Chapter 03 - Securities Markets

Chapter 03 Securities Markets

1. Underwriting is one of the services provided by _____. . the S!C ". invest#ent bankers C. pub$ic$y traded co#panies %. &%'C

(. Under fir# co##it#ent underwriting the ______ assu#es the fu$$ risk that the shares cannot be so$d to the pub$ic at the stipu$ated offering price. . red herring ". issuing co#pany C. initia$ stockho$der %. underwriter

3. !)p$icit costs of an '*+ tend to be around ______ of the funds raised. . 1, ". -, C. 1., %. (.,

/. "arnegat 0ight so$d (001000 shares in an initia$ pub$ic offering. 2he underwriter3s e)p$icit fees were 4501000. 2he offering price for the shares was 43.1 but i##ediate$y upon issue1 the share price 6u#ped to 4/3. 7hat is the best esti#ate of the tota$ cost to "arnegat 0ight of the e8uity issue9 . 4501000 ". 411(501000 C. 4(13501000 %. 411:501000

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Chapter 03 - Securities Markets

.. red herring beco#es a prospectus when ____. . the pre$i#inary registration state#ent is approved by the S!C ". the '*+ is co#p$ete C. the offering is seasoned %. the $ockup period e)pires

:. *rivate p$ace#ents can be advantageous rather than pub$ic issue because ______. '. private p$ace#ents are cheaper to #arket than pub$ic issues ''. private p$ace#ents #ay sti$$ be so$d to the genera$ pub$ic under S!C ;u$e 1// '''. private$y p$aced securities trade on secondary #arkets . ' on$y ". ' and ''' on$y C. '' and ''' on$y %. '1 '' and '''

-. $eve$ _____ subscriber to the < S% = syste# #ay enter bid and ask prices. .1 ". ( C. 3 %. /

>. 7hich one of the fo$$owing state#ents about '*+s is not true9 . '*+s genera$$y underperfor# in the short run. ". '*+s often provide very good initia$ returns to investors. C. '*+s genera$$y provide superior $ong-ter# perfor#ance as co#pared to other stocks. %. Shares in '*+s are often pri#ari$y a$$ocated to institutiona$ investors.

5. 2he issue process where investors sub#it bids for a new issue and the shares in an '*+ are a$$ocated to the highest bidders unti$ the entire issue is so$d is ca$$ed a . best efforts offer ". %utch auction C. secondary offering %. fir# co##it#ent offer

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Chapter 03 - Securities Markets

10. 2he <?S! recent$y ac8uired the !C< _______ and < S% = recent$y ac8uired the !C< ________. . rchipe$ago@ 'nstinet ". 'nstinet@ rchipe$ago C. 's$and@ 'nstinet %. 0S!@ !urone)t

11. ;ank the fo$$owing types of #arkets fro# $east integrated and organiAed to #ost integrated and organiAed. '. "rokered #arkets ''. Continuous auction #arkets '''. %ea$er #arkets 'B. %irect search #arkets . 'B1 ''1 '1 ''' ". '1 '''1 'B1 '' C. ''1 '''1 'B1 ' %. 'B1 '1 '''1 ''

1(. ______ drop in the %ow Cones 'ndustria$ verage wou$d stop trading for the day. . 10, ". (0, C. 30, %. /0,

13. 7hich one of the fo$$owing is not an e)a#p$e of a brokered #arket9 . ;esidentia$ rea$ estate #arket ". Market for $arge b$ock security transactions C. *ri#ary #arket for securities %. < S% =

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Chapter 03 - Securities Markets

1/. Circuit breakers wi$$ be i#posed if the %ow Cones 'ndustria$ verage drops by a #ini#u# of ______ by (.30 p#. . 10, ". (0, C. 30, %. /0,

1.. *urchases of new issues of stock take p$ace _________. . at the desk of the &ed ". in the pri#ary #arket C. in the secondary #arket %. in the #oney #arkets

1:. 'nitia$ #argin re8uire#ents on stocks are set by _________. . the &edera$ %eposit 'nsurance Corporation ". the &edera$ ;eserve C. the <ew ?ork Stock !)change %. the Securities and !)change Co##ission

1-. 7hich one of the fo$$owing types of #arkets re8uires the greatest $eve$ of trading activity to be cost effective9 . "roker #arket ". %ea$er #arket C. Continuous auction #arket %. %irect search #arket

1>. 7hich one of the fo$$owing is a fa$se state#ent regarding <?S! specia$ists9 . +n a stock e)change a$$ buy or se$$ orders are e)ecuted at a specia$ist3s post on the e)change ". Specia$ists can not trade for their own accounts C. Specia$ists earn inco#e fro# co##issions and spreads in stock prices %. Specia$ists stand ready to trade at 8uoted bid and ask prices

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Chapter 03 - Securities Markets

15. ;estrictions on trading invo$ving insider infor#ation app$y to _________. '. corporate officers and directors ''. #a6or stockho$ders '''. re$atives of corporate directors and officers . ' on$y ". ' and '' on$y C. '' and ''' on$y %. '1 ''1 and '''.

(0. n order to buy or se$$ a security at the current price is a ______________. . $i#it order ". #arket order C. stop $oss order %. stop buy order

(1. 7hen U.S. stock prices were converted fro# fractions to deci#a$s in (001 the #ini#u# bid-ask spread charged by dea$ers ________. . increased ". decreased C. re#ained the sa#e %. fe$$ at first1 but then increased

((. 2he #arket co$$apse of 15>- pro#pted ________________________. . "$ue Sky $aws ". circuit breakers to ha$t trading during #arket crises C. the Securities 'nvestor *rotection ct %. the <ationa$ Securities Market ct

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Chapter 03 - Securities Markets

(3. 'f an investor p$aces a _________ order the stock wi$$ be so$d if its price fa$$s to the stipu$ated $eve$. 'f an investor p$aces a __________ order the stock wi$$ be bought if its price rises above the stipu$ated $eve$. . stop-buy@ stop-$oss ". #arket@ $i#it C. stop-$oss@ stop-buy %. $i#it@ #arket

(/. +n a given day a stock dea$er #aintains a bid price of 41000..0 for a bond and an ask price of 41003.(.. 2he dea$er #ade 10 trades which tota$ed .00 bonds traded that day. 7hat was the dea$er3s gross trading profit for this security9 . 4113-. ". 4.00 C. 4(-. %. 411/.0

(.. dvantages of !C<s over traditiona$ #arkets inc$ude a$$ but which one of the fo$$owing9 . 0ower transactions costs ". nony#ity of the participants C. S#a$$ a#ount of ti#e needed to e)ecute and order %. bi$ity to hand$e very $arge orders

(:. 2he __________ was estab$ished to protect investors fro# $osses if their brokerage fir#s fai$. . C&2C ". S!C C. S'*C %. 'M;

