Question 1

The trading of stock that was previously issued takes place

Accepted Answer

A) in the secondary market. 
B) in the primary market. 
C) usually with the assistance of an investment banker. 
D) in the secondary and primary markets. 
A) in the secondary market. 
B) in the primary market. 
C) usually with the assistance of an investment banker. 
D) in the secondary and primary markets.

Question 2

All of the following are considered new trading strategies except

Accepted Answer

A) high frequency trading. 
B) algorithmic trading. 
C) dark pools. 
D) short selling. 
A) high frequency trading. 
B) algorithmic trading. 
C) dark pools. 
D) short selling.

Question 3

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

Accepted Answer

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

Question 4

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. 
D) in the secondary and primary markets. 
E) in the primary market and usually with the assistance of an investment banker. 
A) in the secondary market. 
B) in the primary market. 
C) usually with the assistance of an investment banker. 
D) in the secondary and primary markets. 
E) in the primary market and usually with the assistance of an investment banker.

Question 5

The securities act of 1933 I) requires full disclosure of relevant information relating to the issue of new securities.
II. requires registration of new securities.
III. requires issuance of a prospectus detailing financial prospects of the firm.
IV. established the SEC.
V. requires periodic disclosure of relevant financial information.
VI. empowers SEC to regulate exchanges, OTC trading, brokers, and dealers.

Accepted Answer

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

Question 6

You sold JCP 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 the options 
A) limit-sell order. 
B) limit-buy order. 
C) stop-buy order. 
D) day-order. 
E) None of the options

Question 7

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 8

Restrictions on trading involving insider information apply to the following except

Accepted Answer

A) corporate officers. 
B) corporate directors. 
C) major stockholders. 
D) All of the options are subject to insider trading restrictions. 
E) None of the options is subject to insider trading restrictions. 
A) corporate officers. 
B) corporate directors. 
C) major stockholders. 
D) All of the options are subject to insider trading restrictions. 
E) None of the options is subject to insider trading restrictions.

Question 9

A program trade is

Accepted Answer

A) a trade of 10,000 (or more) shares of a stock. 
B) a trade of many shares of one stock for one other stock. 
C) a trade of analytic programs between financial analysts. 
D) a coordinated purchase or sale of an entire portfolio of stocks. 
E) not feasible with current technology but is expected to be popular in the near future. 
A) a trade of 10,000 (or more) shares of a stock. 
B) a trade of many shares of one stock for one other stock. 
C) a trade of analytic programs between financial analysts. 
D) a coordinated purchase or sale of an entire portfolio of stocks. 
E) not feasible with current technology but is expected to be popular in the near future.

Question 10

You purchased 1000 shares of CSCO common stock on margin at $19 per share.Assume the initial margin is 50% and the maintenance 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) $12.86 
B) $15.75 
C) $19.67 
D) $13.57 
A) $12.86 
B) $15.75 
C) $19.67 
D) $13.57

Question 11

Assume you sold short 100 shares of common stock at $40 per share.The initial margin is 50%.What would be the maintenance margin if a margin call is made at a stock price of $50

Accepted Answer

A) 40% 
B) 20% 
C) 35% 
D) 25% 
A) 40% 
B) 20% 
C) 35% 
D) 25%

Question 12

Assume you purchased 200 shares of GE common stock on margin at $70 per share from your broker.If the initial margin is 55%, how much did you borrow from the broker

Accepted Answer

A) $6,000 
B) $4,000 
C) $7,700 
D) $7,000 
E) $6,300 
A) $6,000 
B) $4,000 
C) $7,700 
D) $7,000 
E) $6,300

Question 13

You sold short 100 shares of common stock at $75 per share.The initial margin is 50%.At what stock price would you receive a margin call if the maintenance margin is 30%

Accepted Answer

A) $90.23 
B) $88.52 
C) $86.54 
D) $87.12 
A) $90.23 
B) $88.52 
C) $86.54 
D) $87.12

Question 14

You want to purchase IBM stock at $80 from your broker using as little of your own money as possible.If initial margin is 50% and you have $2,000 to invest, how many shares can you buy

