Exam 4: Securities Markets and the Economy

Exhibit 4-3 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) Kathy Smith has a margin account with a balance of $60,000. If initial margin requirements are 80%, and Jackson Industries is currently selling at $40 per share: -Refer to Exhibit 4-3. If the maintenance margin is 25%, to what price can Jackson Industries fall before Kathy receives a margin call?

The basic distinction between a primary and a secondary market is

The over-the-counter market includes all stocks not listed on one of the major exchanges but constitutes a lesser of a dollar value than the New York Stock Exchange.

A corporation wishing to raise funds will normally want the investment banker to use a "best efforts" arrangement rather than a negotiated basis.

Short selling is practiced when an investor borrows part of the cost of the investment,e.g., they are "short" on cash.

An order that specifies the highest buy or lowest sell price is a

Listed stocks traded on the over-the-counter market are being traded in the third market.

The NYSE has dominated the other U.S. exchanges in trading volume.

The S&P/TSX composite index is a(n)

Secondary markets are important because

Exhibit 4-1 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) Jackie has a margin account with a balance of $150,000. If the initial margin deposit is 60% and Turtle Industries is currently selling at $50 per share: -Refer to Exhibit 4-1. How many shares of Turtle can Jackie purchase?

When an investor borrows part of the investment cost it is known as

Which of the following is not a secondary equity market?

You own 50 shares of Auto Corporation that you purchased for $30 per share. The stock is currently selling for $50 per share and you placed a stop loss order at $45. If the stock price drops to $35 per share, what is your return on this investment?

Specialists benefit from their exclusive knowledge of the limit order books.

Exhibit 4-6 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) You decide to sell short 200 shares of XCorp stock at a price of $75. Your margin deposit is 65%. Commission on the sale is 1.25%. While you are short, the stock pays a $1.75 per share dividend. Interest on margin debt is 5.25% per year. -Refer to Exhibit 4-6. At the end of one year you close out your short position by purchasing share of XCorp at $45 per share. The commission is 1.25%. What is your rate of return on the investment?

Which of the following is true regarding a market order?

Exhibit 4-1 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) Jackie has a margin account with a balance of $150,000. If the initial margin deposit is 60% and Turtle Industries is currently selling at $50 per share: -Refer to Exhibit 4-1. If the maintenance margin is 25%, to what price can Turtle Industries fall before Jackie receives a margin call?

Exhibit 4-7 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) Shares of RossCorp stock are selling for $45 per share. Brokerage commissions are 2% for purchases and 2% for sales. The interest rate on margin debt is 6.25% per year. The maintenance margin is 30%. -Refer to Exhibit 4-7. At the end of one year shares of RossCorp stock are selling for $55 per share and the company paid dividends of $0.85 per share. Assuming that you borrowed 25% of cost of the purchase, what is your rate of return?

Exhibit 4-2 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) Heidi Talbott has a margin account with a balance of $50,000. If the initial margin deposit is 50%, and RC Industries is currently selling at $50 per share: -Refer to Exhibit 4-2. If the maintenance margin is 25%, to what price can RC Industries stock price fall before Heidi receives a margin call?