(-. 7hen #atching orders fro# the pub$ic a specia$ist is re8uired to use the _______. . $owest outstanding bid price and highest outstanding ask price ". highest outstanding bid price and highest outstanding ask price C. $owest outstanding bid price and $owest outstanding ask price %. highest outstanding bid price and $owest outstanding ask price

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Chapter 03 - Securities Markets

(>. 2he process of po$$ing potentia$ investors regarding their interest in a forthco#ing initia$ pub$ic offering D'*+E is ca$$ed ________. . interest bui$ding ". book bui$ding C. #arket ana$ysis %. custo#er identification

(5. 2he bu$k of #ost initia$ pub$ic offerings D'*+sE of e8uity securities go to ___________. . institutiona$ investors ". individua$ investors C. the fir#3s current shareho$ders %. day traders

30. 'nitia$ pub$ic offerings D'*+sE are usua$$y ___________ re$ative to the $eve$s at which their prices stabi$iAe after they begin trading in the secondary #arket. . over priced ". correct$y priced C. under priced %. #ispriced but without any particu$ar bias

31. ccording to 0oughran and ;itter1 initia$ pub$ic offerings tend to e)hibit __________ perfor#ance initia$$y1 and __________ perfor#ance over the $ong ter#. . bad@ good ". bad@ bad C. good@ good %. good@ bad

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Chapter 03 - Securities Markets

3(. Specia$ists try to #aintain a narrow bid-ask spread because _______. '. 'f the spread is too $arge they wi$$ not participate in as #any trades1 $osing co##ission inco#e ''. 2he e)change re8uires specia$ists to #aintain price continuity '''. Specia$ists are non-profit entities designed to faci$itate #arket transactions rather than #ake a profit . ' on$y ". ' and '' on$y C. '' and ''' on$y %. '1 '' and '''

33. 'n a __________ underwriting arrange#ent1 the underwriter assu#es the fu$$ risk that shares #ay not be so$d to the pub$ic at the stipu$ated offering price. . best efforts ". fir# co##it#ent C. private p$ace#ent %. none of the above

3/. 2he ______________ is the #ost i#portant dea$er #arket in the U.S. and the ______________ is the #ost i#portant auction #arket. . <?S!@ < S% = ". < S% =@ <?S! C. CM!@ +2C %. M!F@ <?S!

3.. 2he inside 8uotes on a $i#it order book wou$d be co#prised of the ______. . highest bid price and the $owest ask price ". $owest bid price and the $owest ask price C. $owest bid price and the highest ask price %. highest bid price and the highest ask price

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Chapter 03 - Securities Markets

3:. 2he __________ syste# enab$es e)change #e#bers to send orders direct$y to a specia$ist over co#puter $ines. .& F ". %irect *$us C. < S% = %. SU*!;%+2

3-. 2he fu$$y auto#ated trade-e)ecution syste# insta$$ed on the <?S! is ca$$ed .& F ". %irect *$us C. < S% = %. SU*!;%+2

3>. <asda8 now offers three $isting options. 2he $argest1 #ost active$y traded fir#s are on the . <asda8 G$oba$ Market ". <asda8 G$oba$ Se$ect Market C. <asda8 Capita$ Market %. <asda8 *ink Sheet Stocks

35. ppro)i#ate$y __________ of trades invo$ving shares issued by fir#s $isted on the <ew ?ork Stock !)change actua$$y take p$ace on the <ew ?ork Stock !)change. . .0, ". -., C. >0, %. 5.,

/0. 2he _________ price is the price at which a dea$er is wi$$ing to purchase a security. . bid ". ask C. c$earing %. sett$e#ent

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Chapter 03 - Securities Markets

/1. 2he _________ price is the price at which a dea$er is wi$$ing to se$$ a security. . bid ". ask C. c$earing %. sett$e#ent

/(. 2he difference between the price at which a dea$er is wi$$ing to buy1 and the price at which a dea$er is wi$$ing to se$$1 is ca$$ed the _________. . #arket spread ". bid-ask spread C. bid-ask gap %. #arket variation

/3. 2he bid-ask spread e)ists because of _______________. . #arket inefficiencies ". discontinuities in the #arkets C. the need for dea$ers to cover e)penses and #ake a profit %. $ack of trading in thin #arkets

//. "oth the <?S! and <asda8 have $ost #arket share to !C<s in recent years. *art of <asda83s response to the growth of !C<s has been to _______. '. *urchase 'nstinet1 a #a6or !C< ''. !nab$e auto#atic trade e)ecution through its new Market Center '''. Switch fro# stock ownership to #utua$ ownership . ' on$y ". '' and ''' on$y C. ' and '' on$y %. '1 '' and '''

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Chapter 03 - Securities Markets

/.. 2he cost of buying and se$$ing a stock inc$ude _________. '. broker3s co##issions ''. dea$er3s bid-asked spread '''. price concessions investors #ay be forced to #ake . ' and '' on$y ". '' and ''' on$y C. ' and ''' on$y %. '1 '' and '''

/:. 2rades on the __________ are the #ost $ike$y to trade inside the inside 8uotes than in other #arkets. . <?S! ". < S% = #arket C. +2C #arket %. *ink sheet #arket

/-. ?ou purchased F?H stock at 4.0 per share. 2he stock is current$y se$$ing at 4:.. ?our gains cou$d be protected by p$acing a _________. . $i#it-buy order ". $i#it-se$$ order C. #arket order %. stop-$oss order

/>. Consider the fo$$owing $i#it order book of a specia$ist. 2he $ast trade in the stock occurred at a price of 4/0. 'f a #arket buy order for 100 shares co#es in1 at what price wi$$ it be fi$$ed9

. 435.-. ". 4/0.(. C. 4/0.3-. %. 4/0.(. or $ess

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Chapter 03 - Securities Markets

/5. ?ou find that the bid and ask prices for a stock are 410.(. and 410.30 respective$y. 'f you purchase or se$$ the stock you #ust pay a f$at co##ission of 4(.. 'f you buy 100 shares of the stock and i##ediate$y se$$ the#1 what is your tota$ i#p$ied and actua$ transaction cost in do$$ars9 . 4.0 ". 4(. C. 430 %. 4..

