TEST BANK
CAPITAL MARKETS: INSTITUTIONS AND INSTRUMENTS
FABOZZI/MODIGLIANI
Chapter 14
COMMON STOCK MARKET: II
MULTIPLE CHOICE
1. The most common type of order submitted to the stock market is the:
[E]
2. Examples of conditional orders include:
[E]
3. A stop order that designates a price limit is called:
[E]
4. An odd lot is defined as:
5. A block trade is defined by the NYSE as an order of:
[M]
6. Exchanges impose restrictions as to when a short sale may be executed, which is referred
to as:
7. A transaction in which an investor borrows to buy shares using the shares themselves as
collateral is called:
[M]
8. The initial margin requirement is set by:
[M]
9. Margin calls must be satisfied:
10. Trading costs can be decomposed into:
[E]
11. Impact costs, timing costs, and opportunity costs are examples of:
[E]
12. Trading differences exist between retail investors and institutional investors based on:
[M]
13. Which of the following is most correct?
[M]
14. The term upstairs markets refers to:
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15. The execution of trades in a large number of different stocks at or near the same time as
possible is called:
[M]
16. The major applications of program trades are:
17. Which of the following statements is most correct?
[M]
18. The construction of stock market indicators differs on the basis of:
[M]
19. The Nikkei 225 Stock Average and the TOPIX are the indexes for the stocks of
established and large companies traded on the:
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20. Which of the following is not a market index?
TRUE/FALSE
1. The prices of stocks around the world move together in an exact way.
[M]
2. The benefits of international stock diversification arise from international capital markets
that are less than perfectly correlated.
[M]
3. Strong-form market efficiency is easy to test empirically.
[M]
4. The Fed has currently set the margin requirement at 20%.
[E]
5. Implicit trading costs are invisible and difficult to measure.
[M]
ESSAY QUESTIONS
1. Distinguish between block trades and program trades.
Key Issues:
2. Discuss the reasons for why the stock market in the U.S. has undergone significant
structural changes.
Key Issues:
3. The prices of stock on markets around the world do not move together in an exact way
because the economic systems in which those markets are located have dissimilar
economic, social and political environments. Explain the effects of these environmental
factors on stock prices.
Key Issues: