Question 1

Underpricing represents the difference between the aftermarket stock price and the initial offering price.

Accepted Answer

A) True 
 B)False

Question 2

The prudent use of derivatives to hedge,or reduce risk,is similar to the concept of ________________.

Accepted Answer

A) gambling 
B) juggling 
C) hiding 
D) insurance 
E) none of the above. 
A) gambling 
B) juggling 
C) hiding 
D) insurance 
E) none of the above.

Question 3

A person who facilitates market transactions by selling (buying)when other investors wish to buy (sell)is called a:

Accepted Answer

A) registered trader 
B) floor broker 
C) market maker 
D) commission broker 
A) registered trader 
B) floor broker 
C) market maker 
D) commission broker

Question 4

___________________ is an order to sell stock at the market price when the price of the stock falls to a specified level.

Accepted Answer

A) A short sale 
B) A stop-loss order 
C) A limit order 
D) Buying on margin 
A) A short sale 
B) A stop-loss order 
C) A limit order 
D) Buying on margin

Question 5

The seller of an option contract is called a (n)____________ and the price paid for the option itself is the called the ___________.

Accepted Answer

A) option broker,option price 
B) sales agent,option premium 
C) option writer,option premium 
D) option writer,option price 
E) none of the above. 
A) option broker,option price 
B) sales agent,option premium 
C) option writer,option premium 
D) option writer,option price 
E) none of the above.

Question 6

An agreement whereby an investment banker tries to sell securities of an issuing corporation,but assumes no risk if the flotation is unsuccessful is called a:

Accepted Answer

A) due diligence agreement 
B) best-effort agreement 
C) firm commitment price agreement 
D) shelf registration agreement 
A) due diligence agreement 
B) best-effort agreement 
C) firm commitment price agreement 
D) shelf registration agreement

Question 7

If a Microsoft January 20 put option with a strike price of $20 was selling for $5.00 and the market price of the underlying Microsoft stock was $15.00,the price of the put option would be _______________.

Accepted Answer

A) in-the-money 
B) out-of-the-money 
C) fairly priced 
D) not enough information to tell 
A) in-the-money 
B) out-of-the-money 
C) fairly priced 
D) not enough information to tell

Question 8

If a Microsoft January 20 put option with a strike price of $20 was selling for $5.00 and the market price of the underlying Microsoft stock was $10.00,the price of the put option would be _______________.

Accepted Answer

A) in-the-money 
B) out-of-the-money 
C) fairly priced 
D) not enough information to tell 
A) in-the-money 
B) out-of-the-money 
C) fairly priced 
D) not enough information to tell

Question 9

The secondary markets provide pricing information and liquidity to investors.

Accepted Answer

A) True 
 B)False

Question 10

_____________ is when a broker constantly buys and sells securities from a client's portfolio in an effort to generate commissions.Rather than making decisions that are in the client's best interest,frequent commission-generating trades may be made by brokers with selfish motives.

Accepted Answer

A) Blending 
B) Flipping 
C) Swapping 
D) Churning 
E) none of the above. 
A) Blending 
B) Flipping 
C) Swapping 
D) Churning 
E) none of the above.

Question 11

An order to sell stock at the market price when the price of the stock falls to a specified level is called a:

Accepted Answer

A) limit order 
B) market order 
C) short sale 
D) stop-loss order 
A) limit order 
B) market order 
C) short sale 
D) stop-loss order

Question 12

Pre-emptive rights allow shareholders to:

Accepted Answer

A) buy enough of a new securities offering to maintain their present proportional share of ownership 
B) buy an unlimited amount of the new issue at a discount 
C) pre-empt other stockholders from selling securities in a company 
D) none of the above 
A) buy enough of a new securities offering to maintain their present proportional share of ownership 
B) buy an unlimited amount of the new issue at a discount 
C) pre-empt other stockholders from selling securities in a company 
D) none of the above

Question 13

A global depository receipt is traded on the American Stock Exchange.

