Question 1

Securities regulations protect investors by

Accepted Answer

A) requiring disclosures of information by firms 
B) stopping investors from buying overpriced stock 
C) reducing competition among brokers 
D) establishing commission schedules 
A) requiring disclosures of information by firms 
B) stopping investors from buying overpriced stock 
C) reducing competition among brokers 
D) establishing commission schedules

Question 2

Stockbrokers set bid and ask prices.

Accepted Answer

A) True 
 B)False

Question 3

Publicly owned stock that is not listed on an exchange (such as the NYSE)is traded in the over-the-counter markets such as the Nasdaq stock market.

Accepted Answer

A) True 
 B)False

Question 4

If a stock is bought on margin,

Accepted Answer

A) part of the cost of the investment is borrowed 
B) the commissions on the investment are increased 
C) the cost of the investment is reduced 
D) the interest on the borrowed funds is set by the Securities and Exchange Commission (SE
C)  
A) part of the cost of the investment is borrowed 
B) the commissions on the investment are increased 
C) the cost of the investment is reduced 
D) the interest on the borrowed funds is set by the Securities and Exchange Commission (SE
C)

Question 5

An investor purchased Orange Computer on margin for $30 a share. The stock's price subsequently increased to $50 a share at which time the investor sold the stock. If the margin requirement were 60 percent and the interest rate on borrowed funds were 7 percent, what would be the percentage earned on the investor's funds (excluding commissions)? What would have been the return if the investor had not bought the stock on margin?

Accepted Answer

Cost of the stock: $30 
 Margin requirem

Question 6

The syndicate's role in an underwriting is to sell the new issue of securities.

Accepted Answer

A) True 
 B)False

Question 7

The final prospectus does not include

Accepted Answer

A) the firm's balance sheet 
B) the price of the securities sold to the public 
C) the underwriter's profit on the sale 
D) the underwriting discount 
A) the firm's balance sheet 
B) the price of the securities sold to the public 
C) the underwriter's profit on the sale 
D) the underwriting discount

Question 8

A major function of organized securities markets is to facilitate the transfers of securities among investors.

Accepted Answer

A) True 
 B)False

Question 9

ADRs pay dividends in foreign currencies.

Accepted Answer

A) True 
 B)False

Question 10

A prospectus is required when a corporation issues new securities that are sold to the general public.

Accepted Answer

A) True 
 B)False

Question 11

The cost of investing includes
1. commissions
2. the spread
3. dividends

Accepted Answer

A) 1 and 2 
B) 1 and 3 
C) 2 and 3 
D) all of the above 
A) 1 and 2 
B) 1 and 3 
C) 2 and 3 
D) all of the above

Question 12

An investor bought 100 shares of Copier Corp. on margin for $85 a share. The firm paid an annual dividend of $4 a share; the margin requirement was 60 percent with an interest rate of 8 percent on borrowed funds, and commissions on the purchase and sale were $75. The price of the stock rose to $120 in one year. 
 ​ 
 a. What is the percentage earned on the investment if the stock is bought for cash (i.e., the investor did not use margin)? 
 ​ 
 b. What is the percentage earned on the investment if the stock is bought on margin?

Accepted Answer

a. Profit=Cash inflow-Cash outflow 
 =Sa

Question 13

A new issue of corporate securities sold to the general public must be

Accepted Answer

A) registered with the SEC 
B) initially sold through brokers 
C) offered initially to existing stockholders 
D) bought by specialists in corporate securities 
A) registered with the SEC 
B) initially sold through brokers 
C) offered initially to existing stockholders 
D) bought by specialists in corporate securities

Question 14

A new issue of corporate securities sold to the general public must be registered with the SEC.

