Question 1

The flotation costs of an initial public offering are comprised solely of direct costs and the spread.

Accepted Answer

A) True 
 B)False

Question 2

Shelf registration allows firms to register only debt issues with the SEC, and have them available to sell for two years.

Accepted Answer

A) True 
 B)False

Question 3

The advantage of buying on margin is:

Accepted Answer

A) larger potential profit 
B) using more of your own money 
C) deductible loss 
D) non-taxable capital gain 
A) larger potential profit 
B) using more of your own money 
C) deductible loss 
D) non-taxable capital gain

Question 4

The prospectus is a contract outlining the duties, responsibilities and fees between the issuing firm and its underwriter.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is not an advantage of shelf registration?

Accepted Answer

A) 	saving time on issuing securities 
B) 	allows issuer to determine which investment bank offers the best service 
C) 	eliminates filing fees 
D) 	all the above 
E) 	none of the above 
A) 	saving time on issuing securities 
B) 	allows issuer to determine which investment bank offers the best service 
C) 	eliminates filing fees 
D) 	all the above 
E) 	none of the above

Question 6

All firms can use shelf registration which saves issuers both time and money.

Accepted Answer

A) True 
 B)False

Question 7

All derivative securities always derive their values from: In the Learning Extension-not part of the chapter.

Accepted Answer

A) stocks 
B) bonds 
C) other derivatives 
D) neither of the above 
A) stocks 
B) bonds 
C) other derivatives 
D) neither of the above

Question 8

Federal regulation of investment banking is administered primarily under the provisions of the ___________________.

Accepted Answer

A) Investment Banking Act of 1977 
B) The Garn-St.Germain Act of 1997 
C) The Securities Act of 1933 
D) none of the above 
A) Investment Banking Act of 1977 
B) The Garn-St.Germain Act of 1997 
C) The Securities Act of 1933 
D) none of the above

Question 9

The process whereby an underwriting syndicate steps in to buy back securities to prevent a larger price drop than that which has already occurred is called.

Accepted Answer

A) market stabilization 
B) price normalization 
C) dollar cost averaging 
D) all the above 
E) none of the above 
A) market stabilization 
B) price normalization 
C) dollar cost averaging 
D) all the above 
E) none of the above

Question 10

Specialists are assigned dealers who have the responsibility of making a market in an assigned security.

Accepted Answer

A) True 
 B)False

Question 11

Insider trading regulation is provided for under the Securities Exchange Act of 1934.

Accepted Answer

A) True 
 B)False

Question 12

___________________ is an order to sell stock at the market price when the price of the stock falls to a specified level.

Accepted Answer

A) A short sale 
B) A stop-loss order 
C) A limit order 
D) Buying on margin 
A) A short sale 
B) A stop-loss order 
C) A limit order 
D) Buying on margin

Question 13

Churning happens when a broker constantly buys and sells securities from a client's portfolio in an effort to generate commissions.

Accepted Answer

A) True 
 B)False

Question 14

Brokerage firms that not only assist in trades but also have research staffs that analyze firms and make recommendations about which stocks to buy or sell are called:

Accepted Answer

A) discount brokerage firms 
B) full service brokerage firms 
C) investment banking firms 
D) stock advisory brokers 
A) discount brokerage firms 
B) full service brokerage firms 
C) investment banking firms 
D) stock advisory brokers

Question 15

Which of the following is not a characteristic of a good market?

Accepted Answer

A) central location 
B) quick and accurate trade execution 
C) low cost of trading 
D) all of the above are characteristics of a good market 
A) central location 
B) quick and accurate trade execution 
C) low cost of trading 
D) all of the above are characteristics of a good market

Question 16

A limit order is an order to sell stock at the market price when the price of the stock falls to a specified level.

Accepted Answer

A) True 
 B)False

Question 17

If a Microsoft January 20 put option with a strike price of $20 was selling for $5.00 and the market price of the underlying Microsoft stock was $10.00, the price of the put option would be _______________.

Accepted Answer

A) in-the-money 
B) out-of-the-money 
C) fairly priced 
D) not enough information to tell 
A) in-the-money 
B) out-of-the-money 
C) fairly priced 
D) not enough information to tell

Question 18

The seller of an option contract is called a (n) ____________ and the price paid for the option itself is the called the ___________.

Accepted Answer

A) option broker, option price 
B) sales agent, call option 
C) sales agent, option premium 
D) option writer, option price 
E) none of the above. 
A) option broker, option price 
B) sales agent, call option 
C) sales agent, option premium 
D) option writer, option price 
E) none of the above.

Question 19

The SEC's definition of "Insiders" is limited to corporate personnel.

