Question 1

You buy 300 shares of Qualitycorp for $30 per share and deposit initial margin of 50%.The next day Qualitycorp's price drops to $25 per share.What is your actual margin?

Accepted Answer

A)  50% 
B)  40% 
C)  33% 
D)  60% 
E)  25% 
A)  50% 
B)  40% 
C)  33% 
D)  60% 
E)  25% B

Question 2

You purchased 100 shares of common stock on margin for $35 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 $42 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% D

Question 3

Assume you sold short 100 shares of common stock at $50 per share.The initial margin is 60%.What would be the minimum margin if a margin call is made at a stock price of $60?

Accepted Answer

A)  40% 
B)  33% 
C)  35% 
D)  25% 
E)  none of these 
A)  40% 
B)  33% 
C)  35% 
D)  25% 
E)  none of these B

Question 4

Assume you sell short 100 shares of common stock at $45 per share,with initial margin at 50%.What would be your rate of return if you repurchase the stock at $40/share? The stock paid no dividends during the period,and you did not remove any money from the account before making the offsetting transaction.

Accepted Answer

A)  20% 
B)  25% 
C)  22% 
D)  77% 
E)  none of these 
A)  20% 
B)  25% 
C)  22% 
D)  77% 
E)  none of these

Question 5

In a "best-efforts" basis

Accepted Answer

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

Question 6

Assume you purchased 100 shares of common stock at $50 per share.The initial margin is 40%.Your investment was

Accepted Answer

A)  $3,000 
B)  $5000 
C)  $2000 
D)  $9000 
E)  $7800 
A)  $3,000 
B)  $5000 
C)  $2000 
D)  $9000 
E)  $7800

Question 7

Which of the following is not required under the AIMR standards of professional conduct?

Accepted Answer

A)  knowledge of all applicable laws,rules and regulations 
B)  disclosure of all personal investments whether or not they may conflict with a client's investments 
C)  disclosure of all conflicts to clients and prospects 
D)  reasonable inquiry into a client's financial situation 
E)  All of these are required under the AIMR standards 
A)  knowledge of all applicable laws,rules and regulations 
B)  disclosure of all personal investments whether or not they may conflict with a client's investments 
C)  disclosure of all conflicts to clients and prospects 
D)  reasonable inquiry into a client's financial situation 
E)  All of these are required under the AIMR standards

Question 8

Discuss margin buying of common stocks.Include in your discussion the advantages and disadvantages,the types of margin requirements,how these requirements are met,and who determines these requirements.

Accepted Answer

Buying stock on margin means buying stoc

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

Question 10

Which one of the following statements regarding orders is false?

Accepted Answer

A)  A market order is simply an order to buy or sell a stock immediately at the prevailing market price. 
B)  A limit sell order is where investors specify prices at which they are willing to sell a security. 
C)  If stock ABC is selling at $50,a limit-buy order may instruct the broker to buy the stock if and when the share price falls below $45. 
D)  A day order expires at the close of the trading day. 
E)  None of these. 
A)  A market order is simply an order to buy or sell a stock immediately at the prevailing market price. 
B)  A limit sell order is where investors specify prices at which they are willing to sell a security. 
C)  If stock ABC is selling at $50,a limit-buy order may instruct the broker to buy the stock if and when the share price falls below $45. 
D)  A day order expires at the close of the trading day. 
E)  None of these.

Question 11

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. 
E)  none of these. 
A)  $4,800. 
B)  $12,000. 
C)  $5,600. 
D)  $7,200. 
E)  none of these.

Question 12

The following statements regarding the specialist are true:

Accepted Answer

A)  Specialists maintain a book listing outstanding unexecuted limit orders. 
B)  Specialists earn income from commissions and spreads in stock prices. 
C)  Specialists stand ready to trade at quoted bid and ask prices. 
D)  Specialists cannot trade in their own accounts. 
E)  a,b,and c are all true. 
A)  Specialists maintain a book listing outstanding unexecuted limit orders. 
B)  Specialists earn income from commissions and spreads in stock prices. 
C)  Specialists stand ready to trade at quoted bid and ask prices. 
D)  Specialists cannot trade in their own accounts. 
E)  a,b,and c are all true.

