Question 1

A market is liquid if

Accepted Answer

A) trades are executed quickly. 
B) market prices don't fluctuate sharply on successive trades 
C) both a) and b) are correct. 
D) if fees are low. 
A) trades are executed quickly. 
B) market prices don't fluctuate sharply on successive trades 
C) both a) and b) are correct. 
D) if fees are low.

Question 2

71.In reality, an option's value will equal its intrinsic value only at expiration.At all other times, the option's premium or price will exceed its intrinsic value.A major reason for this is/are _____________. 71 through 95---not in the chapter-they are part of the learning extension.
Editing is needed if these items are to be part of a separate test bank for Chap 11's Learning Extension.

Accepted Answer

A) marketability 
B) price 
C) trade restrictions 
D) time 
E) none of the above 
A) marketability 
B) price 
C) trade restrictions 
D) time 
E) none of the above

Question 3

An odd lot is a trade involving 100 shares or multiples of 100 shares.

Accepted Answer

A) True 
 B)False

Question 4

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

Question 5

If there were no secondary markets for trading between investors, there would be no primary market for the initial sale of securities.

Accepted Answer

A) True 
 B)False

Question 6

___________________ are comprised of direct costs, the spread, and underpricing.

Accepted Answer

A) Commission costs 
B) Flotation costs 
C) Brokerage commissions 
D) none of the above 
A) Commission costs 
B) Flotation costs 
C) Brokerage commissions 
D) none of the above

Question 7

A contract that obligates the owner to purchase an underlying asset at a specified price on a specified day is a (n) ____________ contract.

Accepted Answer

A) option 
B) futures 
C) hedge 
D) derivative 
A) option 
B) futures 
C) hedge 
D) derivative

Question 8

Which of the following statements is false?

Accepted Answer

A) The Dow Jones Industrial Average is an example of a price-weighted index. 
B) An American depository receipt is a receipt which represents foreign shares to U.S.investors. 
C) Index arbitrage occurs when traders buy and sell stocks with offsetting trades in futures and options in order to lock in profits from price differences between these different markets. 
D) Each of the above statements is correct. 
A) The Dow Jones Industrial Average is an example of a price-weighted index. 
B) An American depository receipt is a receipt which represents foreign shares to U.S.investors. 
C) Index arbitrage occurs when traders buy and sell stocks with offsetting trades in futures and options in order to lock in profits from price differences between these different markets. 
D) Each of the above statements is correct.

Question 9

If a limit order is not quite close to the current market price is turned over to the specialist, it is placed into:

Accepted Answer

A) central limit order book 
B) market order book 
C) short sale book 
D) none of the above
Not in the book 
A) central limit order book 
B) market order book 
C) short sale book 
D) none of the above
Not in the book

Question 10

The market for large blocks of listed stocks that operates outside the confines of the organized exchanges is called the:

Accepted Answer

A) primary market 
B) secondary market 
C) third market 
D) fourth market 
A) primary market 
B) secondary market 
C) third market 
D) fourth market

Question 11

The purpose of pPre-emptive rights is to allow shareholders to:

Accepted Answer

A) buy enough of a new securities offering to maintain their present proportional share of ownership 
B) buy an unlimited amount of the new issue at a discount 
C) pre-empt other stockholders from selling securities in a company 
D) none of the above 
A) buy enough of a new securities offering to maintain their present proportional share of ownership 
B) buy an unlimited amount of the new issue at a discount 
C) pre-empt other stockholders from selling securities in a company 
D) none of the above

Question 12

If a Microsoft January 20 put option with a strike price of $20 were about to expire and the market price of the underlying Microsoft stock was $15.00, the price of the put option would have to be __________ to eliminate arbitrage opportunities.

Accepted Answer

A) $1.00 
B) $2.00 
C) $4.00 
D) $6.00 
E) none of the above. 
A) $1.00 
B) $2.00 
C) $4.00 
D) $6.00 
E) none of the above.

Question 13

All securities must be listed before they may be traded on the American New York Stock Exchange and regional exchanges.

Accepted Answer

A) True 
 B)False

A market is liquid if

An odd lot is a trade involving 100 shares or multiples of 100 shares.

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

If there were no secondary markets for trading between investors, there would be no primary market for the initial sale of securities.

___________________ are comprised of direct costs, the spread, and underpricing.

A contract that obligates the owner to purchase an underlying asset at a specified price on a specified day is a (n) ____________ contract.

Which of the following statements is false?

If a limit order is not quite close to the current market price is turned over to the specialist, it is placed into:

The market for large blocks of listed stocks that operates outside the confines of the organized exchanges is called the:

The purpose of pPre-emptive rights is to allow shareholders to:

If a Microsoft January 20 put option with a strike price of $20 were about to expire and the market price of the underlying Microsoft stock was $15.00, the price of the put option would have to be __________ to eliminate arbitrage opportunities.

All securities must be listed before they may be traded on the American New York Stock Exchange and regional exchanges.

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

A market is liquid if

An odd lot is a trade involving 100 shares or multiples of 100 shares.

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

If there were no secondary markets for trading between investors, there would be no primary market for the initial sale of securities.

___________________ are comprised of direct costs, the spread, and underpricing.

A contract that obligates the owner to purchase an underlying asset at a specified price on a specified day is a (n) ____________ contract.

Which of the following statements is false?

If a limit order is not quite close to the current market price is turned over to the specialist, it is placed into:

The market for large blocks of listed stocks that operates outside the confines of the organized exchanges is called the:

The purpose of pPre-emptive rights is to allow shareholders to:

If a Microsoft January 20 put option with a strike price of $20 were about to expire and the market price of the underlying Microsoft stock was $15.00, the price of the put option would have to be __________ to eliminate arbitrage opportunities.

All securities must be listed before they may be traded on the American New York Stock Exchange and regional exchanges.

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 _.