Accepted Answer

A) 100 shares 
B) 200 shares 
C) 50 shares 
D) 500 shares 
E) 25 shares 
A) 100 shares 
B) 200 shares 
C) 50 shares 
D) 500 shares 
E) 25 shares

Question 15

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

Accepted Answer

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

Question 16

The secondary market consists of

Accepted Answer

A) transactions on the AMEX. 
B) transactions in the OTC market. 
C) transactions through the investment banker. 
D) transactions on the AMEX and in the OTC market. 
E) transactions on the AMEX, through the investment banker, and in the OTC market. 
A) transactions on the AMEX. 
B) transactions in the OTC market. 
C) transactions through the investment banker. 
D) transactions on the AMEX and in the OTC market. 
E) transactions on the AMEX, through the investment banker, and in the OTC market.

Question 17

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. 
A) $4,800. 
B) $12,000. 
C) $5,600. 
D) $7,200.

Question 18

The finalized registration statement for new securities approved by the SEC is called

Accepted Answer

A) a red herring. 
B) the preliminary statement. 
C) the prospectus. 
D) a best-efforts agreement. 
E) a firm commitment. 
A) a red herring. 
B) the preliminary statement. 
C) the prospectus. 
D) a best-efforts agreement. 
E) a firm commitment.

Question 19

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 maintenance 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 20

You want to purchase XON stock at $60 from your broker using as little of your own money as possible.If initial margin is 50% and you have $3,000 to invest, how many shares can you buy

Accepted Answer

A) 100 shares 
B) 200 shares 
C) 50 shares 
D) 500 shares 
E) 25 shares 
A) 100 shares 
B) 200 shares 
C) 50 shares 
D) 500 shares 
E) 25 shares

Exam 3: How Securities Are Traded

The trading of stock that was previously issued takes place

All of the following are considered new trading strategies except

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

A purchase of a new issue of stock takes place

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

You want to buy 100 shares of Hotstock Inc.at the best possible price as quickly as possible.You would most likely place a

Restrictions on trading involving insider information apply to the following except

A program trade is

You purchased 1000 shares of CSCO common stock on margin at $19 per share.Assume the initial margin is 50% and the maintenance margin is 30%.Below what stock price level would you get a margin call Assume the stock pays no dividend; ignore interest on margin.

Assume you sold short 100 shares of common stock at $40 per share.The initial margin is 50%.What would be the maintenance margin if a margin call is made at a stock price of $50

Assume you purchased 200 shares of GE common stock on margin at $70 per share from your broker.If the initial margin is 55%, how much did you borrow from the broker

You sold short 100 shares of common stock at $75 per share.The initial margin is 50%.At what stock price would you receive a margin call if the maintenance margin is 30%

You want to purchase IBM stock at $80 from your broker using as little of your own money as possible.If initial margin is 50% and you have $2,000 to invest, how many shares can you buy

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

The secondary market consists of

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

The finalized registration statement for new securities approved by the SEC is called

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 maintenance margin be if a margin call is made at a stock price of $30 Ignore interest on margin.

You want to purchase XON stock at $60 from your broker using as little of your own money as possible.If initial margin is 50% and you have $3,000 to invest, how many shares can you buy

The Investment Environment

Asset Classes and Financial Instruments

Mutual Funds and Other Investment Companies

Risk, Return, and the Historical Record

Capital Allocation to Risky Assets

Optimal Risky Portfolios

Index Models

The Capital Asset Pricing Model

Arbitrage Pricing Theory and Multifactor Models of Risk and Return

The Efficient Market Hypothesis

Behavioral Finance and Technical Analysis

Empirical Evidence on Security Returns

Bond Prices and Yields

The Term Structure of Interest Rates

Managing Bond Portfolios

Macroeconomic and Industry Analysis

Equity Valuation Models

Financial Statement Analysis

Options Markets: Introduction

Option Valuation

Futures Markets

Futures, Swaps, and Risk Management

Portfolio Performance Evaluation

International Diversification

Hedge Funds

The Theory of Active Portfolio Management

Investment Policy and the Framework of the Cfa Institute

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