Question 1

Initial margin requirements are determined by

Accepted Answer

A)  the Ontario Security Commission. 
B)  the Bank of Canada. 
C)  the Toronto Stock Exchange. 
D)  b and c. 
E)  a and b. 
A)  the Ontario Security Commission. 
B)  the Bank of Canada. 
C)  the Toronto Stock Exchange. 
D)  b and c. 
E)  a and b.

Question 2

Which of the following is true regarding private placements of primary security offerings?

Accepted Answer

A)  Extensive and costly registration statements are required by the OSC. 
B)  For very large issues,they are better suited than public offerings. 
C)  They trade in secondary markets. 
D)  The shares are sold directly to a small group of institutional or wealthy investors. 
E)  They have greater liquidity than public offerings. 
A)  Extensive and costly registration statements are required by the OSC. 
B)  For very large issues,they are better suited than public offerings. 
C)  They trade in secondary markets. 
D)  The shares are sold directly to a small group of institutional or wealthy investors. 
E)  They have greater liquidity than public offerings.

Question 3

You sold short 100 shares of common stock at $45 per share.The initial margin is 50%.Your initial investment was

Accepted Answer

A)  $4,800. 
B)  12,000. 
C)  $2,250. 
D)  $7,200. 
E)  none of these. 
A)  $4,800. 
B)  12,000. 
C)  $2,250. 
D)  $7,200. 
E)  none of these.

Question 4

Assume you sell short 1000 shares of common stock at $35 per share,with initial margin at 50%.What would be your rate of return if you repurchase the stock at $25/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)  20.47% 
B)  25.63% 
C)  57.14% 
D)  77.23% 
E)  none of these 
A)  20.47% 
B)  25.63% 
C)  57.14% 
D)  77.23% 
E)  none of these

Question 5

The U.S.over-the-counter market

Accepted Answer

A)  has been growing in recent years. 
B)  is an automated market. 
C)  contains some firms that qualify for NYSE listing. 
D)  a and b. 
E)  a,b,and c. 
A)  has been growing in recent years. 
B)  is an automated market. 
C)  contains some firms that qualify for NYSE listing. 
D)  a and b. 
E)  a,b,and c.

Question 6

Electronic Communications Networks (ECNs)may be used
I.as an alternative to the TSX.
II.as an alternative to Nasdaq.
III.by institutional traders.
IV.to eliminate the bid-ask spread.

Accepted Answer

A)  I and III 
B)  II,and IV 
C)  I,II,and III 
D)  I and IV 
E)  I,II,III,and IV 
A)  I and III 
B)  II,and IV 
C)  I,II,and III 
D)  I and IV 
E)  I,II,III,and IV

Question 7

Which of the following orders instructs the broker to buy at the current market price?

Accepted Answer

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

Question 8

The use of the Internet to trade and underwrite securities

Accepted Answer

A)  is illegal under OSC regulations 
B)  is regulated by the Toronto Stock Exchange 
C)  is expected to grow quickly 
D)  increases underwriting costs for a new security issue 
E)  is regulated by the National Association of Securities Dealers
The OSC permits trading and underwriting of securities over the Internet,but has required firms participating in this activity to take steps to safeguard investment funds.This form of underwriting is expected to grow quickly due to its lower cost.It is not regulated by either the NYSE or the NASD. 
A)  is illegal under OSC regulations 
B)  is regulated by the Toronto Stock Exchange 
C)  is expected to grow quickly 
D)  increases underwriting costs for a new security issue 
E)  is regulated by the National Association of Securities Dealers
The OSC permits trading and underwriting of securities over the Internet,but has required firms participating in this activity to take steps to safeguard investment funds.This form of underwriting is expected to grow quickly due to its lower cost.It is not regulated by either the NYSE or the NASD.

Question 9

A purchase of a new issue of stock takes place

Accepted Answer

A)  in the secondary market. 
B)  in the primary market. 
C)  usually with the assistance of an investment banker or dealer. 
D)  a and b. 
E)  b and c. 
A)  in the secondary market. 
B)  in the primary market. 
C)  usually with the assistance of an investment banker or dealer. 
D)  a and b. 
E)  b and c.

Question 10

Shares for short transactions

Accepted Answer

A)  are usually borrowed from other brokers. 
B)  are typically shares held by the short seller's broker in street name. 
C)  are borrowed from commercial banks. 
D)  b and c. 
E)  none of these. 
A)  are usually borrowed from other brokers. 
B)  are typically shares held by the short seller's broker in street name. 
C)  are borrowed from commercial banks. 
D)  b and c. 
E)  none of these.

Question 11

The floor trader is best described as

Accepted Answer

A)  an independent member of the exchange who owns a seat and handles overload work for commission brokers. 
B)  someone who makes a market in one or more securities. 
C)  a representative of a brokerage firm who is on the floor of the exchange. 
D)  a frequent trader who performs no public function but executes trades for small investors. 
E)  any counter party to a trade executed on the floor of the exchange. 
A)  an independent member of the exchange who owns a seat and handles overload work for commission brokers. 
B)  someone who makes a market in one or more securities. 
C)  a representative of a brokerage firm who is on the floor of the exchange. 
D)  a frequent trader who performs no public function but executes trades for small investors. 
E)  any counter party to a trade executed on the floor of the exchange.

