43) Which one of the following statements concerning the NYSE is correct?
A) The NYSE was created based on the Walnut Tree Agreement.
B) The average daily trading volume on the NYSE in 2007 was approximately one billion shares.
C) The NYSE and NASDAQ merged in 2007.
D) The NYSE is part of a firm that also operates a stock exchange in Amsterdam.
E) The NYSE merged with NASDAQ in 2007.
44) Which of the following are common sources of venture capital?
I. private individuals
II. NASDAQ
III. university endowment funds
IV. insurance companies
A) I and II only
B) III and IV only
C) I, III, and IV only
D) I, II, and IV only
E) I, II, III, and IV
45) Which one of the following statements concerning venture capital is correct?
A) Venture capital is frequently provided in stages with each stage financed by a different
venture capitalist.
B) Most venture capitalists are passive investors.
C) The founders of a firm generally realize substantial payoffs as soon as the firm receives
venture financing.
D) Venture capitalists generally compete with banks to find projects to finance.
E) Well established firms tend to absorb most of the available venture capital.
46) How long is the “lock-up” period that is commonly found in an IPO underwriting contract?
A) one month
B) three months
C) six months
D) one year
E) eighteen months
47) Which one of the following can be assumed when the SEC approves an IPO registration?
A) The securities offering will provide value to the shareholders.
B) The issuer is financially sound.
C) The issuer will remain solvent.
D) All rules have been followed to allow for full disclosure of information.
E) The stock price is set at a level which will allow shareholders to earn a positive rate of return.
48) Which one of the following transactions occurs in the primary market?
A) sale of stock by Shareholder A to Shareholder B
B) gift of shares from a grandmother to her granddaughter
C) sale of newly issued shares by the issuer to a shareholder
D) sale of shares in the third market
E) purchase of shares by a dealer from a shareholder
49) Trey currently owns 545,000 shares of ABC stock. He will sell those shares for $17.10 a
share. He is also willing to purchase additional shares for $17.07 a share. Trey is a securities:
A) broker.
B) representative.
C) underwriter.
D) floor broker.
E) dealer.
50) Alexis is an individual investor. She purchases shares at the ________ price and sells at the
________ price.
A) asked; bid
B) average; asked
C) bid; asked
D) bid; average
E) asked; average
51) What is the current structure of the NYSE?
A) general partnership
B) limited partnership
C) non-profit organization
D) publicly traded corporation
E) government agency
52) In 2007, NYSE Holdings merged with which one of the following?
A) NASDAQ
B) AMEX
C) Chicago Stock Exchange
D) London Stock Exchange
E) Euronext, N.V.
53) In order to currently trade on the floor of the NYSE, members must:
A) be registered as a floor trader.
B) own a seat.
C) purchase a trading license.
D) be a specialist.
E) be designated as a floor broker.
54) Which one of the following has the greatest duty to provide liquidity to the financial market?
A) floor broker
B) independent broker
C) dealer
D) designated market maker
E) floor trader
55) The SuperDOT system has lessened the role of which one of the following?
A) personal financial advisers
B) floor traders
C) specialists
D) floor brokers
E) underwriters
56) Which one of the following statements related to the NYSE Hybrid market is correct?
A) Floor brokers operate both electronically and in person.
B) The Hybrid system replaces the market specialists.
C) The automated system works better than the specialist for stocks with minimal liquidity.
D) The automated system will only replace the specialist in times of market duress.
E) Investors can automatically trade an unlimited number of shares.
57) To be listed on the NYSE, a firm must have at least:
A) 2,500 shareholders.
B) 100,000 shares traded on an average day.
C) 1.5 million shares held by the public.
D) $75 million in market value for an IPO.
E) pre-tax aggregate earnings of $10 million in the previous 3 years.
58) Lucas wants to sell 9,000 shares of stock and places a market order. The floor broker is
unable to arrange the sale with another floor broker so the specialist agrees to “stop” the stock.
What has the specialist agreed to do?
A) cancel the order
B) place the order into the order book to hold until an order to buy 9,000 shares is received
C) purchase the shares if no other buyer is readily available
D) sell the shares to the next available buyer regardless of the price received
E) sell the shares at the end of the trading day at the best price available at that time
59) The duties of a specialist include which of the following?
I. maintain an orderly market
II. offer a higher bid price than the floor brokers
III. provide liquidity to the market
IV. purchase all shares offered as limit sell
A) I and III only
B) II and III only
C) I, II, and III only
D) I, III, and IV only
E) I, II, III, and IV
60) Fay placed an order to sell 500 shares of stock she currently owned. As soon as the order
reached the trading floor, the shares were immediately sold. Which type of order did Faith place?
