Professional Documents
Culture Documents
1.20%
5.50%
12.00%
20.00% *
Registered trader.
Commission broker.
Registered dealer.
Specialist. *
is a
Limit order. *
Short sale.
Market order.
Priced order.
a)
b)
c)
d)
$41,667
$62,500 *
$75,000
$87,500
12. What is Jack's profit if the price of Irish Industries rises to $55?
a)
b)
c)
d)
$ 5,555
$ 9,259
$13,895 *
$23,598
13. If the maintenance margin is 20 percent, to what price can Irish Industries fall before Jack receives a
margin call?
a)
b)
c)
d)
14.
>
$21.75
$23.75
$33.75 *
$35.75
15. A stock broker may improperly buy and sell the securities in a customers account to generate
commissions. This is known as ____________ .
>
17.
>
a.
b.
c.
d.
enhancement
insider trading
indexing
churning
18 The
a.
b.
mutual funds.
insurance companies.
c.
d.
pension funds *
commercial banks
19.
Finance professionals who work with individual investors and institutions in executing orders for
individual common stocks or bonds are called:
>
a.
b.
c.
d.
22.
a.
b.
c.
d.
brokers.
portfolio managers.
analysts.
certified financial planners.
can sell a bond at any time without losing the interest that has accrued. *
can buy a bond at any time and gain the interest accrued from the time of the last
payment.
can sell a bond at any time and retain the interest portion of the bond.
buy a bond at any time and receive an immediate interest check.
24. A corporate bond with a rating of BBB- is considered to be which of the following?
a.
b.
c.
d.
non-investment grade
investment grade *
speculative grade
junk, or high-yield
>
27.
>
self-regulatory organization with particular responsibility for the regulation of futures markets.
28.
>
29.
>
30. Which stock index is a good benchmark for determining the performance of small companies?
>
a. Whilshire 4500
b. Nikkei 225 Index
c. Russell 2000
a. NASDAQ 100
31. Investment
a.
b.
c.
d.
companies must register with the SEC under the provisions of the:
32. Short sales with 50% initial margin trigger a 30% maintenance margin call following a:
>
a.
b.
c.
d.
Solution: consider that the investor shorts one share of a $100 with $50 of borrowed money. To trigger
a 30% margin call, the price would have to change to 0.3 = (100+50-P) / P, solving for P =
$115.38, which represents a 15.4% increase in price.
33. If the initial margin requirement is 40%, an investor buying 100 shares at $100 per share must furnish
equity of:
>
$4,000.
$6,000.
$10,000.
$100.
Solution: equity = 40% 100 $100 = $4,000
34.Limit orders:
a.
>
b.
c.
d.
35.
Primary markets:
a.
b.
c.
>
d.
36.
>
a.
b.
c.
d.
37. An investor buys $10,000 worth of stock using 50% margin. If the stock price increases by 20%, what
return does the investor earn? (ignore transaction costs and interest fees)
>
a. 10%
b. 20%
c. 30%
d. 40%
Solution: return = 20%$10,000 / (50% $10,000) = 0.4 or 40%
38. If an investor would like to sell short shares originally valued at $20,000 in which his/her cash
contribution is $10,000, what is the stock value when the investor receives a margin call if the maintenance
margin 30%?
>
0.30
Solution:
a.
b.
c.
d.
40. Index
a.
b.
c.
d.
syndicate offer
IPO
prospectus *
shelf rule
43. Merrill Lynch and UBS are examples of:
a.
b.
c.
d.
discount brokers
wholesale brokers
full-service brokers *
blue-chip brokers
44. Ms. Brown sold short 100 shares of common stock at $78 per share. The
price has declined to $69. The outlook for the stock is mixed, so she
would cover her short position if the stock moves up as much as $1 but
hold if it continues down. Ms. Brown should place a
a.
b.
c.
d.