Question 1

In 2007, the NASDAQ stock market merged with ________.

Accepted Answer

A)  Euronext 
B)  OMX, which operates seven Nordic and Baltic stock exchanges 
C)  the International Securities Exchange (IS
E)  
D)  BATS 
A)  Euronext 
B)  OMX, which operates seven Nordic and Baltic stock exchanges 
C)  the International Securities Exchange (IS
E)  
D)  BATS B

Question 2

In 2014, BATS advertised average latency times of approximately ________.

Accepted Answer

A)  100 microseconds 
B)  200 microseconds 
C)  1 second 
D)  5 seconds 
A)  100 microseconds 
B)  200 microseconds 
C)  1 second 
D)  5 seconds A

Question 3

The market share held by the NYSE Arca system in February 2011 was approximately ________.

Accepted Answer

A)  65% 
B)  45% 
C)  25% 
D)  10% 
A)  65% 
B)  45% 
C)  25% 
D)  10% D

Question 4

You sell short 200 shares of Doggie Treats Inc. that are currently selling at $25 per share. You post the 50% margin required on the short sale. If your broker requires a 30% maintenance margin, at what stock price will you get a margin call? (You earn no interest on the funds in your margin account, and the firm does not pay any dividends.)

Accepted Answer

A)  $28.85 
B)  $35.71 
C)  $31.50 
D)  $32.25 
A)  $28.85 
B)  $35.71 
C)  $31.50 
D)  $32.25

Question 5

If an investor uses the full amount of margin available, the equity in a margin account used for a stock purchase can be found as ________.

Accepted Answer

A)  market value of the stock - amount owed on the margin loan 
B)  market value of the stock + amount owed on the margin loan 
C)  market value of the stock ÷ margin loan 
D)  margin loan × market value of the stock 
A)  market value of the stock - amount owed on the margin loan 
B)  market value of the stock + amount owed on the margin loan 
C)  market value of the stock ÷ margin loan 
D)  margin loan × market value of the stock

Question 6

Which one of the following is a false statement regarding NYSE specialists?

Accepted Answer

A)  On a stock exchange most buy or sell orders are executed via an electronic system rather than through specialists. 
B)  Specialists cannot trade for their own accounts. 
C)  Specialists maintain limit order books, which contain the outstanding unexecuted limit orders. 
D)  Specialists stand ready to trade at narrower bid-ask spreads in cases where the spread has become too wide. 
A)  On a stock exchange most buy or sell orders are executed via an electronic system rather than through specialists. 
B)  Specialists cannot trade for their own accounts. 
C)  Specialists maintain limit order books, which contain the outstanding unexecuted limit orders. 
D)  Specialists stand ready to trade at narrower bid-ask spreads in cases where the spread has become too wide.

Question 7

The bid-ask spread exists because of ________.

Accepted Answer

A)  market inefficiencies 
B)  discontinuities in the markets 
C)  the need for dealers to cover expenses and make a profit 
D)  lack of trading in thin markets 
A)  market inefficiencies 
B)  discontinuities in the markets 
C)  the need for dealers to cover expenses and make a profit 
D)  lack of trading in thin markets

Question 8

You sell short 300 shares of Microsoft that are currently selling at $30 per share. You post the 50% margin required on the short sale. If you earn no interest on the funds in your margin account, what will be your rate of return after 1 year if Microsoft is selling at $27? (Ignore any dividends.)

Accepted Answer

A)  10% 
B)  20% 
C)  6.67% 
D)  15% 
A)  10% 
B)  20% 
C)  6.67% 
D)  15%

Question 9

Rank the following types of markets from least integrated and organized to most integrated and organized:
I. Brokered markets
II. Continuous auction markets
III. Dealer markets
IV. Direct search markets

Accepted Answer

A)  IV, II, I, III 
B)  I, III, IV, II 
C)  II, III, IV, I 
D)  IV, I, III, II 
A)  IV, II, I, III 
B)  I, III, IV, II 
C)  II, III, IV, I 
D)  IV, I, III, II

Question 10

The process of polling potential investors regarding their interest in a forthcoming initial public offering (IPO) is called ________.

Accepted Answer

A)  interest building 
B)  book building 
C)  market analysis 
D)  customer identification 
A)  interest building 
B)  book building 
C)  market analysis 
D)  customer identification

Question 11

Which one of the following is not an example of a brokered market?

Accepted Answer

A)  residential real estate market 
B)  market for large block security transactions 
C)  primary market for securities 
D)  NASDAQ 
A)  residential real estate market 
B)  market for large block security transactions 
C)  primary market for securities 
D)  NASDAQ

Question 12

The ________ was established to protect investors from losses if their brokerage firms fail.

Accepted Answer

A)  CFTC 
B)  SEC 
C)  SIPC 
D)  AIMR 
A)  CFTC 
B)  SEC 
C)  SIPC 
D)  AIMR

Question 13

Privately held firms may have only ________ shareholders.

Accepted Answer

A)  10 
B)  99 
C)  250 
D)  2,000 
A)  10 
B)  99 
C)  250 
D)  2,000

Question 14

According to SEC Rule 415 regarding shelf registration, firms can gradually sell securities to the public for ________ following initial registration.

