Question 1

Which one of the following is generally true concerning securities held in street name?

Accepted Answer

A)  The securities are registered under your mailing address rather than your name. 
B)  There is a greater likelihood the security may be stolen. 
C)  All dividend checks are mailed to your street address. 
D)  The annual stock report is mailed directly to your street address. 
E)  The brokerage firm is the owner of record. 
A)  The securities are registered under your mailing address rather than your name. 
B)  There is a greater likelihood the security may be stolen. 
C)  All dividend checks are mailed to your street address. 
D)  The annual stock report is mailed directly to your street address. 
E)  The brokerage firm is the owner of record.

Question 2

Market timing is the:

Accepted Answer

A)  placing of an order within the last half-hour of trading for a day. 
B)  period of time between the placement of a short sale and the covering of that sale. 
C)  buying and selling of securities in anticipation of the overall direction of the market. 
D)  staggering of either buy or sell orders to mask the total size of a large transaction. 
E)  placing of trades within the last half-hour prior to the commencement of daily trading. 
A)  placing of an order within the last half-hour of trading for a day. 
B)  period of time between the placement of a short sale and the covering of that sale. 
C)  buying and selling of securities in anticipation of the overall direction of the market. 
D)  staggering of either buy or sell orders to mask the total size of a large transaction. 
E)  placing of trades within the last half-hour prior to the commencement of daily trading.

Question 3

If you ignore a margin call,your broker:

Accepted Answer

A)  will seize all the assets in your account. 
B)  will close your account. 
C)  may place a short sale on your behalf to cover the amount of the call. 
D)  may sell some of your securities to repay the margin loan. 
E)  will increase both your margin loan and the rate of interest on that loan. 
A)  will seize all the assets in your account. 
B)  will close your account. 
C)  may place a short sale on your behalf to cover the amount of the call. 
D)  may sell some of your securities to repay the margin loan. 
E)  will increase both your margin loan and the rate of interest on that loan.

Question 4

Last week,you sold 300 shares of ABC stock for $6,300.The sale was a short sale with an initial margin requirement of 70 percent.The maintenance margin is 40 percent.Some positive news concerning the company was released last night and the stock price jumped this morning to $28 a share.What is your current margin position in this stock?

Accepted Answer

A)  61.33 percent 
B)  56.67 percent 
C)  48.33 percent 
D)  38.68 percent 
E)  27.50 percent 
A)  61.33 percent 
B)  56.67 percent 
C)  48.33 percent 
D)  38.68 percent 
E)  27.50 percent

Question 5

Alfonso purchased 600 shares of Crosswinds,Inc.,stock on 60 percent margin when the stock was selling for $37 a share.The stock is currently selling for $32 a share.What is his current equity position?

Accepted Answer

A)  $7,680 
B)  $8,880 
C)  $9,600 
D)  $10,320 
E)  $11,560 
A)  $7,680 
B)  $8,880 
C)  $9,600 
D)  $10,320 
E)  $11,560

Question 6

A short sale:

Accepted Answer

A)  creates a long position in a stock. 
B)  involves the borrowing of securities. 
C)  is the purchase of less than 100 shares of a stock. 
D)  is a bullish outlook towards a security. 
E)  is the resale of a security within four hours of purchase. 
A)  creates a long position in a stock. 
B)  involves the borrowing of securities. 
C)  is the purchase of less than 100 shares of a stock. 
D)  is a bullish outlook towards a security. 
E)  is the resale of a security within four hours of purchase.

Question 7

Kay just purchased $5,000 worth of stock.She paid $3,000 in cash and borrowed $2,000.In this example,the term margin refers to:

Accepted Answer

A)  the total amount of the purchase. 
B)  the percentage of the purchase that was paid in cash. 
C)  the percentage of the purchase paid with borrowed funds. 
D)  any future increase in the value of the stock. 
E)  any future decrease in the value of the stock. 
A)  the total amount of the purchase. 
B)  the percentage of the purchase that was paid in cash. 
C)  the percentage of the purchase paid with borrowed funds. 
D)  any future increase in the value of the stock. 
E)  any future decrease in the value of the stock.

