Question 1

When a firm markets new securities, a preliminary registration statement must be filed with

Accepted Answer

A)  the exchange on which the security will be listed. 
B)  the Securities and Exchange Commission. 
C)  the Federal Reserve. 
D)  all other companies in the same line of business. 
E)  the Federal Deposit Insurance Corporation. 
A)  the exchange on which the security will be listed. 
B)  the Securities and Exchange Commission. 
C)  the Federal Reserve. 
D)  all other companies in the same line of business. 
E)  the Federal Deposit Insurance Corporation.

Question 2

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 3

Assume you sell short 1,000 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 per 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% 
A)  20.47% 
B)  25.63% 
C)  57.14% 
D)  77.23%

Question 4

Which of the following orders instructs the broker to buy 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 5

A sale by IBM of new stock to the public would be a(n)

Accepted Answer

A)  short sale. 
B)  seasoned equity offering. 
C)  private placement. 
D)  secondary-market transaction. 
E)  initial public offering. 
A)  short sale. 
B)  seasoned equity offering. 
C)  private placement. 
D)  secondary-market transaction. 
E)  initial public offering.

Question 6

Specialists on stock exchanges perform which of the following functions?

Accepted Answer

A)  Act as dealers in their own accounts 
B)  Analyze the securities in which they specialize 
C)  Provide liquidity to the market 
D)  Act as dealers in their own accounts and analyze the securities in which they specialize 
E)  Act as dealers in their own accounts and provide liquidity to the market 
A)  Act as dealers in their own accounts 
B)  Analyze the securities in which they specialize 
C)  Provide liquidity to the market 
D)  Act as dealers in their own accounts and analyze the securities in which they specialize 
E)  Act as dealers in their own accounts and provide liquidity to the market

Question 7

Assume you sold short 100 shares of common stock at $50 per share. The initial margin is 60%. What would be the maintenance margin if a margin call is made at a stock price of $60?

Accepted Answer

A)  40% 
B)  33% 
C)  35% 
D)  25% 
A)  40% 
B)  33% 
C)  35% 
D)  25%

Question 8

The preliminary prospectus is referred to as a(n)

Accepted Answer

A)  red herring. 
B)  indenture. 
C)  greenmail. 
D)  tombstone. 
E)  headstone. 
A)  red herring. 
B)  indenture. 
C)  greenmail. 
D)  tombstone. 
E)  headstone.

Question 9

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

Accepted Answer

A)  stop-buy order. 
B)  limit-buy order. 
C)  market order. 
D)  limit-sell order. 
E)  None of these options are correct. 
A)  stop-buy order. 
B)  limit-buy order. 
C)  market order. 
D)  limit-sell order. 
E)  None of these options are correct.

Question 10

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 11

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 12

Which of the following statements regarding the specialist are true?

Accepted Answer

A)  Specialists maintain a book listing outstanding, unexecuted limit orders. 
B)  Specialists earn income from commissions and spreads in stock prices. 
C)  Specialists stand ready to trade at quoted bid and ask prices. 
D)  Specialists cannot trade in their own accounts. 
E)  Specialists maintain a book listing outstanding, unexecuted limit orders, earn income from commissions and spreads in stock 
A)  Specialists maintain a book listing outstanding, unexecuted limit orders. 
B)  Specialists earn income from commissions and spreads in stock prices. 
C)  Specialists stand ready to trade at quoted bid and ask prices. 
D)  Specialists cannot trade in their own accounts. 
E)  Specialists maintain a book listing outstanding, unexecuted limit orders, earn income from commissions and spreads in stock

Question 13

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 SEC. 
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 SEC. 
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 14

When stocks are held in street name,

Accepted Answer

A)  the investor receives a stock certificate with the owner's street address. 
B)  the investor receives a stock certificate without the owner's street address. 
C)  the investor does not receive a stock certificate. 
D)  the broker holds the stock in the brokerage firm's name on behalf of the client. 
E)  the investor does not receive a stock certificate, and the broker holds the stock in the brokerage firm's name on behalf of the client. 
A)  the investor receives a stock certificate with the owner's street address. 
B)  the investor receives a stock certificate without the owner's street address. 
C)  the investor does not receive a stock certificate. 
D)  the broker holds the stock in the brokerage firm's name on behalf of the client. 
E)  the investor does not receive a stock certificate, and the broker holds the stock in the brokerage firm's name on behalf of the client.

Question 15

Block transactions are transactions for more than _______ shares, and they account for about _____ percent of all trading on the NYSE.

Accepted Answer

A)  1,000; 5 
B)  500; 10 
C)  100,000; 50 
D)  10,000; 30 
E)  5,000; 23 
A)  1,000; 5 
B)  500; 10 
C)  100,000; 50 
D)  10,000; 30 
E)  5,000; 23

Question 16

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 17

You sold short 300 shares of common stock at $55 per share. The initial margin is 60%. At what stock price would you receive a margin call if the maintenance margin is 35%?

Accepted Answer

A)  $51.00 
B)  $65.19 
C)  $35.22 
D)  $40.36 
A)  $51.00 
B)  $65.19 
C)  $35.22 
D)  $40.36

Question 18

You sold short 100 shares of common stock at $45 per share. The initial margin is 50%. At what stock price would you receive a margin call if the maintenance margin is 35%?

Accepted Answer

A)  $50 
B)  $65 
C)  $35 
D)  $40 
A)  $50 
B)  $65 
C)  $35 
D)  $40

Question 19

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 20

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.

Exam 3: How Securities Are Traded

When a firm markets new securities, a preliminary registration statement must be filed with

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 above a specified price?

A sale by IBM of new stock to the public would be a(n)

Specialists on stock exchanges perform which of the following functions?

Assume you sold short 100 shares of common stock at $50 per share. The initial margin is 60%. What would be the maintenance margin if a margin call is made at a stock price of $60?

The preliminary prospectus is referred to as a(n)

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

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.

The secondary market consists of

Which of the following statements regarding the specialist are true?

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

When stocks are held in street name,

Block transactions are transactions for more than _______ shares, and they account for about _____ percent of all trading on the NYSE.

A program trade is

You sold short 300 shares of common stock at $55 per share. The initial margin is 60%. At what stock price would you receive a margin call if the maintenance margin is 35%?

You sold short 100 shares of common stock at $45 per share. The initial margin is 50%. At what stock price would you receive a margin call if the maintenance margin is 35%?

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

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

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

Filters

Block transactions are transactions for more than ___ shares, and they account for about _ percent of all trading on the NYSE.