Accepted Answer

A)  1 year 
B)  2 years 
C)  3 years 
D)  4 years 
A)  1 year 
B)  2 years 
C)  3 years 
D)  4 years

Question 15

You short-sell 200 shares of Tuckerton Trading Co., now selling for $50 per share. What is your maximum possible loss?

Accepted Answer

A)  $50 
B)  $150 
C)  $10,000 
D)  unlimited 
A)  $50 
B)  $150 
C)  $10,000 
D)  unlimited

Question 16

If an investor places a ________ order, the stock will be sold if its price falls to the stipulated level. If an investor places a ________ order, the stock will be bought if its price rises above the stipulated level.

Accepted Answer

A)  buy stop; stop-loss 
B)  market; limit 
C)  stop-loss; buy stop 
D)  limit; market 
A)  buy stop; stop-loss 
B)  market; limit 
C)  stop-loss; buy stop 
D)  limit; market

Question 17

You hold 5,000 shares of the 1 million outstanding shares of Wealthy Wranglers common stock. You've just learned that the company plans to issue more shares, so that 2 million shares will be outstanding. This is called ________.

Accepted Answer

A)  an advanced equity offering 
B)  a weathered equity offering 
C)  a seasoned equity offering 
D)  a veteran equity offering 
A)  an advanced equity offering 
B)  a weathered equity offering 
C)  a seasoned equity offering 
D)  a veteran equity offering

Question 18

You short-sell 200 shares of Rock Creek Fly Fishing Co., now selling for $50 per share. If you want to limit your loss to $2,500, you should place a stop-buy order at ________.

Accepted Answer

A)  $37.50 
B)  $62.50 
C)  $56.25 
D)  $59.75 
A)  $37.50 
B)  $62.50 
C)  $56.25 
D)  $59.75

Question 19

Trading on inside information is:
I. Prohibited by federal law
II. Prohibited by the CFA Institute Standards of Professional Conduct
III. Monitored by the SEC

Accepted Answer

A)  I and II only 
B)  II and III only 
C)  I and III only 
D)  I, II, and III 
A)  I and II only 
B)  II and III only 
C)  I and III only 
D)  I, II, and III

Question 20

The ________ requires full disclosure of relevant information relating to the issue of new securities.

Accepted Answer

A)  Insider Trading Act of 1931 
B)  Securities Act of 1933 
C)  Securities Exchange Act of 1934 
D)  Investment Company Act of 1940 
A)  Insider Trading Act of 1931 
B)  Securities Act of 1933 
C)  Securities Exchange Act of 1934 
D)  Investment Company Act of 1940

Exam 3: Securities Markets

In 2007, the NASDAQ stock market merged with ________.

In 2014, BATS advertised average latency times of approximately ________.

The market share held by the NYSE Arca system in February 2011 was approximately ________.

If an investor uses the full amount of margin available, the equity in a margin account used for a stock purchase can be found as ________.

Which one of the following is a false statement regarding NYSE specialists?

The bid-ask spread exists because of ________.

You sell short 300 shares of Microsoft that are currently selling at $30 per share. You post the 50% margin required on the short sale. If you earn no interest on the funds in your margin account, what will be your rate of return after 1 year if Microsoft is selling at $27? (Ignore any dividends.)

Rank the following types of markets from least integrated and organized to most integrated and organized: I. Brokered markets II. Continuous auction markets III. Dealer markets IV. Direct search markets

The process of polling potential investors regarding their interest in a forthcoming initial public offering (IPO) is called ________.

Which one of the following is not an example of a brokered market?

The ________ was established to protect investors from losses if their brokerage firms fail.

Privately held firms may have only ________ shareholders.

According to SEC Rule 415 regarding shelf registration, firms can gradually sell securities to the public for ________ following initial registration.

You short-sell 200 shares of Tuckerton Trading Co., now selling for $50 per share. What is your maximum possible loss?

If an investor places a ________ order, the stock will be sold if its price falls to the stipulated level. If an investor places a ________ order, the stock will be bought if its price rises above the stipulated level.

You hold 5,000 shares of the 1 million outstanding shares of Wealthy Wranglers common stock. You've just learned that the company plans to issue more shares, so that 2 million shares will be outstanding. This is called ________.

You short-sell 200 shares of Rock Creek Fly Fishing Co., now selling for $50 per share. If you want to limit your loss to $2,500, you should place a stop-buy order at ________.

Trading on inside information is: I. Prohibited by federal law II. Prohibited by the CFA Institute Standards of Professional Conduct III. Monitored by the SEC

The ________ requires full disclosure of relevant information relating to the issue of new securities.

Investments: Background and Issues

Asset Classes and Financial Instruments

Mutual Funds and Other Investment Companies

Risk, Return, and the Historical Record

Efficient Diversification

Capital Asset Pricing and Arbitrage Pricing Theory

The Efficient Market Hypothesis

Behavioral Finance and Technical Analysis

Bond Prices and Yields

Managing Bond Portfolios

Macroeconomic and Industry Analysis

Equity Valuation

Financial Statement Analysis

Options Markets

Option Valuation

Futures Markets and Risk Management

Evaluating Investment Performance

International Diversification

Hedge Funds

Taxes, Inflation, and Investment Strategy

Investors and the Investment Process

Filters

If an investor places a order, the stock will be sold if its price falls to the stipulated level. If an investor places a order, the stock will be bought if its price rises above the stipulated level.