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50) According to SEC Rule 415 regarding shelf registration, firms can gradually sell securities to
the public for ________ following initial registration.
A) 1 year
B) 2 years
C) 3 years
D) 4 years
51) What happened to the effective spread on trades when the SEC allowed the minimum tick
size to move from one-eighth of a dollar to one-sixteenth of a dollar in 1997 and from one-
sixteenth of a dollar to one cent in 2001?
A) The effective spread increased in 1997 but decreased in 2001.
B) The effective spread increased in both cases.
C) The effective spread decreased in 1997 but increased in 2001.
D) The effective spread decreased in both cases.
52) Assume you purchased 500 shares of XYZ common stock on margin at $40 per share from
your broker. If the initial margin is 60%, the amount you borrowed from the broker is ________.
A) $20,000
B) $12,000
C) $8,000
D) $15,000
53) You sold short 300 shares of common stock at $30 per share. The initial margin is 50%. You
must put up ________.
A) $4,500
B) $6,000
C) $9,000
D) $10,000
54) You short-sell 200 shares of Tuckerton Trading Co., now selling for $50 per share. What is
your maximum possible loss?
A) $50
B) $150
C) $10,000
D) unlimited
55) You short-sell 200 shares of Tuckerton Trading Co., now selling for $50 per share. What is
your maximum possible gain, ignoring transactions cost?
A) $50
B) $150
C) $10,000
D) unlimited
56) 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 ________.
A) $37.50
B) $62.50
C) $56.25
D) $59.75
57) You purchased 200 shares of ABC common stock on margin at $50 per share. Assume the
initial margin is 50% and the maintenance margin is 30%. You will get a margin call if the stock
drops below ________. (Assume the stock pays no dividends, and ignore interest on the margin
loan.)
A) $26.55
B) $35.71
C) $28.95
D) $30.77
58) You purchased 250 shares of common stock on margin for $25 per share. The initial margin
is 65%, and the stock pays no dividend. Your rate of return would be ________ if you sell the
stock at $32 per share. Ignore interest on margin.
A) 35%
B) 39%
C) 43%
D) 28%
59) 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.)
A) $28.85
B) $35.71
C) $31.50
D) $32.25
60) Transactions that do not involve the original issue of securities take place in ________.
A) primary markets
B) secondary markets
C) over-the-counter markets
D) institutional markets
61) What was the result of high-frequency traders' leaving the market during the flash crash of
2010?
A) Market liquidity decreased.
B) Market liquidity increased.
C) Market volatility decreased.
D) Trading frequency increased.
62) ________ often accompany short sales and are used to limit potential losses from the short
position.
A) Limit orders
B) Restricted orders
C) Limit loss orders
D) Stop-buy orders
63) The market share held by the NYSE Arca system in February 2011 was approximately
________.
A) 65%
B) 45%
C) 25%
D) 10%
64) Regulation NMS:
I. Supports the goal of integrating financial markets
II. Requires the use of specialists to execute trades
III. Requires that exchanges honor quotes of other exchanges when they can be executed
automatically
A) I only
B) I and II only
C) I and III only
D) I, II, and III
65) The commission structure on a stock purchase is $50 plus $.03 per share. If you purchase
600 shares of a stock selling for $65, what is your commission?
A) $35
B) $45
C) $53
D) $68
66) All major stock markets today are effectively ________.
A) specialist trading systems
B) electronic trading systems
C) continuous auction markets
D) direct search markets
67) In 2007, the NASDAQ stock market merged with ________.
A) Euronext
B) OMX, which operates seven Nordic and Baltic stock exchanges
C) the International Securities Exchange (ISE)
D) BATS
68) 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 ________.
A) an advanced equity offering
B) a weathered equity offering
C) a seasoned equity offering
D) a veteran equity offering
69) 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 ________.
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
70) The average depth of the limit order book is ________.
A) lower for the large stocks in the S&P 500 Index than for the smaller stocks in the Russell
2000 Index
B) higher for the large stocks in the S&P 500 Index than for the smaller stocks in the Russell
2000 Index
C) about the same for both the large stocks in the S&P 500 Index and the smaller stocks in the
Russell 2000 Index
D) unrelated to the sizes of the stocks in the indexes
71) The CFA Institute Standards of Professional Conduct require that members ________.
A) place their clients' interests before their own
B) disclose conflicts of interest to clients
C) inform their employers that they are obligated to comply with the Standards of Professional
Conduct
D) all of these options
