 
C)  to allow a company to announce important news or where there is a significant order imbalance between buyers and sellers in a security. 
D)  any time designated market makers exhaust their capital.

Question 18

Dollar cost averaging, in which additional shares are purchased over time, is one advantage of dividend reinvestment plans.

Accepted Answer

A) True 
 B)False

Question 19

An investor who short sold 120 shares of stock at $150 per share wishes to realize a gross profit of $2,400. At what price must the investor cover the short sale?

Accepted Answer

None

Question 20

Which of the following institutions has helped to eliminate the use of stock certificates by placing stock transactions on computers?

Accepted Answer

A)  Federal Reserve 
B)  Securities Exchange Commission 
C)  Depository Trust Company 
D)  Federal Deposit Insurance Corporation 
A)  Federal Reserve 
B)  Securities Exchange Commission 
C)  Depository Trust Company 
D)  Federal Deposit Insurance Corporation

Exam 5: How Securities Are Traded

Compare and contrast the functions and responsibilities of an NYSE designated market maker (DMM) with those of an OTC dealer.

What are two methods of investing in stocks without a broker?

The main provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 was establishing stiffer penalties for insider trading.

The short interest ratio indicates the number of days it would take for short sellers to cover all the shares sold short.

Which of the following regulations mandates greater corporate responsibility, such as holding a firm's executives responsible for the accuracy of the firm's financial statements?

Most short sales are executed by the broker acting as the "lender" of the security sold.

Which statement regarding fees by full-service brokers is not true?

What is the actual margin when the stock price is $56? A)65.9% B)75.9% C)79.9% D 80.9%

The Securities Investor Protection Corporation (SIPC) insures customer accounts at member brokers against brokerage failure for:

The NYSE is:

What is the difference between gains and losses on long positions vs. short sales?

What costs and risks are incurred in using a margin account that are not present in a cash account?

The law that requires that all new issues being offered for public sale to be registered with the SEC is the:

Ms. Brown sold short 100 shares at $78 per share. The price has declined to $69. The stock's outlook is mixed, so she would like to cover her short position if the stock moves up as much as $1, but hold if it continues down. Ms. Brown should place a:

What are the advantages to investors of keeping their securities in street name?

Negotiated commissions are the norm for institutional investors; whereas most individual investors pay specified commissions set by the brokerage firm.

A trading halt on the NYSE occurs:

Dollar cost averaging, in which additional shares are purchased over time, is one advantage of dividend reinvestment plans.

An investor who short sold 120 shares of stock at $150 per share wishes to realize a gross profit of $2,400. At what price must the investor cover the short sale?

Which of the following institutions has helped to eliminate the use of stock certificates by placing stock transactions on computers?

Understanding Investments

Investment Alternatives

Indirect Investing

Securities Markets and Market Indexes

The Risk and Return From Investing

Portfolio Theory

Portfolio Selection and Asset Allocation

Capital Market Theory and Asset Pricing Models

Common Stock Valuation

Common Stocks: Analysis and Strategy

Market Efficiency

Economymarket Analysis

Sectorindustry Analysis

Company Analysis

Technical Analysis

Bond Yields and Prices

Bonds: Analysis and Strategy

Options

Futures Contracts

Managing Your Financial Assets

Evaluation of Investment Performance

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