Question 8

Eight months ago,Freda purchased 500 shares of stock on margin at a price per share of $35.The initial margin requirement on her account is 70 percent and the maintenance margin is 40 percent.The call money rate is 4.75 percent and she pays 2 percent above that rate.Today,she sold these shares for $37.50 each.What is her annualized rate of return?

Accepted Answer

A)  8.50 percent 
B)  10.61 percent 
C)  12.70 percent 
D)  14.90 percent 
E)  16.42 percent 
A)  8.50 percent 
B)  10.61 percent 
C)  12.70 percent 
D)  14.90 percent 
E)  16.42 percent

Question 9

Tate Industries stock is selling for $20 a share.You would like to purchase as many shares of this stock as you can.Your margin account currently has available cash of $4,500 and the initial margin requirement is 75 percent.What is the maximum number of shares you can buy?

Accepted Answer

A)  193 shares 
B)  287 shares 
C)  300 shares 
D)  360 shares 
E)  408 shares 
A)  193 shares 
B)  287 shares 
C)  300 shares 
D)  360 shares 
E)  408 shares

Question 10

Staci owns 1,000 shares of stock in a margin account.Those shares are most likely held in:

Accepted Answer

A)  transit. 
B)  her registered name. 
C)  street name. 
D)  a wrap account. 
E)  a discretionary account. 
A)  transit. 
B)  her registered name. 
C)  street name. 
D)  a wrap account. 
E)  a discretionary account.

Question 11

You recently purchased 1,300 shares of stock at a cost per share of $54.10.The initial margin requirement on this stock is 60 percent and the maintenance margin is 30 percent.The stock is currently valued at $42.30 a share.What is your current margin position? Ignore margin interest.

Accepted Answer

A)  46.91 percent 
B)  48.84 percent 
C)  63.05 percent 
D)  65.28 percent 
E)  78.18 percent 
A)  46.91 percent 
B)  48.84 percent 
C)  63.05 percent 
D)  65.28 percent 
E)  78.18 percent

Question 12

Today,you short sold 1,100 shares of Jasper Industrial stock at $48 a share.The initial margin is 60 percent and the maintenance margin is 30 percent.Which one of the following is correct concerning your account balance sheet for this transaction?

Accepted Answer

A)  You have an asset of $31,680 from the sale proceeds. 
B)  You have a liability from the short position of $21,120. 
C)  Your account equity is $21,120. 
D)  Your initial margin deposit is $15,840. 
E)  Your total assets are $84,480. 
A)  You have an asset of $31,680 from the sale proceeds. 
B)  You have a liability from the short position of $21,120. 
C)  Your account equity is $21,120. 
D)  Your initial margin deposit is $15,840. 
E)  Your total assets are $84,480.

Question 13

Rosita purchased 300 shares of a stock for $37 a share.Today,the stock is selling for $41 a share.The initial margin requirement is 70 percent and the maintenance margin is 30 percent.Rosita had to pay ________ in cash to purchase the stock and must have at least ________ in equity today.

Accepted Answer

A)  $3,690; $3,330 
B)  $3,690; $3,690 
C)  $7,770; $3,330 
D)  $7,770; $3,690 
E)  $8,610; $3,690 
A)  $3,690; $3,330 
B)  $3,690; $3,690 
C)  $7,770; $3,330 
D)  $7,770; $3,690 
E)  $8,610; $3,690

Question 14

Yvette recently purchased 500 shares of stock at a cost per share of $43.50.The initial margin requirement on this stock is 75 percent and the maintenance margin is 40 percent.The stock is currently valued at $44.75 a share.What is her current margin position? Ignore margin interest.

Accepted Answer

A)  74.29 percent 
B)  74.78 percent 
C)  75.70 percent 
D)  76.03 percent 
E)  76.14 percent 
A)  74.29 percent 
B)  74.78 percent 
C)  75.70 percent 
D)  76.03 percent 
E)  76.14 percent

Question 15

Which one of the following describes a short position?

