Question 1

In a ____________ offering the firm preregisters with the SEC any securities it wishes to sell over the next two years.

Accepted Answer

A) rights 
B) full underwritten 
C) general cash 
D) shelf 
E) best efforts 
A) rights 
B) full underwritten 
C) general cash 
D) shelf 
E) best efforts D

Question 2

In cumulative voting,a stockholder who owns 51 percent of the shares can be assured of the ability to elect the entire board of directors.

Accepted Answer

A) True 
 B)False  False

Question 3

What are ECNs?
 How are they changing trading in the traditional markets?

Accepted Answer

ECNs are electronic communication networks. These computerized trading systems automatically match buy and sell orders. Since they are electronic,ECNs allow for extended trading hours. As fewer humans and physical overheads are required,ECNs provide a potentially cheaper trading platform than the exchanges. Institutions use ECNs to solicit trading interest on large blocks of shares. The rule changes requiring publishing all quotes from different markets mean that ECN market share is likely to grow at the expense of the NYSE and NASDAQ (hence,a rationale for the mergers between NYSE and Archipelago,and NASDAQ and Instinet).

Question 4

A firm is using cumulative voting and four director spots are up for election. There are 3.6 million shares outstanding. How many shares must a minority owner own or control to ensure that he or she can gain control of one seat on the board of directors?

Accepted Answer

A) 900,001 
B) 880,001 
C) 720,001 
D) 1,800,001 
E) 1,750,001 
A) 900,001 
B) 880,001 
C) 720,001 
D) 1,800,001 
E) 1,750,001

Question 5

An order to buy shares of stock at a specified price or better is called a limit order.

Accepted Answer

A) True 
 B)False

Question 6

You buy a stock for $30 per share and sell it for $33 after holding it for slightly over a year and collecting a $0.75 per share dividend. Your ordinary income tax rate is 28 percent and your capital gains tax rate is 20 percent. Your after-tax rate of return is

Accepted Answer

A) 8.00 percent. 
B) 10.25 percent. 
C) 12.50 percent. 
D) 9.80 percent. 
E) 8.75 percent. 
A) 8.00 percent. 
B) 10.25 percent. 
C) 12.50 percent. 
D) 9.80 percent. 
E) 8.75 percent.

Question 7

Answer the following questions concerning the given partial stock quote:

Accepted Answer

@#IMG-DLM& a. What was the dividend yield?
b. What

Question 8

In what major ways do stocks differ from bonds?

Accepted Answer

Stocks have the following characteristic

Question 9

The Dow Jones Industrial Average is a price-weighted index of 30 stocks chosen to represent the overall market.

Accepted Answer

A) True 
 B)False

Question 10

NYSE listing has traditionally benefited a firm by

Accepted Answer

A) improving the stock's price. 
B) generating increased publicity for the firm. 
C) providing easier access to primary market capital. 
D) generating increased publicity for the firm and providing easier access to primary market capital. 
E) improving the stock's price,generating increased publicity for the firm,and providing easier access to primary market capital. 
A) improving the stock's price. 
B) generating increased publicity for the firm. 
C) providing easier access to primary market capital. 
D) generating increased publicity for the firm and providing easier access to primary market capital. 
E) improving the stock's price,generating increased publicity for the firm,and providing easier access to primary market capital.

Question 11

Suppose that over the last 10 to 15 years significantly large numbers of investors have been able to earn abnormal returns from using the firm's publicly available financial information to forecast growth in earnings and dividends. This would be evidence that the markets are not
I. weak form efficient.
II. semi-strong form efficient.
III. strong form efficient.

Accepted Answer

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

Question 12

The largest single type of holder of common stock is

Accepted Answer

A) pension funds. 
B) households. 
C) mutual funds. 
D) brokers and dealers. 
E) life insurance firms. 
A) pension funds. 
B) households. 
C) mutual funds. 
D) brokers and dealers. 
E) life insurance firms.

Question 13

Today,Stock A is worth $20 and has 1,000 shares outstanding. Stock B costs $30 and has 500 shares outstanding. Stock C is priced at $50 per share and has 1,200 shares outstanding. If,tomorrow,Stock A is priced at $22,Stock B at $35,and Stock C is worth $48,what would the value-weighted index amount equal? (The index has a base period value of 100.)

Accepted Answer

A) 35.00 
B) 105.00 
C) 108.44 
D) 101.45 
E) 102.21 
A) 35.00 
B) 105.00 
C) 108.44 
D) 101.45 
E) 102.21

Question 14

At year-end a firm has assets of $100 and debts due of $120. In this situation,the stockholders must pay an additional $20 out of their own pocket.

