Question 1

Which of the following is not a major category of membership in stock exchanges?

Accepted Answer

A)  Specialist 
B)  Commission broker 
C)  Floor broker 
D)  Financial analyst 
E)  Registered trader 
A)  Specialist 
B)  Commission broker 
C)  Floor broker 
D)  Financial analyst 
E)  Registered trader

Question 2

Exhibit 4.2
Use the Information Below for the Following Problem(S)
Heidi Talbott has a margin account with a balance of $50,000. The initial margin deposit is 50 percent, and RC Industries is currently selling at $50 per share.
-Refer to Exhibit 4.2.If the maintenance margin is 25 percent,to what price can RC Industries stock price fall before Heidi receives a margin call?

Accepted Answer

A)  $21.75 
B)  $23.33 
C)  $32.00 
D)  $33.33 
E)  None of the above 
A)  $21.75 
B)  $23.33 
C)  $32.00 
D)  $33.33 
E)  None of the above

Question 3

Super DOT is an electronic order-routing system through which member firms can transmit market and limit orders directly to the posts where the securities are traded.

Accepted Answer

A) True 
 B)False

Question 4

Listed stocks traded on the over-the-counter market are being traded in the third market.

Accepted Answer

A) True 
 B)False

Question 5

Exhibit 4.7
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

Shares of RossCorp stock are selling for $45 per share. Brokerage commissions are 2% for purchases and 2% for sales. The interest rate on margin debt is 6.25% per year. The maintenance margin is 30%.
-Refer to Exhibit 4.7.At the end of one year shares of RossCorp stock are selling for $55 per share and the company paid dividends of $0.85 per share.Assuming that you borrowed 25% of cost of the purchase,what is your rate of return?

Accepted Answer

A)  -23.51% 
B)  29.35% 
C)  23.51% 
D)  5.21% 
E)  10.06% 
A)  -23.51% 
B)  29.35% 
C)  23.51% 
D)  5.21% 
E)  10.06%

Question 6

The over-the-counter market includes all stocks not listed on one of the major exchanges but constitutes a lesser of a dollar value than the New York and American Exchanges combined.

Accepted Answer

A) True 
 B)False

Question 7

Investors can leverage their stock transactions with the use of

Accepted Answer

A)  Margin orders 
B)  Stop loss orders 
C)  Limit orders 
D)  Market orders 
E)  Specialists 
A)  Margin orders 
B)  Stop loss orders 
C)  Limit orders 
D)  Market orders 
E)  Specialists

Question 8

Exhibit 4.2
Use the Information Below for the Following Problem(S)
Heidi Talbott has a margin account with a balance of $50,000. The initial margin deposit is 50 percent, and RC Industries is currently selling at $50 per share.
-Refer to Exhibit 4.2.What is Heidi's profit if RC's price rises to $80?

Accepted Answer

A)  $55,000 
B)  $50,000 
C)  $60,000 
D)  $68,270 
E)  $28,570 
A)  $55,000 
B)  $50,000 
C)  $60,000 
D)  $68,270 
E)  $28,570

Question 9

Exhibit 4.5
Use the Information Below for the Following Problem(S)
You decide to sell 100 shares of Topgun Enterprises Inc. short when it is selling at its yearly high of $42.25. Your broker tells you that your margin requirement is 60 percent and that the commission on the sale is $20. While you are short, Topgun pays a $0.85 per share dividend. At the end of one year you buy your Topgun shares (cover your short sale) at $44 and are charged a commission of $20 and a 5 percent interest rate.
-Refer to Exhibit 4.5.What is your rate of return on the investment?

Accepted Answer

A)  10.48% 
B)  12.87% 
C)  -13.98% 
D)  -24.49% 
E)  -15.05% 
A)  10.48% 
B)  12.87% 
C)  -13.98% 
D)  -24.49% 
E)  -15.05%

Question 10

Informational efficiency is where the cost of acquiring information is very cheap.

Accepted Answer

A) True 
 B)False

Question 11

Trading in the secondary markets for Corporate bonds

Accepted Answer

A)  Takes place through a network of primary dealers 
B)  Takes place over the counter by dealers who buy and sell on their own account 
C)  Takes place on the NYSE bond annex 
D)  All of the above 
E)  None of the above 
A)  Takes place through a network of primary dealers 
B)  Takes place over the counter by dealers who buy and sell on their own account 
C)  Takes place on the NYSE bond annex 
D)  All of the above 
E)  None of the above

Question 12

In a call market,trading for individual stocks

Accepted Answer

A)  Occurs anytime the market is open. 
B)  Takes place at specific times. 
C)  Takes place at the open and close of the trading day. 
D)  All of the above. 
E)  None of the above. 
A)  Occurs anytime the market is open. 
B)  Takes place at specific times. 
C)  Takes place at the open and close of the trading day. 
D)  All of the above. 
E)  None of the above.

Question 13

Which of the following is an underwriting function?

Accepted Answer

A)  Origination 
B)  Risk-bearing 
C)  Distribution 
D)  Choices b and c 
E)  All of the above 
A)  Origination 
B)  Risk-bearing 
C)  Distribution 
D)  Choices b and c 
E)  All of the above

Question 14

A pure auction market is also referred to as a quote-driven market.