Accepted Answer

A)  Purchasing a security on margin 
B)  Selling a security that you originally purchased on margin 
C)  Loaning a security to your broker to cover a margin call 
D)  Having less equity than required in your margin account 
E)  Selling a security that you do not own 
A)  Purchasing a security on margin 
B)  Selling a security that you originally purchased on margin 
C)  Loaning a security to your broker to cover a margin call 
D)  Having less equity than required in your margin account 
E)  Selling a security that you do not own

Question 16

If you benefit when a security decreases in value,you have a ________ position in the security.

Accepted Answer

A)  long 
B)  margined 
C)  short 
D)  covered 
E)  wrapped 
A)  long 
B)  margined 
C)  short 
D)  covered 
E)  wrapped

Question 17

Allan purchased 500 shares of stock on margin for $31.75 a share and sold the shares five months later for $34.50 a share.The initial margin requirement was 65 percent and the maintenance margin was 30 percent.The interest rate on the margin loan was 8.5 percent.He received no dividend income.What was his holding period return?

Accepted Answer

A)  7.05 percent 
B)  8.45 percent 
C)  9.88 percent 
D)  10.76 percent 
E)  11.46 percent 
A)  7.05 percent 
B)  8.45 percent 
C)  9.88 percent 
D)  10.76 percent 
E)  11.46 percent

Question 18

Jack is researching chemical companies in an effort to determine which company's stock he should purchase.This process is known as:

Accepted Answer

A)  market timing. 
B)  purchase shorting. 
C)  marketing research. 
D)  asset allocation. 
E)  security selection. 
A)  market timing. 
B)  purchase shorting. 
C)  marketing research. 
D)  asset allocation. 
E)  security selection.

Question 19

A company that owns income-producing real estate such as an apartment complex or a retail shopping center is called a(n):

Accepted Answer

A)  REIT. 
B)  SIPC. 
C)  REEF. 
D)  EAR. 
E)  SPIC. 
A)  REIT. 
B)  SIPC. 
C)  REEF. 
D)  EAR. 
E)  SPIC.

Question 20

Which one of the following statements is correct?

Accepted Answer

A)  The call money rate is the rate of interest brokerage firms charge on margin loans. 
B)  The spread is the fee a deep-discount broker charges to execute a trade. 
C)  The percentage of a purchase paid for with borrowed funds is referred to as the margin. 
D)  A margin loan is treated as an asset on an account balance sheet. 
E)  Margin is equal to account equity divided by the value of the securities owned. 
A)  The call money rate is the rate of interest brokerage firms charge on margin loans. 
B)  The spread is the fee a deep-discount broker charges to execute a trade. 
C)  The percentage of a purchase paid for with borrowed funds is referred to as the margin. 
D)  A margin loan is treated as an asset on an account balance sheet. 
E)  Margin is equal to account equity divided by the value of the securities owned.

Which one of the following is generally true concerning securities held in street name?

Market timing is the:

If you ignore a margin call,your broker:

Alfonso purchased 600 shares of Crosswinds,Inc.,stock on 60 percent margin when the stock was selling for $37 a share.The stock is currently selling for $32 a share.What is his current equity position?

A short sale:

Kay just purchased $5,000 worth of stock.She paid $3,000 in cash and borrowed $2,000.In this example,the term margin refers to:

Tate Industries stock is selling for $20 a share.You would like to purchase as many shares of this stock as you can.Your margin account currently has available cash of $4,500 and the initial margin requirement is 75 percent.What is the maximum number of shares you can buy?

Staci owns 1,000 shares of stock in a margin account.Those shares are most likely held in:

You recently purchased 1,300 shares of stock at a cost per share of $54.10.The initial margin requirement on this stock is 60 percent and the maintenance margin is 30 percent.The stock is currently valued at $42.30 a share.What is your current margin position? Ignore margin interest.

Today,you short sold 1,100 shares of Jasper Industrial stock at $48 a share.The initial margin is 60 percent and the maintenance margin is 30 percent.Which one of the following is correct concerning your account balance sheet for this transaction?

Rosita purchased 300 shares of a stock for $37 a share.Today,the stock is selling for $41 a share.The initial margin requirement is 70 percent and the maintenance margin is 30 percent.Rosita had to pay in cash to purchase the stock and must have at least in equity today.