.0. ccording to S!C ;u$e /1. regarding she$f registration1 fir#s can gradua$$y se$$ securities to the pub$ic for __________ fo$$owing initia$ registration. . 1 year ". ( years C. 3 years %. / years

.1. 7hat percentage of <?S! transactions is e)ecuted by specia$ists9 . 10, ". (., C. .0, %. -.,

.(. ssu#e you purchased .00 shares of F?H co##on stock on #argin at 4/0 per share fro# your broker. 'f the initia$ #argin is :0,1 the a#ount you borrowed fro# the broker is _________. . 4(01000 ". 41(1000 C. 4>1000 %. 41.1000

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Chapter 03 - Securities Markets

.3. ?ou so$d short 300 shares of co##on stock at 430 per share. 2he initia$ #argin is .0,. ?ou #ust put up _________. . 4/1.00 ". 4:1000 C. 451000 %. 4101000

./. ?ou short-se$$ (00 shares of 2uckerton 2rading Co.1 now se$$ing for 4.0 per share. 7hat is your #a)i#u# possib$e $oss9 . 4.0 ". 41.0 C. 4101000 %. un$i#ited

... ?ou short-se$$ (00 shares of 2uckerton 2rading Co.1 now se$$ing for 4.0 per share. 7hat is your #a)i#u# possib$e gain ignoring transactions cost9 . 4.0 ". 41.0 C. 4101000 %. un$i#ited

.:. ?ou short-se$$ (00 shares of ;ock Creek &$y &ishing Co.1 now se$$ing for 4.0 per share. 'f you wish to $i#it your $oss to 4(1.001 you shou$d p$ace a stop-buy order at ____. . 43-..0 ". 4:(..0 C. 4.:.(. %. 4.5.-.

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Chapter 03 - Securities Markets

.-. ?ou purchased (00 shares of "C co##on stock on #argin at 4.0 per share. ssu#e the initia$ #argin is .0, and the #aintenance #argin is 30,. ?ou wi$$ get a #argin ca$$ if the stock drops be$ow ________. D ssu#e the stock pays no dividends and ignore interest on the #argin $oan.E . 4(:... ". 43..-1 C. 4(>.5. %. 430.--

.>. ?ou purchased (.0 shares of co##on stock on #argin for 4(. per share. 2he initia$ #argin is :., and the stock pays no dividend. ?our rate of return wou$d be __________ if you se$$ the stock at 43( per share. 'gnore interest on #argin. . 3., ". 35, C. /3, %. (>,

.5. Specia$ists on the stock e)changes #ay do a$$ of the fo$$owing e)cept _________. . 2hey #ake a #arket in shares of the fir#s for which they specia$iAe ". 2hey keep the $i#it order book C. Use their privi$eged infor#ation to #ake specu$ative invest#ents on their own account %. Use their privi$eged infor#ation to #ake invest#ents on beha$f of c$ients of brokerage fir#s with which they do business

:0. 2ransactions that do not invo$ve the origina$ issue of securities take p$ace in _________. . pri#ary #arkets ". secondary #arkets C. over-the-counter #arkets %. institutiona$ #arkets

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Chapter 03 - Securities Markets

:1. Many e)change-$isted securities are a$so traded in the over-the-counter #arket. 2rading of this sort is said to take p$ace in the ___________. . third #arket ". fourth #arket C. after-#arket %. b$ock #arket

:(. __________ often acco#pany short sa$es1 and are used to $i#it potentia$ $osses fro# the short position. . 0i#it orders ". ;estricted orders C. 0i#it-$oss orders %. Stop-buy orders

:3. 2he appro)i#ate do$$ar va$ue of trades on the <?S! in (00> was . 4-. bi$$ion ". 4100 bi$$ion C. 41(. bi$$ion %. 41.0 bi$$ion

:/. ;egistered traders _________________. . trade on their own account on$y ". perfor# trades for brokerage fir#s C. perfor# retai$ trades for the pub$ic %. trade for the govern#ent

:.. 7hich Congressiona$ action directed the S!C to i#p$e#ent a nationa$ co#petitive securities #arket9 . Securities ct of 1533 ". S!C ct of 153/ C. Securities ct #end#ents of 15-. %. &inancia$ Services ModerniAation ct of 1555

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Chapter 03 - Securities Markets

::. Most !uropean #arkets1 inc$uding !urone)t1 use aIan _____________________. . specia$ist trading syste# ". e$ectronic trading syste# C. continuous auction #arket %. direct search #arket

:-. 7hich of the fo$$owing state#ents about Saitoris in Capanese stock #arkets is incorrect9 . Saitoris #aintain the $i#it order book but #ay not trade for their own account ". Saitoris have #ore responsibi$ities than <?S! specia$ists C. Saitoris act as dea$ers in the Capanese #arkets %. Saitoris are the princip$e source of $i8uidity in Capanese #arkets

:>. 2he ter# Jpaying for order f$owJ refers to the practice of ________________. . paying #ore than one broker to e)ecute your order ". dea$ers trading with their custo#ers at an outdated price C. paying a broker a rebate for directing the trade to a particu$ar stock dea$er rather than directing the order to the <?S! %. a$$ocating shares in an '*+ to preferred custo#ers who agree to buy #ore shares in the after#arket

:5. 'f an investor uses the fu$$ a#ount of #argin avai$ab$e1 the e8uity in a #argin account used for a stock purchase can be found as ________. . #arket va$ue of the stock - a#ount owed on the #argin $oan ". #arket va$ue of the stock K a#ount owed on the #argin $oan C. #arket va$ue of the stock #argin $oan %. #argin $oan ) #arket va$ue of the stock

-0. 'f the %ow Cones 'ndustria$ verage fa$$s by 10, by 11 a#1 trading wi$$ ______. . continue unchanged ". wi$$ be ha$ted for one hour C. wi$$ be ha$ted for one-ha$f hour %. wi$$ be ha$ted for the rest of the day

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Chapter 03 - Securities Markets

-1. 2he C& 'nstitute Standards of *rofessiona$ Conduct re8uire that #e#bers _____. . p$ace their c$ients interests before their own ". disc$ose conf$icts of interest to c$ients C. infor# their e#p$oyers that they are ob$igated to co#p$y with the Standards of *rofessiona$ Conduct %. 2he 'M; Standard re8uire a$$ three

-(. 2rading on insider infor#ation is ____. '. prohibited by federa$ $aw ''. prohibited by the C& 'nstitute Standards of *rofessiona$ Conduct '''. $ega$ in Capan . ' and '' on$y ". '' and ''' on$y C. ' and ''' on$y %. '1 '' and '''

-3. 2he ____ re8uires fu$$ disc$osure of re$evant infor#ation re$ating to the issue of new securities. . 'nsider 2rading ct of 1531 ". Securities ct of 1533 C. Securities !)change ct of 153/ %. 'nvest#ent Co#pany ct of 15/0

-/. 2he S'*C was estab$ished by the ____. . 'nsider 2rading ct of 1531 ". Securities ct of 1533 C. Securities !)change ct of 153/ %. none of these acts estab$ished the S'*C

-.. "rokerage fir#s can change #argin-$oan practices ____. . without notice ". on$y after -( hours notice C. on$y on new orders %. on$y with per#ission fro# the S!C

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Chapter 03 - Securities Markets

-:. 7hich of the fo$$owing are true concerning short sa$es of e)change $isted stocks9 '. short sa$e is per#itted on$y if the $ast recorded change in the stock3s price was positive ''. *roceeds fro# the short sa$e #ust be kept on deposit with the broker '''. Short-se$$ers #ust post #argin with their broker to cover potentia$ $osses on the position 'B. 2he short-se$$er earns interest on any cash deposited with the broker that is used to #eet the #argin re8uire#ent . ' and '' on$y ". '1 ''' and 'B on$y C. '' and ''' on$y %. '1 ''1 ''' and 'B

--. %ay to day regu$ation of the <ew ?ork Stock !)change and enforce#ent of e)change ru$es and federa$ securities $aws is conducted by the . S!C. ". C&2C. C. <?S! ;egu$ation1 'nc. %. U.S. %epart#ent of the 2reasury.