Accepted Answer

A) True 
 B)False

Question 15

A pure auction market is one in which

Accepted Answer

A)  Dealers provide liquidity by buying and selling shares of stock for themselves. 
B)  Dealers compete against each other to provide the highest bid and lowest asking prices. 
C)  Buyers submit bid prices to sellers. 
D)  Sellers submit ask prices to buyers. 
E)  Buyers and sellers submit bid and ask prices to a central location to be matched. 
A)  Dealers provide liquidity by buying and selling shares of stock for themselves. 
B)  Dealers compete against each other to provide the highest bid and lowest asking prices. 
C)  Buyers submit bid prices to sellers. 
D)  Sellers submit ask prices to buyers. 
E)  Buyers and sellers submit bid and ask prices to a central location to be matched.

Question 16

When a market is internally efficient,it means that

Accepted Answer

A)  The market has price continuity. 
B)  The market has minimal transactions costs 
C)  The market has good depth 
D)  The market has more buyers than sellers 
E)  The market has more sellers than buyers 
A)  The market has price continuity. 
B)  The market has minimal transactions costs 
C)  The market has good depth 
D)  The market has more buyers than sellers 
E)  The market has more sellers than buyers

Question 17

A market is a means through which buyers and sellers are brought together to aid in the transfer of goods and/or services.

Accepted Answer

A) True 
 B)False

Question 18

An order that specifies the highest buy or lowest sell price is a

Accepted Answer

A)  Limit order. 
B)  Short sale. 
C)  Market order. 
D)  Margin call. 
E)  Stop loss. 
A)  Limit order. 
B)  Short sale. 
C)  Market order. 
D)  Margin call. 
E)  Stop loss.

Question 19

Exhibit 4.6
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

You decide to sell short 200 shares of XCorp stock at a price of $75. Your margin deposit is 65 percent. Commission on the sale is 1.25%. While you are short, the stock pays a $1.75 per share dividend. Interest on margin debt is 5.25% per year.
-Refer to Exhibit 4.6.At the end of one year you close out your short position by purchasing share of XCorp at $45 per share.The commission is 1.25%.What is your rate of return on the investment?

Accepted Answer

A)  -55.92% 
B)  10.31% 
C)  51.06% 
D)  23.1% 
E)  -33.05% 
A)  -55.92% 
B)  10.31% 
C)  51.06% 
D)  23.1% 
E)  -33.05%

Question 20

Exhibit 4.3
Use the Information Below for the Following Problem(S)
Kathy Smith has a margin account with a balance of $60,000. Initial margin requirements are 80 percent, and Jackson Industries is currently selling at $40 per share.
-Refer to Exhibit 4.3.How many shares of Jackson can Kathy buy?

Accepted Answer

A)  1875 
B)  1500 
C)  1750 
D)  1200 
E)  None of the above 
A)  1875 
B)  1500 
C)  1750 
D)  1200 
E)  None of the above

Exam 4: Securities Markets: Organization and Operation

Which of the following is not a major category of membership in stock exchanges?

Super DOT is an electronic order-routing system through which member firms can transmit market and limit orders directly to the posts where the securities are traded.

Listed stocks traded on the over-the-counter market are being traded in the third market.

The over-the-counter market includes all stocks not listed on one of the major exchanges but constitutes a lesser of a dollar value than the New York and American Exchanges combined.

Investors can leverage their stock transactions with the use of

Informational efficiency is where the cost of acquiring information is very cheap.

Trading in the secondary markets for Corporate bonds

In a call market,trading for individual stocks

Which of the following is an underwriting function?

A pure auction market is also referred to as a quote-driven market.

A pure auction market is one in which

When a market is internally efficient,it means that

A market is a means through which buyers and sellers are brought together to aid in the transfer of goods and/or services.

An order that specifies the highest buy or lowest sell price is a

Exhibit 4.3 Use the Information Below for the Following Problem(S) Kathy Smith has a margin account with a balance of $60,000. Initial margin requirements are 80 percent, and Jackson Industries is currently selling at $40 per share. -Refer to Exhibit 4.3.How many shares of Jackson can Kathy buy?

An Overview of the Investment Process

The Asset Allocation Decision

The Global Market Investment Decision

Security-Market Indexes

Efficient Capital Markets

An Introduction to Portfolio Management

An Introduction to Asset Pricing Models

Multifactor Models of Risk and Return

Analysis of Financial Statements

Security Valuation Principles

Macroanalysis and Microvaluation of the Stock Market

Industry Analysis

Company Analysis and Stock Valuation

Equity Portfolio Management Stragtegies

Technical Analysis

Bond Fundamentals

The Analysis and Valuation of Bonds

Bond Portfolio Management Strategies

An Introduction to Derivative Markets and Securities

Forward and Futures Contracts

Option Contracts

Swap Contracts,convertible Securities,and Other Embedded Derivatives

Professional Money Management, alternative Assets, and Industry Ethics

Evaluation of Portfolio Performance

Investment Return and Risk Analysis Questions

Investment and Retirement Plans

Calculating Covariance and Correlation Coefficient of Assets

Portfolio Variance and Stock Weight Calculations

Portfolio Optimization with Negative Correlation: Finding Minimum Variance and Weight Allocation

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