Yvette recently purchased 500 shares of stock at a cost per share of $43.50.The initial margin requirement on this stock is 75 percent and the maintenance margin is 40 percent.The stock is currently valued at $44.75 a share.What is her current margin position? Ignore margin interest.

Which one of the following describes a short position?

If you benefit when a security decreases in value,you have a ________ position in the security.

Jack is researching chemical companies in an effort to determine which company's stock he should purchase.This process is known as:

A company that owns income-producing real estate such as an apartment complex or a retail shopping center is called a(n):

Which one of the following statements is correct?

A Brief History of Risk and Return

Overview of Security Types

Mutual Funds and Other Investment Companies

The Stock Market

Common Stock Valuation

Stock Price Behavior and Market Efficiency

Behavioral Finance and the Psychology of Investing

Interest Rates

Bond Prices and Yields

Diversification and Risky Asset Allocation

Return,Risk,and the Security Market Line

Performance Evaluation and Risk Management

Futures Contracts

Stock Options

Option Valuation

Projecting Cash Flow and Earnings

Corporate and Government Bonds

Global Economic Activity and Industry Analysis

Mortgage-Backed Securities

Filters

Exam 2: The Investment Process

Which one of the following is generally true concerning securities held in street name?

Market timing is the:

If you ignore a margin call,your broker:

Alfonso purchased 600 shares of Crosswinds,Inc.,stock on 60 percent margin when the stock was selling for $37 a share.The stock is currently selling for $32 a share.What is his current equity position?

A short sale:

Kay just purchased $5,000 worth of stock.She paid $3,000 in cash and borrowed $2,000.In this example,the term margin refers to:

Tate Industries stock is selling for $20 a share.You would like to purchase as many shares of this stock as you can.Your margin account currently has available cash of $4,500 and the initial margin requirement is 75 percent.What is the maximum number of shares you can buy?

Staci owns 1,000 shares of stock in a margin account.Those shares are most likely held in:

You recently purchased 1,300 shares of stock at a cost per share of $54.10.The initial margin requirement on this stock is 60 percent and the maintenance margin is 30 percent.The stock is currently valued at $42.30 a share.What is your current margin position? Ignore margin interest.

Today,you short sold 1,100 shares of Jasper Industrial stock at $48 a share.The initial margin is 60 percent and the maintenance margin is 30 percent.Which one of the following is correct concerning your account balance sheet for this transaction?

Rosita purchased 300 shares of a stock for $37 a share.Today,the stock is selling for $41 a share.The initial margin requirement is 70 percent and the maintenance margin is 30 percent.Rosita had to pay ________ in cash to purchase the stock and must have at least ________ in equity today.

Yvette recently purchased 500 shares of stock at a cost per share of $43.50.The initial margin requirement on this stock is 75 percent and the maintenance margin is 40 percent.The stock is currently valued at $44.75 a share.What is her current margin position? Ignore margin interest.

Which one of the following describes a short position?

If you benefit when a security decreases in value,you have a ________ position in the security.

Jack is researching chemical companies in an effort to determine which company's stock he should purchase.This process is known as:

A company that owns income-producing real estate such as an apartment complex or a retail shopping center is called a(n):

Which one of the following statements is correct?

A Brief History of Risk and Return

Overview of Security Types

Mutual Funds and Other Investment Companies

The Stock Market

Common Stock Valuation

Stock Price Behavior and Market Efficiency

Behavioral Finance and the Psychology of Investing

Interest Rates

Bond Prices and Yields

Diversification and Risky Asset Allocation

Return,Risk,and the Security Market Line

Performance Evaluation and Risk Management

Futures Contracts

Stock Options

Option Valuation

Projecting Cash Flow and Earnings

Corporate and Government Bonds

Global Economic Activity and Industry Analysis

Mortgage-Backed Securities

Filters

Rosita purchased 300 shares of a stock for $37 a share.Today,the stock is selling for $41 a share.The initial margin requirement is 70 percent and the maintenance margin is 30 percent.Rosita had to pay in cash to purchase the stock and must have at least in equity today.