Exam 4: Securities Markets and the Economy

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. Suppose at the end of one year XCorp is selling at $90 per share and you cover your short position at this price. What is your rate of return on the investment? (Assume a 1.25% commission on the purchase.)

The NASDAQ National Market System is an order driven market.

In a dealer market trading system shares of stock are sold to the investor with the highest bid price and bought from the seller with the lowest offering price.

Exhibit 4-4 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) You decide to sell 100 shares of Davis Industries short when it is selling at its yearly high of $35. Your broker tells you that your margin requirement is 55% and that the commission on the sale is $15. While you are short, Davis pays a $0.75 per share dividend. At the end of one year you buy your Davis shares (cover your short sale) at $30 and are charged a commission of $15 and a 6% interest rate. -Refer to Exhibit 4-4. What is your dollar return on the investment?

Which of the following is not a characteristic of Short Form Prospectus Distribution system?

Which of the following is not a function of the specialist?

Which of the following is not a characteristic of a good market for goods and services?

Why do regional exchanges exist?

The over-the-counter market lists more stocks than the New York Stock Exchange.

Which of the following statements about a market is true?

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 $35 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?

A continuous market that has price continuity requires depth of buyers and sellers.

The value of the stocks traded in the over-the-counter market is greater than the values of the stocks traded on the New York Stock Exchange.

A pure auction market is one in which

If transaction prices are volatile, but long-term prices are stable, this is referred to as price continuity.

Exhibit 4-5 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) You decide to sell 100 shares of Topgun Enterprises Inc. short when it is selling at its yearly high of $42.25. Your broker tells you that your margin requirement is 60% and that the commission on the sale is $20. While you are short, Topgun pays a $0.85 per share dividend. At the end of one year you buy your Topgun shares (cover your short sale) at $44 and are charged a commission of $20 and a 5% interest rate. -Suppose you buy a round lot of DG Solutions stock on 60% margin when it is selling at $55 per share. The broker charges a 10% annual interest rate and commissions are 3% of the total stock value on both the purchase and the sale. If at year end you receive a $1.10 per share dividend and sell the stock for 55 5/8, what is your rate of return on the investment?

The TSX is a dealer market.

Exhibit 4-5 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) You decide to sell 100 shares of Topgun Enterprises Inc. short when it is selling at its yearly high of $42.25. Your broker tells you that your margin requirement is 60% and that the commission on the sale is $20. While you are short, Topgun pays a $0.85 per share dividend. At the end of one year you buy your Topgun shares (cover your short sale) at $44 and are charged a commission of $20 and a 5% interest rate. -Refer to Exhibit 4-5. What is your dollar return on the investment?

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 paid the full cost of the purchase, what is your rate of return if you sell RossCorp stock?

In a call market, trading for individual stocks