->. 'n ________ #arkets participants post bid and ask prices at which they are wi$$ing to trade1 but orders are not auto#atica$$y e)ecuted by co#puter. ____________ e)ecute trades for peop$e other than the#se$ves and in _______________ #arkets a co#puter #atches orders with an e)isting $i#it order book and e)ecutes the trades auto#atica$$y. . e$ectronic@ %ea$ers@ brokers ". dea$er@ "rokers@ e$ectronic C. direct search@ "rokers@ e$ectronic %. brokered@ %ea$ers@ direct search

-5. n investor puts up 4.1000 but borrows an e8ua$ a#ount of #oney fro# their broker to doub$e the a#ount invested to 4101000. 2he broker charges -, on the $oan. 2he stock was origina$$y purchased at 4(. per share and in one year the investor se$$s the stock for 4(>. 2he investor3s rate of return was ____. . 1-, ". 1(, C. 1/, %. 15,

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Chapter 03 - Securities Markets

>0. n investor buys 4>1000 worth of a stock priced at 4/0 per share using .0, initia$ #argin. 2he broker charges :, on the #argin $oan and re8uires a 30, #aintenance #argin. 'n one year the investor gets a #argin ca$$. t the ti#e of the #argin ca$$ the stock3s price #ust have been ____. . 4(0.00 ". 4(5.-C. 430.(5 %. 43(./.

>1. 2he <ew ?ork Stock !)change is a good e)a#p$e of _________. . an auction #arket ". a brokered #arket C. a dea$er #arket %. a direct search #arket

>(. 2he pri#ary #arket where new security issues are offered to the pub$ic is a good e)a#p$e of _________. . an auction #arket ". a brokered #arket C. a dea$er #arket %. a direct search #arket

>3. 2he over-the-counter securities #arket is a good e)a#p$e of _________. . an auction #arket ". a brokered #arket C. a dea$er #arket %. a direct search #arket

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Chapter 03 - Securities Markets

>/. n investor buys 41:1000 worth of a stock priced at 4(0 per share using :0, initia$ #argin. 2he broker charges >, on the #argin $oan and re8uires a 3., #aintenance #argin. 2he stock pays a 40..0 per share dividend in one year and then the stock is so$d at 4(3 per share. 7hat was the investor3s rate of return9 . 1-..0, ". 15.:-, C. (3.>3, %. (..-.,

>.. '"M is $isted on the <?S!. 'f a share of '"M is so$d via the < S% = e)change in which #arket is it thought to have traded9 . *ri#ary #arket ". Secondary #arket C. 2hird #arket %. &ourth #arket

>:. ?ou se$$ short 300 shares of Microsoft which are current$y se$$ing at 430 per share. ?ou post the .0, #argin re8uired on the short sa$e. 'f you earn no interest on the funds in your #argin account what wi$$ be your rate of return after one year if Microsoft is se$$ing at 4(-9 D'gnore any dividendsE . 10.00, ". (0.00, C. :.:-, %. 1.,

>-. 2he co##ission structure on a stock purchase is 4(0 p$us 40.0( per share. 'f you purchase / round $ots of a stock se$$ing for 4.:1 what is your co##ission9 . 4(0 ". 4(( C. 4(: %. 4(>

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Chapter 03 - Securities Markets

>>. 2he co##ission structure on a stock purchase is 4.0 p$us 40.03 per share. 'f you purchase :00 shares of a stock se$$ing for 4:.1 what is your co##ission9 . 43. ". 4/. C. 4.3 %. 4:>

>5. ?ou se$$ short (00 shares of %oggie 2reats 'nc. which are current$y se$$ing at 4(. per share. ?ou post the .0, #argin re8uired on the short sa$e. 'f your broker re8uires a 30, #aintenance #argin1 at what stock price wi$$ you get a #argin ca$$9 D?ou earn no interest on the funds in your #argin account and the fir# does not pay any dividendsE . 4(>.>. ". 43..-1 C. 431..0 %. 43(.(.

50. 2he #argin re8uire#ent on a stock purchase is (.,. ?ou fu$$y use the #argin a$$owed to purchase 100 shares of MS&2 at 4(.. 'f the price drops to 4((1 what is your percentage $oss9 . 5, ". 1., C. />, %. .-,

Chapter 03 Securities Markets nswer Ley

Multiple Choice Questions

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Chapter 03 - Securities Markets

1. Underwriting is one of the services provided by _____. . the S!C B. invest#ent bankers C. pub$ic$y traded co#panies %. &%'C

Difficulty: Easy

(. Under fir# co##it#ent underwriting the ______ assu#es the fu$$ risk that the shares cannot be so$d to the pub$ic at the stipu$ated offering price. . red herring ". issuing co#pany C. initia$ stockho$der D. underwriter

Difficulty: Medium

3. !)p$icit costs of an '*+ tend to be around ______ of the funds raised. . 1, B. -, C. 1., %. (.,

Difficulty: Medium

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Chapter 03 - Securities Markets

/. "arnegat 0ight so$d (001000 shares in an initia$ pub$ic offering. 2he underwriter3s e)p$icit fees were 4501000. 2he offering price for the shares was 43.1 but i##ediate$y upon issue1 the share price 6u#ped to 4/3. 7hat is the best esti#ate of the tota$ cost to "arnegat 0ight of the e8uity issue9 . 4501000 ". 411(501000 C. 4(13501000 D. 411:501000 2ota$ Cost M 501000 K D/3 - 3.E(001000 M 411:501000

Difficulty: Hard

.. red herring beco#es a prospectus when ____. A. the pre$i#inary registration state#ent is approved by the S!C ". the '*+ is co#p$ete C. the offering is seasoned %. the $ockup period e)pires

Difficulty: Medium

:. *rivate p$ace#ents can be advantageous rather than pub$ic issue because ______. '. private p$ace#ents are cheaper to #arket than pub$ic issues ''. private p$ace#ents #ay sti$$ be so$d to the genera$ pub$ic under S!C ;u$e 1// '''. private$y p$aced securities trade on secondary #arkets A. ' on$y ". ' and ''' on$y C. '' and ''' on$y %. '1 '' and '''

Difficulty: Medium

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Chapter 03 - Securities Markets

-. $eve$ _____ subscriber to the < S% = syste# #ay enter bid and ask prices. .1 ". ( C. 3 %. /

Difficulty: Easy

>. 7hich one of the fo$$owing state#ents about '*+s is not true9 . '*+s genera$$y underperfor# in the short run. ". '*+s often provide very good initia$ returns to investors. C. '*+s genera$$y provide superior $ong-ter# perfor#ance as co#pared to other stocks. %. Shares in '*+s are often pri#ari$y a$$ocated to institutiona$ investors.