Question 13

A sale by Nortel of new stock to the public would be a(n)

Accepted Answer

A)  short sale 
B)  seasoned new issue offering 
C)  private placement 
D)  secondary market transaction 
E)  initial public offering 
A)  short sale 
B)  seasoned new issue offering 
C)  private placement 
D)  secondary market transaction 
E)  initial public offering

Question 14

Assume you purchased 100 shares of common stock at $50 per share using 2,500 of your own money.The initial margin requirement is 50%.If the maintenance margin is 30%,at what prince would you get a margin call?

Accepted Answer

A)  $26.14 
B)  $50.00 
C)  $35.71 
D)  $77.12 
E)  $78.00 
A)  $26.14 
B)  $50.00 
C)  $35.71 
D)  $77.12 
E)  $78.00

Question 15

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. 
E)  none of these. 
A)  $4,800.60. 
B)  $12,000.25. 
C)  $2,250.75. 
D)  $1,822.50. 
E)  none of these.

Question 16

You sold ABC stock short at $80 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 these. 
A)  limit-sell order 
B)  limit-buy order 
C)  stop-buy order 
D)  day-order 
E)  none of these.

Question 17

You purchased 100 shares of common stock on margin at $45 per share.Assume the initial margin is 50% and the stock pays no dividend.What would the minimum margin be if a margin call is made at a stock price of $30? Ignore interest on margin.

Accepted Answer

A)  0.33 
B)  0.55 
C)  0.43 
D)  0.23 
E)  0.25 
A)  0.33 
B)  0.55 
C)  0.43 
D)  0.23 
E)  0.25

Question 18

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

Accepted Answer

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

Question 19

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 20

A prompt offering prospectus

Accepted Answer

A)  is a way of placing issues in the primary market. 
B)  allows firms to register securities for sale in advance of the actual time of sale. 
C)  increases transaction costs to the issuing firm. 
D)  a and b. 
E)  a and c. 
A)  is a way of placing issues in the primary market. 
B)  allows firms to register securities for sale in advance of the actual time of sale. 
C)  increases transaction costs to the issuing firm. 
D)  a and b. 
E)  a and c.

Exam 3: Securities Markets

You buy 300 shares of Qualitycorp for $30 per share and deposit initial margin of 50%.The next day Qualitycorp's price drops to $25 per share.What is your actual margin?

You purchased 100 shares of common stock on margin for $35 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 $42 per share? Ignore interest on margin.

Assume you sold short 100 shares of common stock at $50 per share.The initial margin is 60%.What would be the minimum margin if a margin call is made at a stock price of $60?

In a "best-efforts" basis

Assume you purchased 100 shares of common stock at $50 per share.The initial margin is 40%.Your investment was

Which of the following is not required under the AIMR standards of professional conduct?

Discuss margin buying of common stocks.Include in your discussion the advantages and disadvantages,the types of margin requirements,how these requirements are met,and who determines these requirements.

The cost of buying and selling a stock consists of __________.

Which one of the following statements regarding orders is false?

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

The following statements regarding the specialist are true:

A sale by Nortel of new stock to the public would be a(n)

Assume you purchased 100 shares of common stock at $50 per share using 2,500 of your own money.The initial margin requirement is 50%.If the maintenance margin is 30%,at what prince would you get a margin call?

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

You sold ABC stock short at $80 per share.Your losses could be minimized by placing a __________:

You purchased 100 shares of common stock on margin at $45 per share.Assume the initial margin is 50% and the stock pays no dividend.What would the minimum margin be if a margin call is made at a stock price of $30? Ignore interest on margin.

Which of the following orders instructs the broker to sell at or below 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

A prompt offering prospectus

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