Accepted Answer

A) True 
 B)False

Question 20

The document which details the issuer's finances and must be provided to each buyer of the security is called the:

Accepted Answer

A) indenture 
B) prospectus 
C) tombstone 
D) all the above 
A) indenture 
B) prospectus 
C) tombstone 
D) all the above

The flotation costs of an initial public offering are comprised solely of direct costs and the spread.

Shelf registration allows firms to register only debt issues with the SEC, and have them available to sell for two years.

The advantage of buying on margin is:

The prospectus is a contract outlining the duties, responsibilities and fees between the issuing firm and its underwriter.

Which of the following is not an advantage of shelf registration?

All firms can use shelf registration which saves issuers both time and money.

All derivative securities always derive their values from: In the Learning Extension-not part of the chapter.

Federal regulation of investment banking is administered primarily under the provisions of the ___________________.

The process whereby an underwriting syndicate steps in to buy back securities to prevent a larger price drop than that which has already occurred is called.

Specialists are assigned dealers who have the responsibility of making a market in an assigned security.

Insider trading regulation is provided for under the Securities Exchange Act of 1934.

___________________ is an order to sell stock at the market price when the price of the stock falls to a specified level.

Churning happens when a broker constantly buys and sells securities from a client's portfolio in an effort to generate commissions.

Brokerage firms that not only assist in trades but also have research staffs that analyze firms and make recommendations about which stocks to buy or sell are called:

Which of the following is not a characteristic of a good market?

A limit order is an order to sell stock at the market price when the price of the stock falls to a specified level.

If a Microsoft January 20 put option with a strike price of $20 was selling for $5.00 and the market price of the underlying Microsoft stock was $10.00, the price of the put option would be _______________.

The seller of an option contract is called a (n) __ and the price paid for the option itself is the called the _.

The SEC's definition of "Insiders" is limited to corporate personnel.

The document which details the issuer's finances and must be provided to each buyer of the security is called the:

The Financial Environment

Money and the Monetary System

Banks and Other Financial Institutions

Federal Reserve System

Policy Makers and the Money Supply

International Finance and Trade

Savings and Investment Process

Interest Rates

Time Value of Money

Bonds and Stocks: Characteristics and Valuation

Financial Return and Risk Concepts

Business Organization and Financial Data

Financial Analysis and Long-Term Financial Planning

Managing Working Capital

Short-Term Business Financing

Capital Budgeting Analysis

Capital Structure and the Cost of Capital

Filters

Exam 11: Securities Markets

The flotation costs of an initial public offering are comprised solely of direct costs and the spread.

Shelf registration allows firms to register only debt issues with the SEC, and have them available to sell for two years.

The advantage of buying on margin is:

The prospectus is a contract outlining the duties, responsibilities and fees between the issuing firm and its underwriter.

Which of the following is not an advantage of shelf registration?

All firms can use shelf registration which saves issuers both time and money.

All derivative securities always derive their values from: In the Learning Extension-not part of the chapter.

Federal regulation of investment banking is administered primarily under the provisions of the ___________________.

The process whereby an underwriting syndicate steps in to buy back securities to prevent a larger price drop than that which has already occurred is called.

Specialists are assigned dealers who have the responsibility of making a market in an assigned security.

Insider trading regulation is provided for under the Securities Exchange Act of 1934.

___________________ is an order to sell stock at the market price when the price of the stock falls to a specified level.

Churning happens when a broker constantly buys and sells securities from a client's portfolio in an effort to generate commissions.

Brokerage firms that not only assist in trades but also have research staffs that analyze firms and make recommendations about which stocks to buy or sell are called:

Which of the following is not a characteristic of a good market?

A limit order is an order to sell stock at the market price when the price of the stock falls to a specified level.

If a Microsoft January 20 put option with a strike price of $20 was selling for $5.00 and the market price of the underlying Microsoft stock was $10.00, the price of the put option would be _______________.

The seller of an option contract is called a (n) ____________ and the price paid for the option itself is the called the ___________.

The SEC's definition of "Insiders" is limited to corporate personnel.

The document which details the issuer's finances and must be provided to each buyer of the security is called the:

The Financial Environment

Money and the Monetary System

Banks and Other Financial Institutions

Federal Reserve System

Policy Makers and the Money Supply

International Finance and Trade

Savings and Investment Process

Interest Rates

Time Value of Money

Bonds and Stocks: Characteristics and Valuation

Financial Return and Risk Concepts

Business Organization and Financial Data

Financial Analysis and Long-Term Financial Planning

Managing Working Capital

Short-Term Business Financing

Capital Budgeting Analysis

Capital Structure and the Cost of Capital

Filters

The seller of an option contract is called a (n) __ and the price paid for the option itself is the called the _.