Accepted Answer

A) True 
 B)False

Question 15

If the stock markets are semi-strong efficient,stock prices reflect all historic and current public information about a firm but prices do not reflect inside information.

Accepted Answer

A) True 
 B)False

Question 16

When would preferred stock be a better investment choice than common stock or bonds?

Accepted Answer

Preferred stocks have higher yields than

Question 17

As of December 2005,trading licenses are required to conduct trades on the floor of the NYSE. Which of the following statements about these trading licenses is/are correct?
I. Licenses are auctioned off in a special type of auction called a Dutch auction.
II. The NYSE determines the minimum bid price.
III. The SEC determines the maximum bid price.
IV. Trading licenses are good for 10 years.

Accepted Answer

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

Question 18

With ____________ voting,all directors up for election are voted on by the shareholders at the same time in one general election.

Accepted Answer

A) straight 
B) participating 
C) nonparticipating 
D) proxy 
E) cumulative 
A) straight 
B) participating 
C) nonparticipating 
D) proxy 
E) cumulative

Question 19

The NASDAQ automatic order execution system for individual traders placing buy or sell orders of 1,000 or fewer shares is called the

Accepted Answer

A) ECN Network. 
B) SOE System. 
C) NASDAQ/AMEX Joint Program. 
D) Instinet Network. 
E) E*Trade Online Program. 
A) ECN Network. 
B) SOE System. 
C) NASDAQ/AMEX Joint Program. 
D) Instinet Network. 
E) E*Trade Online Program.

Question 20

Common stocks typically have which of the following that bonds do NOT have?
I. Voting rights
II. Fixed cash flows
III. Set maturity date
IV. Tax deductibility of cash flows to investors

Accepted Answer

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

Exam 8: Stock Markets

In a ____________ offering the firm preregisters with the SEC any securities it wishes to sell over the next two years.

In cumulative voting,a stockholder who owns 51 percent of the shares can be assured of the ability to elect the entire board of directors.

What are ECNs? How are they changing trading in the traditional markets?

A firm is using cumulative voting and four director spots are up for election. There are 3.6 million shares outstanding. How many shares must a minority owner own or control to ensure that he or she can gain control of one seat on the board of directors?

An order to buy shares of stock at a specified price or better is called a limit order.

You buy a stock for $30 per share and sell it for $33 after holding it for slightly over a year and collecting a $0.75 per share dividend. Your ordinary income tax rate is 28 percent and your capital gains tax rate is 20 percent. Your after-tax rate of return is

Answer the following questions concerning the given partial stock quote:

In what major ways do stocks differ from bonds?

The Dow Jones Industrial Average is a price-weighted index of 30 stocks chosen to represent the overall market.

NYSE listing has traditionally benefited a firm by

The largest single type of holder of common stock is

At year-end a firm has assets of $100 and debts due of $120. In this situation,the stockholders must pay an additional $20 out of their own pocket.

If the stock markets are semi-strong efficient,stock prices reflect all historic and current public information about a firm but prices do not reflect inside information.

When would preferred stock be a better investment choice than common stock or bonds?

With ____________ voting,all directors up for election are voted on by the shareholders at the same time in one general election.

The NASDAQ automatic order execution system for individual traders placing buy or sell orders of 1,000 or fewer shares is called the

Common stocks typically have which of the following that bonds do NOT have? I. Voting rights II. Fixed cash flows III. Set maturity date IV. Tax deductibility of cash flows to investors

Introduction

Determinants of Interest Rates

Interest Rates and Security Valuation

The Federal Reserve System, Monetary Policy, and Interest Rates

Money Markets

Bond Markets

Mortgage Markets

Foreign Exchange Markets

Derivative Securities Markets

Commercial Banks: Industry Overview

Commercial Banks Financial Statements and Analysis

Regulation of Commercial Banks

Other Lending Institutions: Savings Institutions, Credit Unions, and Finance Companies

Insurance Companies

Securities Firms and Investment Banks

Investment Companies

Pension Funds

Types of Risks Incurred by Financial Institutions

Managing Credit Risk on the Balance Sheet

Managing Liquidity Risk on the Balance Sheet

Managing Interest Rate Risk and Insolvency Risk on the Balance Sheet

Managing Risk Off the Balance Sheet With Derivative Securities

Managing Risk Off the Balance Sheet With Loan Sales and Securitization

Filters