Difficulty: Medium

5. 2he issue process where investors sub#it bids for a new issue and the shares in an '*+ are a$$ocated to the highest bidders unti$ the entire issue is so$d is ca$$ed a . best efforts offer B. %utch auction C. secondary offering %. fir# co##it#ent offer

Difficulty: Medium

10. 2he <?S! recent$y ac8uired the !C< _______ and < S% = recent$y ac8uired the !C< ________. A. rchipe$ago@ 'nstinet ". 'nstinet@ rchipe$ago C. 's$and@ 'nstinet %. 0S!@ !urone)t

Difficulty: Medium

3-(/

Chapter 03 - Securities Markets

11. ;ank the fo$$owing types of #arkets fro# $east integrated and organiAed to #ost integrated and organiAed. '. "rokered #arkets ''. Continuous auction #arkets '''. %ea$er #arkets 'B. %irect search #arkets . 'B1 ''1 '1 ''' ". '1 '''1 'B1 '' C. ''1 '''1 'B1 ' D. 'B1 '1 '''1 ''

Difficulty: Hard

1(. ______ drop in the %ow Cones 'ndustria$ verage wou$d stop trading for the day. . 10, ". (0, C. 30, %. /0,

Difficulty: Medium

13. 7hich one of the fo$$owing is not an e)a#p$e of a brokered #arket9 . ;esidentia$ rea$ estate #arket ". Market for $arge b$ock security transactions C. *ri#ary #arket for securities D. < S% =

Difficulty: Medium

3-(.

Chapter 03 - Securities Markets

1/. Circuit breakers wi$$ be i#posed if the %ow Cones 'ndustria$ verage drops by a #ini#u# of ______ by (.30 p#. A. 10, ". (0, C. 30, %. /0,

Difficulty: Medium

1.. *urchases of new issues of stock take p$ace _________. . at the desk of the &ed B. in the pri#ary #arket C. in the secondary #arket %. in the #oney #arkets

Difficulty: Easy

1:. 'nitia$ #argin re8uire#ents on stocks are set by _________. . the &edera$ %eposit 'nsurance Corporation B. the &edera$ ;eserve C. the <ew ?ork Stock !)change %. the Securities and !)change Co##ission

Difficulty: Easy

1-. 7hich one of the fo$$owing types of #arkets re8uires the greatest $eve$ of trading activity to be cost effective9 . "roker #arket ". %ea$er #arket C. Continuous auction #arket %. %irect search #arket

Difficulty: Easy

3-(:

Chapter 03 - Securities Markets

1>. 7hich one of the fo$$owing is a fa$se state#ent regarding <?S! specia$ists9 . +n a stock e)change a$$ buy or se$$ orders are e)ecuted at a specia$ist3s post on the e)change B. Specia$ists can not trade for their own accounts C. Specia$ists earn inco#e fro# co##issions and spreads in stock prices %. Specia$ists stand ready to trade at 8uoted bid and ask prices

Difficulty: Easy

15. ;estrictions on trading invo$ving insider infor#ation app$y to _________. '. corporate officers and directors ''. #a6or stockho$ders '''. re$atives of corporate directors and officers . ' on$y ". ' and '' on$y C. '' and ''' on$y D. '1 ''1 and '''.

Difficulty: Hard

(0. n order to buy or se$$ a security at the current price is a ______________. . $i#it order B. #arket order C. stop $oss order %. stop buy order

Difficulty: Easy

(1. 7hen U.S. stock prices were converted fro# fractions to deci#a$s in (001 the #ini#u# bid-ask spread charged by dea$ers ________. . increased B. decreased C. re#ained the sa#e %. fe$$ at first1 but then increased

Difficulty: Medium

3-(-

Chapter 03 - Securities Markets

((. 2he #arket co$$apse of 15>- pro#pted ________________________. . "$ue Sky $aws B. circuit breakers to ha$t trading during #arket crises C. the Securities 'nvestor *rotection ct %. the <ationa$ Securities Market ct

Difficulty: Easy

(3. 'f an investor p$aces a _________ order the stock wi$$ be so$d if its price fa$$s to the stipu$ated $eve$. 'f an investor p$aces a __________ order the stock wi$$ be bought if its price rises above the stipu$ated $eve$. . stop-buy@ stop-$oss ". #arket@ $i#it C. stop-$oss@ stop-buy %. $i#it@ #arket

Difficulty: Easy

(/. +n a given day a stock dea$er #aintains a bid price of 41000..0 for a bond and an ask price of 41003.(.. 2he dea$er #ade 10 trades which tota$ed .00 bonds traded that day. 7hat was the dea$er3s gross trading profit for this security9 A. 4113-. ". 4.00 C. 4(-. %. 411/.0 D1003.1. - 1000..0E.00 M 4113-.

Difficulty: Easy

3-(>

Chapter 03 - Securities Markets

(.. dvantages of !C<s over traditiona$ #arkets inc$ude a$$ but which one of the fo$$owing9 . 0ower transactions costs ". nony#ity of the participants C. S#a$$ a#ount of ti#e needed to e)ecute and order D. bi$ity to hand$e very $arge orders

Difficulty: Medium

(:. 2he __________ was estab$ished to protect investors fro# $osses if their brokerage fir#s fai$. . C&2C ". S!C C. S'*C %. 'M;

Difficulty: Easy

(-. 7hen #atching orders fro# the pub$ic a specia$ist is re8uired to use the _______. . $owest outstanding bid price and highest outstanding ask price ". highest outstanding bid price and highest outstanding ask price C. $owest outstanding bid price and $owest outstanding ask price D. highest outstanding bid price and $owest outstanding ask price

Difficulty: Hard

(>. 2he process of po$$ing potentia$ investors regarding their interest in a forthco#ing initia$ pub$ic offering D'*+E is ca$$ed ________. . interest bui$ding B. book bui$ding C. #arket ana$ysis %. custo#er identification

Difficulty: Easy

3-(5

Chapter 03 - Securities Markets

(5. 2he bu$k of #ost initia$ pub$ic offerings D'*+sE of e8uity securities go to ___________. A. institutiona$ investors ". individua$ investors C. the fir#3s current shareho$ders %. day traders

