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11
14) Market makers in dealer markets
A) bring sellers and buyers together by matching offers.
B) earn commissions paid by the sellers of securities.
C) buy securities at a bid price and hope to resell them at a higher offer price.
D) all of the above.
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: Previous Edition
Learning Goal: Learning Goal 3
15) Which one of the following statements about the NYSE is correct?
A) Each member of the exchange owns a trading post.
B) Any listed stock may be traded at any of 20 trading posts.
C) Brokerage firms are only permitted to have one individual trading on the floor of the
exchange.
D) Buy orders are filled at the lowest price and sell orders are filled at the highest price.
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: Previous Edition
Learning Goal: Learning Goal 3
16) In recent years, trading in secondary markets has increasingly become a function of
A) securities exchanges.
B) dealer markets.
C) technology that by-passes both brokers and dealers.
D) broker-dealer markets using consolidated venues and technologies.
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: Previous Edition
Learning Goal: Learning Goal 3
12
17) The great majority of transactions on the NYSE are executed
A) automatically through electronic technology.
B) on the trading floor by brokers known as specialists.
C) by dealers known as market makers.
D) by auction in trading areas known as pits.
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: Previous Edition
Learning Goal: Learning Goal 3
18) Which of the following are correct statements concerning the NYSE?
I. Each stock has a designated location, called a post, at which its shares are traded.
II. The NYSE is a dealer market.
III. Supply and demand determines the price of each security.
IV. A specialist buys and sells to maintain a market for a particular security.
A) I and II only
B) I and III only
C) I, III and IV only
D) I, II, III and IV
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: Previous Edition
Learning Goal: Learning Goal 3
19) A market where securities are are bought from or sold to a market maker is known as a
A) broker market.
B) dealer market.
C) exchange floor.
D) board of exchange.
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: Previous Edition
Learning Goal: Learning Goal 3
13
20) Large technology companies such as IBM and Microsoft trade
A) exclusively on the NASDAQ.
B) exclusively on the NYSE.
C) on either the NASDAQ or the NYSE.
D) exclusively on alternative trading systems.
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: Previous Edition
Learning Goal: Learning Goal 3
21) Which of the following is currently a requirement for a stock to be listed on the NYSE?
A) A price of at least $10 per share.
B) Three consecutive years of profitable operations.
C) Gross revenue of at least $15,000,000.
D) Total value of shares available for public trading (float) of $15,000,000.
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: New Question
Learning Goal: Learning Goal 3
22) The dominant exchange for trading options contracts is the ________. The dominant
player in the trading of futures contracts is ________.
A) NYSE; Nasdaq OMX BX
B) PHLX; CBOE
C) CBOE; CME Group
D) ISE; CBOT
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: New Question
Learning Goal: Learning Goal 3
14
23) Exchange traded funds are
A) mutual funds that trade on the Big Board.
B) baskets of securities that trade like a single stock.
C) index funds that trade on the NYSE.
D) groups of securities that trade only on regional exchanges.
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: Previous Edition
Learning Goal: Learning Goal 3
24) The dominant options exchange is the
A) Chicago Board Options Exchange.
B) American Stock Exchange.
C) Pacific Stock Exchange.
D) Philadelphia Options Exchange.
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: Previous Edition
Learning Goal: Learning Goal 3
25) The NYSE Euronext includes exchanges in all of the following cities EXCEPT
A) Amsterdam.
B) Brussels.
C) Paris.
D) Tokyo.
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: Previous Edition
Learning Goal: Learning Goal 3
15
26) The purpose of the Intermarket Trading System is to link major exchanges and dealer
markets to
A) eliminate competition between brokers and dealers.
B) allow brokers and dealers to make transactions at the best price.
C) allow individual to compare the prices offered by various dealers and brokers.
D) allow individual investors to traded directly with each other.
