72) 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
A) I and II only
B) II and III only
C) I and III only
D) I, II, and III
73) The ________ requires full disclosure of relevant information relating to the issue of new
securities.
A) Insider Trading Act of 1931
B) Securities Act of 1933
C) Securities Exchange Act of 1934
D) Investment Company Act of 1940
74) The SIPC was established by the ________.
A) Insider Trading Act of 1931
B) Securities Act of 1933
C) Securities Exchange Act of 1934
D) none of these options
75) Maintenance requirements for margin accounts are set by ________.
A) brokerage firms
B) the SEC
C) the Federal Reserve System’s Board of Governors
D) the Supreme Court
76) Which of the following are true concerning short sales of exchange-listed stocks?
I. Proceeds from the short sale must be kept on deposit with the broker.
II. Short-sellers must post margin with their broker to cover potential losses on the position.
III. The short-seller earns interest on any cash deposited with the broker that is used to meet the
margin requirement.
A) I only
B) I and III only
C) I and II only
D) I, II, and III
77) The largest nongovernmental regulator of securities firms in the United States is ________.
A) the CFA Institute
B) the Public Company Accounting Oversight Board
C) the Financial Industry Regulatory Authority
D) the Board of Directors of NYSE Euronext
78) In ________ markets, participants post bid and ask prices at which they are willing to trade,
but orders are not automatically executed by computer. ________ execute trades for people other
than themselves, and in ________ markets a computer matches orders with an existing limit
order book and executes the trades automatically.
A) electronic; Dealers; brokers
B) dealer; Brokers; electronic
C) direct search; Brokers; electronic
D) brokered; Dealers; direct search
79) An investor puts up $5,000 but borrows an equal amount of money from his broker to double
the amount invested to $10,000. The broker charges 7% on the loan. The stock was originally
purchased at $25 per share, and in 1 year the investor sells the stock for $28. The investor’s rate
of return was ________.
A) 17%
B) 12%
C) 14%
D) 19%
80) An investor buys $8,000 worth of a stock priced at $40 per share using 50% initial margin.
The broker charges 6% on the margin loan and requires a 30% maintenance margin. In 1 year the
investor has interest payable and gets a margin call. At the time of the margin call the stock’s
price must have been less than ________.
A) $20
B) $29.77
C) $30.29
D) $32.45
81) The New York Stock Exchange is a good example of ________.
A) an auction market
B) a brokered market
C) a dealer market
D) a direct search market
82) The primary market where new security issues are offered to the public is a good example of
________.
A) an auction market
B) a brokered market
C) a dealer market
D) a direct search market
83) The over-the-counter securities market is a good example of ________.
A) an auction market
B) a brokered market
C) a dealer market
D) a direct search market
84) An investor buys $16,000 worth of a stock priced at $20 per share using 60% initial margin.
The broker charges 8% on the margin loan and requires a 35% maintenance margin. The stock
pays a $.50-per-share dividend in 1 year, and then the stock is sold at $23 per share. What was
the investor’s rate of return?
A) 17.5%
B) 19.67%
C) 23.83%
D) 25.75%
85) Level 3 NASDAQ subscribers ________.
A) are registered market makers
B) can post bid and ask prices
C) have the fastest execution of trades
D) all of these options
86) 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.)
A) 10%
B) 20%
C) 6.67%
D) 15%
87) The commission structure on a stock purchase is $20 plus $.02 per share. If you purchase
four round lots of a stock selling for $56, what is your commission?
A) $20
B) $22
C) $26
D) $28
88) In 2014, BATS advertised average latency times of approximately ________.
A) 100 microseconds
B) 200 microseconds
C) 1 second
D) 5 seconds
89) The market share held by the “Other” category (which includes dark pools) constitutes
roughly ________% of trading volume in NYSE-listed shares.
A) 5%
B) 10%
C) 30%
D) 50%
90) In 2013, NYSE Euronext was acquired by ________.
A) DOT
B) ICE
C) BATS
D) It was not acquired.
91) SIPC ensures investors against failure of a brokerage firm up to a limit of ________.
A) $100,000
B) $250,000
C) $500,000
D) $1,000,000
92) Privately held firms may have only ________ shareholders.
A) 10
B) 99
C) 250
D) 2,000
93) The term “underwriting syndicate” describes ________.
A) the issuing firm
B) the lead underwriter
C) the investment banks that participate in the underwriting
D) the private investors that purchase the shares
94) The non-European country with the highest average first-day returns in 2014 was ________.
A) Canada
B) United States
C) China
D) Jordan