Difficulty: Easy

30. 'nitia$ pub$ic offerings D'*+sE are usua$$y ___________ re$ative to the $eve$s at which their prices stabi$iAe after they begin trading in the secondary #arket. . over priced ". correct$y priced C. under priced %. #ispriced but without any particu$ar bias

Difficulty: Easy

31. ccording to 0oughran and ;itter1 initia$ pub$ic offerings tend to e)hibit __________ perfor#ance initia$$y1 and __________ perfor#ance over the $ong ter#. . bad@ good ". bad@ bad C. good@ good D. good@ bad

Difficulty: Medium

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Chapter 03 - Securities Markets

3(. Specia$ists try to #aintain a narrow bid-ask spread because _______. '. 'f the spread is too $arge they wi$$ not participate in as #any trades1 $osing co##ission inco#e ''. 2he e)change re8uires specia$ists to #aintain price continuity '''. Specia$ists are non-profit entities designed to faci$itate #arket transactions rather than #ake a profit . ' on$y B. ' and '' on$y C. '' and ''' on$y %. '1 '' and '''

Difficulty: Easy

33. 'n a __________ underwriting arrange#ent1 the underwriter assu#es the fu$$ risk that shares #ay not be so$d to the pub$ic at the stipu$ated offering price. . best efforts B. fir# co##it#ent C. private p$ace#ent %. none of the above

Difficulty: Easy

3/. 2he ______________ is the #ost i#portant dea$er #arket in the U.S. and the ______________ is the #ost i#portant auction #arket. . <?S!@ < S% = B. < S% =@ <?S! C. CM!@ +2C %. M!F@ <?S!

Difficulty: Easy

3-31

Chapter 03 - Securities Markets

3.. 2he inside 8uotes on a $i#it order book wou$d be co#prised of the ______. A. highest bid price and the $owest ask price ". $owest bid price and the $owest ask price C. $owest bid price and the highest ask price %. highest bid price and the highest ask price

Difficulty: Medium

3:. 2he __________ syste# enab$es e)change #e#bers to send orders direct$y to a specia$ist over co#puter $ines. .& F ". %irect *$us C. < S% = D. SU*!;%+2

Difficulty: Easy

3-. 2he fu$$y auto#ated trade-e)ecution syste# insta$$ed on the <?S! is ca$$ed .& F B. %irect *$us C. < S% = %. SU*!;%+2

Difficulty: Easy

3>. <asda8 now offers three $isting options. 2he $argest1 #ost active$y traded fir#s are on the . <asda8 G$oba$ Market B. <asda8 G$oba$ Se$ect Market C. <asda8 Capita$ Market %. <asda8 *ink Sheet Stocks

Difficulty: Medium

3-3(

Chapter 03 - Securities Markets

35. ppro)i#ate$y __________ of trades invo$ving shares issued by fir#s $isted on the <ew ?ork Stock !)change actua$$y take p$ace on the <ew ?ork Stock !)change. . .0, B. -., C. >0, %. 5.,

Difficulty: Medium

/0. 2he _________ price is the price at which a dea$er is wi$$ing to purchase a security. A. bid ". ask C. c$earing %. sett$e#ent

Difficulty: Easy

/1. 2he _________ price is the price at which a dea$er is wi$$ing to se$$ a security. . bid B. ask C. c$earing %. sett$e#ent

Difficulty: Easy

/(. 2he difference between the price at which a dea$er is wi$$ing to buy1 and the price at which a dea$er is wi$$ing to se$$1 is ca$$ed the _________. . #arket spread B. bid-ask spread C. bid-ask gap %. #arket variation

Difficulty: Easy

3-33

Chapter 03 - Securities Markets

/3. 2he bid-ask spread e)ists because of _______________. . #arket inefficiencies ". discontinuities in the #arkets C. the need for dea$ers to cover e)penses and #ake a profit %. $ack of trading in thin #arkets

Difficulty: Easy

//. "oth the <?S! and <asda8 have $ost #arket share to !C<s in recent years. *art of <asda83s response to the growth of !C<s has been to _______. '. *urchase 'nstinet1 a #a6or !C< ''. !nab$e auto#atic trade e)ecution through its new Market Center '''. Switch fro# stock ownership to #utua$ ownership . ' on$y ". '' and ''' on$y C. ' and '' on$y %. '1 '' and '''

Difficulty: Medium

/.. 2he cost of buying and se$$ing a stock inc$ude _________. '. broker3s co##issions ''. dea$er3s bid-asked spread '''. price concessions investors #ay be forced to #ake . ' and '' on$y ". '' and ''' on$y C. ' and ''' on$y D. '1 '' and '''

Difficulty: Medium

3-3/

Chapter 03 - Securities Markets

/:. 2rades on the __________ are the #ost $ike$y to trade inside the inside 8uotes than in other #arkets. A. <?S! ". < S% = #arket C. +2C #arket %. *ink sheet #arket

Difficulty: Medium

/-. ?ou purchased F?H stock at 4.0 per share. 2he stock is current$y se$$ing at 4:.. ?our gains cou$d be protected by p$acing a _________. . $i#it-buy order ". $i#it-se$$ order C. #arket order D. stop-$oss order

Difficulty: Medium

/>. Consider the fo$$owing $i#it order book of a specia$ist. 2he $ast trade in the stock occurred at a price of 4/0. 'f a #arket buy order for 100 shares co#es in1 at what price wi$$ it be fi$$ed9

. 435.-. ". 4/0.(. C. 4/0.3-. D. 4/0.(. or $ess 'n this case the specia$ist wou$d have the option of #atching the buy order with the $owest $i#it se$$ order D4/0.(.E or set an ask price $ower than 4/0.(. D4/0 for e)a#p$eE and trade the order fro# his own stock.

Difficulty: Medium

3-3.

Chapter 03 - Securities Markets

/5. ?ou find that the bid and ask prices for a stock are 410.(. and 410.30 respective$y. 'f you purchase or se$$ the stock you #ust pay a f$at co##ission of 4(.. 'f you buy 100 shares of the stock and i##ediate$y se$$ the#1 what is your tota$ i#p$ied and actua$ transaction cost in do$$ars9 . 4.0 ". 4(. C. 430 D. 4.. 100D10.30 - 10.(.E K (D.(.E M 4..