Question 12

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 minimum 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 13

You purchased 100 shares of ABC common stock on margin at $70 per share.Assume the initial margin is 50% and the minimum margin is 30%.Below what stock price level would you get a margin call? Assume the stock pays no dividend;ignore interest on margin.

Accepted Answer

A)  $21 
B)  $50 
C)  $49 
D)  $80 
E)  none of these 
A)  $21 
B)  $50 
C)  $49 
D)  $80 
E)  none of these

Question 14

Which of the following orders is most useful to short sellers who want to limit their potential losses?

Accepted Answer

A)  Limit order 
B)  Discretionary order 
C)  Limit-loss order 
D)  Stop-buy order 
E)  None of these 
A)  Limit order 
B)  Discretionary order 
C)  Limit-loss order 
D)  Stop-buy order 
E)  None of these

Question 15

You purchased 300 shares of common stock on margin for $60 per share.The initial margin is 60% and the stock pays no dividend.What would your rate of return be if you sell the stock at $45 per share? Ignore interest on margin.

Accepted Answer

A)  25% 
B)  -33% 
C)  44% 
D)  -42% 
E)  -54% 
A)  25% 
B)  -33% 
C)  44% 
D)  -42% 
E)  -54%

Question 16

According to the AIMR Standards of Professional Conduct,AIMR members have responsibilities to all of the following except:

Accepted Answer

A)  the government 
B)  the profession 
C)  the public 
D)  the employer 
E)  clients and prospective clients 
A)  the government 
B)  the profession 
C)  the public 
D)  the employer 
E)  clients and prospective clients

Question 17

List two advantages and two disadvantages or concerns about the use of Electronic Communications Networks (ECNs).

Accepted Answer

Some advantages are that the systems all

Question 18

The over-the-counter market for exchange-listed securities is called the:

Accepted Answer

A)  third market 
B)  fourth market 
C)  Nasdaq 
D)  after-market 
E)  none of these. 
A)  third market 
B)  fourth market 
C)  Nasdaq 
D)  after-market 
E)  none of these.

Question 19

The secondary market consists of

Accepted Answer

A)  transactions on the ME. 
B)  transactions in the OTC market. 
C)  transactions through the investment banker. 
D)  a and b. 
E)  a,b,and c. 
A)  transactions on the ME. 
B)  transactions in the OTC market. 
C)  transactions through the investment banker. 
D)  a and b. 
E)  a,b,and c.

Question 20

You purchased XYZ stock at $50 per share.The stock is currently selling at $65.Your gains may be protected by placing a __________

Accepted Answer

A)  stop-loss order 
B)  limit-buy order 
C)  market order 
D)  limit-sell order 
E)  none of these. 
A)  stop-loss order 
B)  limit-buy order 
C)  market order 
D)  limit-sell order 
E)  none of these.

Exam 3: Securities Markets

Initial margin requirements are determined by

Which of the following is true regarding private placements of primary security offerings?

You sold short 100 shares of common stock at $45 per share.The initial margin is 50%.Your initial investment was

The U.S.over-the-counter market

Electronic Communications Networks (ECNs)may be used I.as an alternative to the TSX. II.as an alternative to Nasdaq. III.by institutional traders. IV.to eliminate the bid-ask spread.

Which of the following orders instructs the broker to buy at the current market price?

The use of the Internet to trade and underwrite securities

A purchase of a new issue of stock takes place

Shares for short transactions

The floor trader is best described as

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 minimum margin is 30%,at what prince would you get a margin call?

You purchased 100 shares of ABC common stock on margin at $70 per share.Assume the initial margin is 50% and the minimum margin is 30%.Below what stock price level would you get a margin call? Assume the stock pays no dividend;ignore interest on margin.

Which of the following orders is most useful to short sellers who want to limit their potential losses?

You purchased 300 shares of common stock on margin for $60 per share.The initial margin is 60% and the stock pays no dividend.What would your rate of return be if you sell the stock at $45 per share? Ignore interest on margin.

According to the AIMR Standards of Professional Conduct,AIMR members have responsibilities to all of the following except:

List two advantages and two disadvantages or concerns about the use of Electronic Communications Networks (ECNs).

The over-the-counter market for exchange-listed securities is called the:

The secondary market consists of

You purchased XYZ stock at $50 per share.The stock is currently selling at $65.Your gains may be protected by placing a __________

Investments: Background and Issues

Asset Classes and Financial Instruments

Mutual Funds and Other Investment Companies

Risk and Return: Past and Prologue

Efficient Diversification

Capital Asset Pricing and Arbitrage Pricing Theory

The Efficient Market Hypothesis

Behavioral Finance and Technical Analysis

Bond Prices and Yield

Managing Bond Portfolios

Macroeconomic and Industry Analysis

Equity Valuation

Financial Statement Analysis

Options Markets

Option Valuation

Futures Markets and Risk Management

Performance Evaluation and Active Portfolio Management

Globalization and International Investing

Taxes, Inflation, and Investment Strategy

Investors and the Investment Process

Mutual Fund: Objectives, Types, NAV, Turnover Ratio, and More

International Finance and Investments: Understanding Foreign Markets and Risks

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