Accepted Answer

A) True 
 B)False

Question 14

A pre-emptive right refers to the right of existing shareholders to sue management in order to head off potential actions by management that would adversely affect the price of the stock.

Accepted Answer

A) True 
 B)False

Question 15

Purchasers and sellers of futures are generally required to deposit an initial margin in the range of ___________ with the exchange's clearinghouse to reduce credit risk.

Accepted Answer

A) 3 to 6 percent 
B) 3 to 6 dollars 
C) 10 to 15 percent 
D) 10 to 15 dollars 
E) none of the above. 
A) 3 to 6 percent 
B) 3 to 6 dollars 
C) 10 to 15 percent 
D) 10 to 15 dollars 
E) none of the above.

Question 16

The ________________________,the greater the chance of the option becoming _____________________.

Accepted Answer

A) shorter the time to expiration,in-the-money 
B) longer the time to expiration,in-the-money 
C) greater the volatility,in-the-money 
D) two of the above are correct. 
E) none of the above. 
A) shorter the time to expiration,in-the-money 
B) longer the time to expiration,in-the-money 
C) greater the volatility,in-the-money 
D) two of the above are correct. 
E) none of the above.

Question 17

Floor brokers act as agents to execute customers' orders for securities purchases and sales.

Accepted Answer

A) True 
 B)False

Question 18

While the Chicago Board Options Exchange remains the main market for exchange traded options,the ______________ exchange also deals in option contracts.

Accepted Answer

A) Miami 
B) Indianapolis 
C) San Francisco 
D) all of the above 
E) none of the above. 
A) Miami 
B) Indianapolis 
C) San Francisco 
D) all of the above 
E) none of the above.

Question 19

If there were no secondary markets for trading between investors,there would be no primary market for the initial sale of securities.

Accepted Answer

A) True 
 B)False

Question 20

If a Microsoft January 20 put option with a strike price of $20 were about to expire and the market price of the underlying Microsoft stock was $15.00,the price of the put option would have to be __________ to eliminate arbitrage opportunities.

Accepted Answer

A) $5.00 
B) $10.00 
C) $15.00 
D) $25.00 
E) none of the above. 
A) $5.00 
B) $10.00 
C) $15.00 
D) $25.00 
E) none of the above.

Underpricing represents the difference between the aftermarket stock price and the initial offering price.

The prudent use of derivatives to hedge,or reduce risk,is similar to the concept of ________________.

A person who facilitates market transactions by selling (buying)when other investors wish to buy (sell)is called a:

___________________ is an order to sell stock at the market price when the price of the stock falls to a specified level.

The seller of an option contract is called a (n)__ and the price paid for the option itself is the called the _.

An agreement whereby an investment banker tries to sell securities of an issuing corporation,but assumes no risk if the flotation is unsuccessful is called a:

If a Microsoft January 20 put option with a strike price of $20 was selling for $5.00 and the market price of the underlying Microsoft stock was $15.00,the price of the put option would be _______________.

If a Microsoft January 20 put option with a strike price of $20 was selling for $5.00 and the market price of the underlying Microsoft stock was $10.00,the price of the put option would be _______________.

The secondary markets provide pricing information and liquidity to investors.

_____________ is when a broker constantly buys and sells securities from a client's portfolio in an effort to generate commissions.Rather than making decisions that are in the client's best interest,frequent commission-generating trades may be made by brokers with selfish motives.

An order to sell stock at the market price when the price of the stock falls to a specified level is called a:

Pre-emptive rights allow shareholders to:

A global depository receipt is traded on the American Stock Exchange.

A pre-emptive right refers to the right of existing shareholders to sue management in order to head off potential actions by management that would adversely affect the price of the stock.

Purchasers and sellers of futures are generally required to deposit an initial margin in the range of ___________ with the exchange's clearinghouse to reduce credit risk.

