Exam 3: Securities Markets

You short-sell 200 shares of Tuckerton Trading Co., now selling for $50 per share. What is your maximum possible loss?

________ often accompany short sales, and are used to limit potential losses from the short position.

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

The money market is an example of ________.

You purchased 250 shares on margin for $25 per share. The initial margin is 65% and the share pays no dividend. Your rate of return would be ________ if you sell the share at $32 per share. (Ignore interest on margin.)

The bid-ask spread exists because of ________.

The cost of buying and selling a share include ________. I. broker's commissions II. dealer's bid-ask spread III. price concessions investors may be forced to make

________ requires very heavy and frequent trading to cover the expense of maintaining the market.

Private placements can be advantageous rather than public issue because ________. I. private placements are cheaper to market than public issues II. private placements may still be sold to the general public III. privately placed securities trade on secondary markets

The trading of existing securities is known as ________.

The ________ price is the price at which a dealer is willing to purchase a security.

An investor buys $16 000 worth of a share priced at $20 per share using 60% initial margin. The broker charges 8% on the margin loan and requires a 35% maintenance margin. The share pays a $0.50 per share dividend in one year and then the share is sold at $23 per share. What was the investor's rate of return?

Consider the following limit order book of a specialist. The last trade in the share occurred at a price of $40. If a market buy order for 100 shares comes in, at what price will it be filled?

As a type of secondary capital raising, ________ can be conducted very quickly and has very few regulatory requirements.

________ often accompany short sales.

You sell short 300 shares of Microsoft which are currently selling at $30 per share. You post the 50% margin required on the short sale. If you earn no interest on the funds in your margin account what will be your rate of return after one year if Microsoft is selling at $27? (Ignore any dividends)

A ________ is a long-term strategy for raising capital rather than a technique for raising capital quickly.

Placements are generally targeted towards ________.

The difference between the price at which a dealer is willing to buy, and the price at which a dealer is willing to sell, is called the ________.

An investor puts up $5 000 but borrows an equal amount of money from their broker to double the amount invested to $10 000. The broker charges 7% on the loan. The shares were originally purchased at $25 per share and in one year the investor sells the shares for $28. The investor's rate of return was ________.