Difficulty: Medium

.0. ccording to S!C ;u$e /1. regarding she$f registration1 fir#s can gradua$$y se$$ securities to the pub$ic for __________ fo$$owing initia$ registration. . 1 year B. ( years C. 3 years %. / years

Difficulty: Medium

.1. 7hat percentage of <?S! transactions is e)ecuted by specia$ists9 . 10, ". (., C. .0, D. -.,

Difficulty: Medium

3-3:

Chapter 03 - Securities Markets

.(. ssu#e you purchased .00 shares of F?H co##on stock on #argin at 4/0 per share fro# your broker. 'f the initia$ #argin is :0,1 the a#ount you borrowed fro# the broker is _________. . 4(01000 ". 41(1000 C. 4>1000 %. 41.1000 .00D4/0ED0./0E M 4>1000

Difficulty: Medium

.3. ?ou so$d short 300 shares of co##on stock at 430 per share. 2he initia$ #argin is .0,. ?ou #ust put up _________. A. 4/1.00 ". 4:1000 C. 451000 %. 4101000 'nvest#ent M 300D30ED..0E M /.00

Difficulty: Medium

./. ?ou short-se$$ (00 shares of 2uckerton 2rading Co.1 now se$$ing for 4.0 per share. 7hat is your #a)i#u# possib$e $oss9 . 4.0 ". 41.0 C. 4101000 D. un$i#ited 2here is no upper $i#it to the price of a share of stock@ therefore no upper $i#it the price you wi$$ have to pay to rep$ace the (00 shares of 2uckerton.

Difficulty: Easy

3-3-

Chapter 03 - Securities Markets

... ?ou short-se$$ (00 shares of 2uckerton 2rading Co.1 now se$$ing for 4.0 per share. 7hat is your #a)i#u# possib$e gain ignoring transactions cost9 . 4.0 ". 41.0 C. 4101000 %. un$i#ited 2uckerton cou$d go bankrupt with a share price of 40. ?ou cou$d keep the entire proceeds fro# the short sa$e.

Difficulty: Medium

.:. ?ou short-se$$ (00 shares of ;ock Creek &$y &ishing Co.1 now se$$ing for 4.0 per share. 'f you wish to $i#it your $oss to 4(1.001 you shou$d p$ace a stop-buy order at ____. . 43-..0 B. 4:(..0 C. 4.:.(. %. 4.5.-. .0 K D(.00I(00E M 4:(..0

Difficulty: Medium

3-3>

Chapter 03 - Securities Markets

.-. ?ou purchased (00 shares of "C co##on stock on #argin at 4.0 per share. ssu#e the initia$ #argin is .0, and the #aintenance #argin is 30,. ?ou wi$$ get a #argin ca$$ if the stock drops be$ow ________. D ssu#e the stock pays no dividends and ignore interest on the #argin $oan.E . 4(:... B. 43..-1 C. 4(>.5. %. 430.--

Difficulty: Hard

.>. ?ou purchased (.0 shares of co##on stock on #argin for 4(. per share. 2he initia$ #argin is :., and the stock pays no dividend. ?our rate of return wou$d be __________ if you se$$ the stock at 43( per share. 'gnore interest on #argin. . 3., ". 35, C. /3, %. (>,

Difficulty: Hard

.5. Specia$ists on the stock e)changes #ay do a$$ of the fo$$owing e)cept _________. . 2hey #ake a #arket in shares of the fir#s for which they specia$iAe ". 2hey keep the $i#it order book C. Use their privi$eged infor#ation to #ake specu$ative invest#ents on their own account D. Use their privi$eged infor#ation to #ake invest#ents on beha$f of c$ients of brokerage fir#s with which they do business

Difficulty: Medium

3-35

Chapter 03 - Securities Markets

:0. 2ransactions that do not invo$ve the origina$ issue of securities take p$ace in _________. . pri#ary #arkets B. secondary #arkets C. over-the-counter #arkets %. institutiona$ #arkets

Difficulty: Easy

:1. Many e)change-$isted securities are a$so traded in the over-the-counter #arket. 2rading of this sort is said to take p$ace in the ___________. A. third #arket ". fourth #arket C. after-#arket %. b$ock #arket

Difficulty: Easy

:(. __________ often acco#pany short sa$es1 and are used to $i#it potentia$ $osses fro# the short position. . 0i#it orders ". ;estricted orders C. 0i#it-$oss orders D. Stop-buy orders

Difficulty: Medium

:3. 2he appro)i#ate do$$ar va$ue of trades on the <?S! in (00> was . 4-. bi$$ion ". 4100 bi$$ion C. 41(. bi$$ion D. 41.0 bi$$ion

Difficulty: Medium

3-/0

Chapter 03 - Securities Markets

:/. ;egistered traders _________________. A. trade on their own account on$y ". perfor# trades for brokerage fir#s C. perfor# retai$ trades for the pub$ic %. trade for the govern#ent

Difficulty: Easy

:.. 7hich Congressiona$ action directed the S!C to i#p$e#ent a nationa$ co#petitive securities #arket9 . Securities ct of 1533 ". S!C ct of 153/ C. Securities ct #end#ents of 15-. %. &inancia$ Services ModerniAation ct of 1555

Difficulty: Medium

::. Most !uropean #arkets1 inc$uding !urone)t1 use aIan _____________________. . specia$ist trading syste# B. e$ectronic trading syste# C. continuous auction #arket %. direct search #arket

Difficulty: Medium

:-. 7hich of the fo$$owing state#ents about Saitoris in Capanese stock #arkets is incorrect9 . Saitoris #aintain the $i#it order book but #ay not trade for their own account B. Saitoris have #ore responsibi$ities than <?S! specia$ists C. Saitoris act as dea$ers in the Capanese #arkets %. Saitoris are the princip$e source of $i8uidity in Capanese #arkets

Difficulty: Medium

3-/1

Chapter 03 - Securities Markets

:>. 2he ter# Jpaying for order f$owJ refers to the practice of ________________. . paying #ore than one broker to e)ecute your order ". dea$ers trading with their custo#ers at an outdated price C. paying a broker a rebate for directing the trade to a particu$ar stock dea$er rather than directing the order to the <?S! %. a$$ocating shares in an '*+ to preferred custo#ers who agree to buy #ore shares in the after#arket

Difficulty: Medium

:5. 'f an investor uses the fu$$ a#ount of #argin avai$ab$e1 the e8uity in a #argin account used for a stock purchase can be found as ________. A. #arket va$ue of the stock - a#ount owed on the #argin $oan ". #arket va$ue of the stock K a#ount owed on the #argin $oan C. #arket va$ue of the stock #argin $oan %. #argin $oan ) #arket va$ue of the stock

Difficulty: Medium

-0. 'f the %ow Cones 'ndustria$ verage fa$$s by 10, by 11 a#1 trading wi$$ ______. . continue unchanged B. wi$$ be ha$ted for one hour C. wi$$ be ha$ted for one-ha$f hour %. wi$$ be ha$ted for the rest of the day

Difficulty: Medium

-1. 2he C& 'nstitute Standards of *rofessiona$ Conduct re8uire that #e#bers _____. . p$ace their c$ients interests before their own ". disc$ose conf$icts of interest to c$ients C. infor# their e#p$oyers that they are ob$igated to co#p$y with the Standards of *rofessiona$ Conduct D. 2he 'M; Standard re8uire a$$ three