Accepted Answer

A) True 
 B)False

Question 15

If the offer price of a new issue is too low,
1. demand will exceed supply
2. supply will exceed demand
3. the price of the securities will rise
4. the price of the securities will fall

Accepted Answer

A) 1 and 3 
B) 1 and 4 
C) 2 and 3 
D) 2 and 4 
A) 1 and 3 
B) 1 and 4 
C) 2 and 3 
D) 2 and 4

Question 16

The purpose of the full disclosure laws is so investors will not make poor investments.

Accepted Answer

A) True 
 B)False

Question 17

The SEC establishes the price of a new issue of stock.

Accepted Answer

A) True 
 B)False

Securities regulations protect investors by

Stockbrokers set bid and ask prices.

Publicly owned stock that is not listed on an exchange (such as the NYSE)is traded in the over-the-counter markets such as the Nasdaq stock market.

If a stock is bought on margin,

The syndicate's role in an underwriting is to sell the new issue of securities.

The final prospectus does not include

A major function of organized securities markets is to facilitate the transfers of securities among investors.

ADRs pay dividends in foreign currencies.

A prospectus is required when a corporation issues new securities that are sold to the general public.

The cost of investing includes 1. commissions 2. the spread 3. dividends

A new issue of corporate securities sold to the general public must be

A new issue of corporate securities sold to the general public must be registered with the SEC.

If the offer price of a new issue is too low, 1. demand will exceed supply 2. supply will exceed demand 3. the price of the securities will rise 4. the price of the securities will fall

The purpose of the full disclosure laws is so investors will not make poor investments.

The SEC establishes the price of a new issue of stock.

An Introduction to Investments

The Time Value of Money

Financial Planning, Taxation and the Efficiency of Financial Markets

Risk and Portfolio Management

Investment Companies: Mutual Funds

Closed-End Investment Companies, Real Estate Investment Trusts Reits, and Exchange-Traded Funds Etfs

Stock

The Valuation of Common Stock

Investment Returns and Aggregate Measures of Stock Markets

The Macroeconomic Environment for Investment Decisions

Behavioral Finance and Technical Analysis

The Bond Market

The Valuation of Fixed-Income Securities

Government Securities

Convertible Bonds and Convertible Preferred Stock

An Introduction to Options

Option Valuation and Strategies

Commodity and Financial Futures

Financial Planning and Investing in an Efficient Market Context

Filters

Exam 2: Securities Markets

Securities regulations protect investors by

Stockbrokers set bid and ask prices.

Publicly owned stock that is not listed on an exchange (such as the NYSE)is traded in the over-the-counter markets such as the Nasdaq stock market.

If a stock is bought on margin,

The syndicate's role in an underwriting is to sell the new issue of securities.

The final prospectus does not include

A major function of organized securities markets is to facilitate the transfers of securities among investors.

ADRs pay dividends in foreign currencies.

A prospectus is required when a corporation issues new securities that are sold to the general public.

The cost of investing includes 1. commissions 2. the spread 3. dividends

A new issue of corporate securities sold to the general public must be

A new issue of corporate securities sold to the general public must be registered with the SEC.

If the offer price of a new issue is too low, 1. demand will exceed supply 2. supply will exceed demand 3. the price of the securities will rise 4. the price of the securities will fall

The purpose of the full disclosure laws is so investors will not make poor investments.

The SEC establishes the price of a new issue of stock.

An Introduction to Investments

The Time Value of Money

Financial Planning, Taxation and the Efficiency of Financial Markets

Risk and Portfolio Management

Investment Companies: Mutual Funds

Closed-End Investment Companies, Real Estate Investment Trusts Reits, and Exchange-Traded Funds Etfs

Stock

The Valuation of Common Stock

Investment Returns and Aggregate Measures of Stock Markets

The Macroeconomic Environment for Investment Decisions

Behavioral Finance and Technical Analysis

The Bond Market

The Valuation of Fixed-Income Securities

Government Securities

Convertible Bonds and Convertible Preferred Stock

An Introduction to Options

Option Valuation and Strategies

Commodity and Financial Futures

Financial Planning and Investing in an Efficient Market Context

Filters