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: Previous Edition
Learning Goal: Learning Goal 3
27) Options contracts on stocks may
A) grant the owner the right to buy the stock at a specified price over a specified period of time.
B) grant the owner the right to sell the stock at a specified price over a specified period of time.
C) depending on the type of contract, grant the owner the right to either buy or sell the stock at
a specified price over a specified period of time.
D) legally oblige the owner to buy the stock at a specified price over a specified period of time.
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: New Question
Learning Goal: Learning Goal 3
28) The automated system for trading highly active OTC securities is the
A) Big Board.
B) Kansas City Board.
C) Chicago Board of Trade.
D) NASDAQ.
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: Previous Edition
Learning Goal: Learning Goal 3
16
29) The over-the-counter (OTC) market is a
A) centrally located auction market.
B) telecommunications network connecting dealers.
C) market solely for institutional traders.
D) geographically dispersed auction market.
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: Previous Edition
Learning Goal: Learning Goal 3
30) ECNs are
A) publicly owned auction markets for listed stocks.
B) privately owned networks that transact trades between institutional investors.
C) facilities used by market makers for trading unlisted securities.
D) part of the third market which trades listed securities between individual investors.
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: Previous Edition
Learning Goal: Learning Goal 3
31) The price an individual investor will pay to purchase a stock in the OTC market is the
A) spread.
B) ask price.
C) bid price.
D) broker price.
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: Previous Edition
Learning Goal: Learning Goal 3
17
32) Which of the following are associated with bull markets?
I. investor pessimism
II. government stimulus
III. economic recovery
IV. low inflation
A) I and II only
B) II and III only
C) I, II and III only
D) II, III and IV only
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: Previous Edition
Learning Goal: Learning Goal 3
33) Which of the following are associated with bear markets?
I. investor pessimism
II. rising profits
III. economic slowdown
IV. rising security prices
A) I and III only
B) II and III only
C) I, II and III only
D) II, III and IV only
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: Previous Edition
Learning Goal: Learning Goal 3
18
34) There are many differences between broker markets and dealer markets. These differences
include such things as membership, location, regulation, and several other characteristics.
Discuss at least five key differences between these two markets.
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: Previous Edition
Learning Goal: Learning Goal 3
2.4 Learning Goal 4
1) Diversification is the inclusion of a number of different investments in a portfolio with the
goal of increasing returns or reducing risk.
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: Previous Edition
Learning Goal: Learning Goal 4
2) The financial markets are becoming more globally integrated.
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: Previous Edition
Learning Goal: Learning Goal 4
3) Participation in foreign stock markets is complicated and expensive for American investors.
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: Previous Edition
Learning Goal: Learning Goal 4
19
4) The U.S. stock markets tend to produce the highest rate of return each year.
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: Previous Edition
Learning Goal: Learning Goal 4
5) Including foreign investments in a portfolio
A) increases the overall risk of the portfolio.
B) reduces the potential rate of return.
C) provides potential benefits from changes in currency values.
D) limits the diversification amongst industries.
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: Previous Edition
Learning Goal: Learning Goal 4
6) Which one of the following statements about foreign investments is true?
A) In general, major foreign markets always tend to underperform the U.S. market.
B) Investing in foreign markets may involve specific risks not encountered with domestic
securities.
C) Investing in foreign markets will always produce higher returns because of exchange rate
fluctuations.
D) Foreign markets include equity securities only.
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: Previous Edition
Learning Goal: Learning Goal 4
20
7) Functioning securities exchanges are located in
I. Brazil
II. China
III. Russia
IV. South Korea
A) I, II, III and IV
B) I, II and IV only
C) I and IV only
D) II, III, and IV only
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: New Question
Learning Goal: Learning Goal 4
8) Dollar-denominated debt securities issued by foreign corporations and traded in U.S.
markets are called
A) ADRs.
B) Yankee bonds.
C) ETFs.
D) global bonds.
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: Previous Edition
Learning Goal: Learning Goal 4