Difficulty: Medium

3-/(

Chapter 03 - Securities Markets

-(. 2rading on insider infor#ation is ____. '. prohibited by federa$ $aw ''. prohibited by the C& 'nstitute Standards of *rofessiona$ Conduct '''. $ega$ in Capan . ' and '' on$y ". '' and ''' on$y C. ' and ''' on$y D. '1 '' and '''

Difficulty: Medium

-3. 2he ____ re8uires fu$$ disc$osure of re$evant infor#ation re$ating to the issue of new securities. . 'nsider 2rading ct of 1531 B. Securities ct of 1533 C. Securities !)change ct of 153/ %. 'nvest#ent Co#pany ct of 15/0

Difficulty: Easy

-/. 2he S'*C was estab$ished by the ____. . 'nsider 2rading ct of 1531 ". Securities ct of 1533 C. Securities !)change ct of 153/ D. none of these acts estab$ished the S'*C

Difficulty: Easy

-.. "rokerage fir#s can change #argin-$oan practices ____. A. without notice ". on$y after -( hours notice C. on$y on new orders %. on$y with per#ission fro# the S!C

Difficulty: Easy

3-/3

Chapter 03 - Securities Markets

-:. 7hich of the fo$$owing are true concerning short sa$es of e)change $isted stocks9 '. short sa$e is per#itted on$y if the $ast recorded change in the stock3s price was positive ''. *roceeds fro# the short sa$e #ust be kept on deposit with the broker '''. Short-se$$ers #ust post #argin with their broker to cover potentia$ $osses on the position 'B. 2he short-se$$er earns interest on any cash deposited with the broker that is used to #eet the #argin re8uire#ent . ' and '' on$y ". '1 ''' and 'B on$y C. '' and ''' on$y %. '1 ''1 ''' and 'B

Difficulty: Hard

--. %ay to day regu$ation of the <ew ?ork Stock !)change and enforce#ent of e)change ru$es and federa$ securities $aws is conducted by the . S!C. ". C&2C. C. <?S! ;egu$ation1 'nc. %. U.S. %epart#ent of the 2reasury.

Difficulty: Hard

->. 'n ________ #arkets participants post bid and ask prices at which they are wi$$ing to trade1 but orders are not auto#atica$$y e)ecuted by co#puter. ____________ e)ecute trades for peop$e other than the#se$ves and in _______________ #arkets a co#puter #atches orders with an e)isting $i#it order book and e)ecutes the trades auto#atica$$y. . e$ectronic@ %ea$ers@ brokers B. dea$er@ "rokers@ e$ectronic C. direct search@ "rokers@ e$ectronic %. brokered@ %ea$ers@ direct search

Difficulty: Hard

3-//

Chapter 03 - Securities Markets

-5. n investor puts up 4.1000 but borrows an e8ua$ a#ount of #oney fro# their broker to doub$e the a#ount invested to 4101000. 2he broker charges -, on the $oan. 2he stock was origina$$y purchased at 4(. per share and in one year the investor se$$s the stock for 4(>. 2he investor3s rate of return was ____. A. 1-, ". 1(, C. 1/, %. 15,

Difficulty: Hard

>0. n investor buys 4>1000 worth of a stock priced at 4/0 per share using .0, initia$ #argin. 2he broker charges :, on the #argin $oan and re8uires a 30, #aintenance #argin. 'n one year the investor gets a #argin ca$$. t the ti#e of the #argin ca$$ the stock3s price #ust have been ____. . 4(0.00 B. 4(5.-C. 430.(5 %. 43(./.

Difficulty: Hard

>1. 2he <ew ?ork Stock !)change is a good e)a#p$e of _________. A. an auction #arket ". a brokered #arket C. a dea$er #arket %. a direct search #arket

Difficulty: Easy

3-/.

Chapter 03 - Securities Markets

>(. 2he pri#ary #arket where new security issues are offered to the pub$ic is a good e)a#p$e of _________. . an auction #arket B. a brokered #arket C. a dea$er #arket %. a direct search #arket

Difficulty: Easy

>3. 2he over-the-counter securities #arket is a good e)a#p$e of _________. . an auction #arket ". a brokered #arket C. a dea$er #arket %. a direct search #arket

Difficulty: Easy

>/. n investor buys 41:1000 worth of a stock priced at 4(0 per share using :0, initia$ #argin. 2he broker charges >, on the #argin $oan and re8uires a 3., #aintenance #argin. 2he stock pays a 40..0 per share dividend in one year and then the stock is so$d at 4(3 per share. 7hat was the investor3s rate of return9 . 1-..0, ". 15.:-, C. (3.>3, %. (..-.,

Difficulty: Hard

3-/:

Chapter 03 - Securities Markets

>.. '"M is $isted on the <?S!. 'f a share of '"M is so$d via the < S% = e)change in which #arket is it thought to have traded9 . *ri#ary #arket ". Secondary #arket C. 2hird #arket %. &ourth #arket

Difficulty: Easy

>:. ?ou se$$ short 300 shares of Microsoft which are current$y se$$ing at 430 per share. ?ou post the .0, #argin re8uired on the short sa$e. 'f you earn no interest on the funds in your #argin account what wi$$ be your rate of return after one year if Microsoft is se$$ing at 4(-9 D'gnore any dividendsE . 10.00, B. (0.00, C. :.:-, %. 1.,

Difficulty: Hard

>-. 2he co##ission structure on a stock purchase is 4(0 p$us 40.0( per share. 'f you purchase / round $ots of a stock se$$ing for 4.:1 what is your co##ission9 . 4(0 ". 4(( C. 4(: D. 4(> Co##ission M (0 K D/00 ) .0(E M 4(>.00

Difficulty: Medium

3-/-

Chapter 03 - Securities Markets

>>. 2he co##ission structure on a stock purchase is 4.0 p$us 40.03 per share. 'f you purchase :00 shares of a stock se$$ing for 4:.1 what is your co##ission9 . 43. ". 4/. C. 4.3 D. 4:> Co##ission M .0 K D:00 ) .03E M 4:>.00

Difficulty: Medium

>5. ?ou se$$ short (00 shares of %oggie 2reats 'nc. which are current$y se$$ing at 4(. per share. ?ou post the .0, #argin re8uired on the short sa$e. 'f your broker re8uires a 30, #aintenance #argin1 at what stock price wi$$ you get a #argin ca$$9 D?ou earn no interest on the funds in your #argin account and the fir# does not pay any dividendsE A. 4(>.>. ". 43..-1 C. 431..0 %. 43(.(.

Difficulty: Hard

50. 2he #argin re8uire#ent on a stock purchase is (.,. ?ou fu$$y use the #argin a$$owed to purchase 100 shares of MS&2 at 4(.. 'f the price drops to 4((1 what is your percentage $oss9 . 5, ". 1., C. />, %. .-,

Difficulty: Medium

3-/>