The ____,the greater the chance of the option becoming _.

Floor brokers act as agents to execute customers' orders for securities purchases and sales.

While the Chicago Board Options Exchange remains the main market for exchange traded options,the ______________ exchange also deals in option contracts.

If there were no secondary markets for trading between investors,there would be no primary market for the initial sale of securities.

If a Microsoft January 20 put option with a strike price of $20 were about to expire and the market price of the underlying Microsoft stock was $15.00,the price of the put option would have to be __________ to eliminate arbitrage opportunities.

The Financial Environment

Money and the Monetary System

Banks and Other Financial Institutions

Federal Reserve System

Policy Makers and the Money Supply

International Finance and Trade

Savings and Investment Process

Interest Rates

Time Value of Money

Bonds and Stocks: Characteristics and Valuation

Financial Return and Risk Concepts

Business Organization and Financial Data

Financial Analysis and Long-Term Financial Planning

Managing Working Capital

Short-Term Business Financing

Capital Budgeting Analysis

Capital Structure and the Cost of Capital

Filters

Exam 11: Securities Markets

Underpricing represents the difference between the aftermarket stock price and the initial offering price.

The prudent use of derivatives to hedge,or reduce risk,is similar to the concept of ________________.

A person who facilitates market transactions by selling (buying)when other investors wish to buy (sell)is called a:

___________________ is an order to sell stock at the market price when the price of the stock falls to a specified level.

The seller of an option contract is called a (n)____________ and the price paid for the option itself is the called the ___________.

An agreement whereby an investment banker tries to sell securities of an issuing corporation,but assumes no risk if the flotation is unsuccessful is called a:

If a Microsoft January 20 put option with a strike price of $20 was selling for $5.00 and the market price of the underlying Microsoft stock was $15.00,the price of the put option would be _______________.

If a Microsoft January 20 put option with a strike price of $20 was selling for $5.00 and the market price of the underlying Microsoft stock was $10.00,the price of the put option would be _______________.

The secondary markets provide pricing information and liquidity to investors.

_____________ is when a broker constantly buys and sells securities from a client's portfolio in an effort to generate commissions.Rather than making decisions that are in the client's best interest,frequent commission-generating trades may be made by brokers with selfish motives.

An order to sell stock at the market price when the price of the stock falls to a specified level is called a:

Pre-emptive rights allow shareholders to:

A global depository receipt is traded on the American Stock Exchange.

A pre-emptive right refers to the right of existing shareholders to sue management in order to head off potential actions by management that would adversely affect the price of the stock.

Purchasers and sellers of futures are generally required to deposit an initial margin in the range of ___________ with the exchange's clearinghouse to reduce credit risk.

The ________________________,the greater the chance of the option becoming _____________________.

Floor brokers act as agents to execute customers' orders for securities purchases and sales.

While the Chicago Board Options Exchange remains the main market for exchange traded options,the ______________ exchange also deals in option contracts.

If there were no secondary markets for trading between investors,there would be no primary market for the initial sale of securities.

If a Microsoft January 20 put option with a strike price of $20 were about to expire and the market price of the underlying Microsoft stock was $15.00,the price of the put option would have to be __________ to eliminate arbitrage opportunities.

The Financial Environment

Money and the Monetary System

Banks and Other Financial Institutions

Federal Reserve System

Policy Makers and the Money Supply

International Finance and Trade

Savings and Investment Process

Interest Rates

Time Value of Money

Bonds and Stocks: Characteristics and Valuation

Financial Return and Risk Concepts

Business Organization and Financial Data

Financial Analysis and Long-Term Financial Planning

Managing Working Capital

Short-Term Business Financing

Capital Budgeting Analysis

Capital Structure and the Cost of Capital

Filters

The seller of an option contract is called a (n)__ and the price paid for the option itself is the called the _.

The ____,the greater the chance of the option becoming _.