A) limit
B) day
C) market
D) short
E) stop
61) Sam placed a limit order to sell 500 shares of stock at $14 a share. Which of the following
does Sam know for sure?
I. His order will execute but the time of execution is unknown.
II. His order may never execute.
III. He will receive exactly $7,000 if his order executes.
IV. He could receive more, but not less, than $14 a share.
A) I and III only
B) I and IV only
C) II and III only
D) II and IV only
E) I only
62) Kelly wants to sell 600 shares of DeLuxe stock at the going market price after the stock
reaches $42 a share. Which type of order should she place?
A) stop
B) limit
C) market
D) fixed
E) loss
63) After the trigger point is reached, a stop-loss order will be executed at the:
A) trigger price.
B) stop price.
C) trigger price or better.
D) stop price or better.
E) market price.
64) Which one of the following orders is frequently used as a means to limit losses resulting
from a short sale?
A) limit
B) market
C) day
D) stop-sell
E) stop-buy
65) Mark just placed a stop limit order to sell 100 shares at $21 stop, $18 limit. Which one of the
following statements is correct concerning this order if the current market price is $16?
A) As soon as the price rises to $18, the stock will be sold.
B) The stock will sell for at least $18 but less than $21.
C) The stock will sell for $18 a share as soon as the price hits $21.
D) The order will become a limit order to sell at $21 once the market price reaches $18.
E) The order will become a limit order to sell at $18 once the market price reaches $21.
66) NASDAQ dealers post which one of the following in addition to their bid and ask prices?
A) commission rates
B) front-end load charges
C) number of shares they will commit to buy or sell
D) total trades for the day
E) trading fees
67) NASDAQ has which of the following characteristics?
I. trading floor
II. computer network
III. specialist system
IV. multiple market makers
A) I and IV only
B) II and IV only
C) I, III, and IV only
D) II, III, and IV only
E) I, II, III, and IV
68) Which one of the following statements concerning NASDAQ is correct?
A) The NASDAQ Capital Market has the most stringent listing requirements of any of the
NASDAQ companies.
B) NASDAQ is actually comprised of four separate markets.
C) Microsoft shares are listed on the NASDAQ Global Market.
D) NASDAQ has more total dollar volume of trading than does the NYSE.
E) There are more companies listed on NASDAQ than on NYSE.
69) The orders displayed on NASDAQ are placed by:
A) individuals on ECNs only.
B) market makers only.
C) both market makers and individuals on ECNs.
D) brokerage firms.
E) floor brokers.
70) Stocks which are listed on the NYSE can:
A) not be listed on any other exchange.
B) only be dual listed on a regional exchange.
C) only be dual listed on Instinet.
D) only be dual listed on the Archipelago Exchange.
E) also be listed on NASDAQ.
71) The stocks listed on the Pink Sheets:
A) are those stocks trading on the NASDAQ CAPITAL MARKET.
B) do not have to file financial statements with the SEC.
C) have all been delisted by the NYSE.
D) are the highest priced stocks listed on NASDAQ.
E) must file financial statements with the SEC but do not have to meet any listing requirements.
72) Which of the following are common characteristic of the OTCBB market?
I. low stock prices
II. dual listings with NASDAQ
II. high percentage price changes
IV. thinly traded securities
A) I and III only
B) I, II, and III only
C) I, III, and IV only
D) II, II, and IV only
E) I, II, III, and IV
73) The DJIA is an index of the stock prices of ________ firms.
A) 25
B) 30
C) 50
D) 100
E) 500
74) Stock market indexes:
A) are all computed using the same methodology.
B) all react the same to a change in the price of a particular stock.
C) all cover the same market sectors.
D) are all price-weighted.
E) vary in the type of stocks included.
75) Which one of the following is the primary flaw of a price-weighted index?
A) Price-weighted indexes ignore stock splits which affect stock prices.
B) The effect a company has on the index is dependent solely on the price per share.
C) Only a small number of stocks can be included in a price-weighted index.
D) If the number of shares outstanding of an index stock changes, the index divisor must be
recomputed.
E) The index can only be computed once the trading day is over.
76) Which one of the following statements related to stock indexes is correct?
A) The index divisor increases in value whenever a stock in the index undergoes a stock split.
B) A value-weighted index includes both dividends and capital gains.
C) The S&P 500 index is value-weighted.
D) The DJIA is value-weighted.
E) Index staleness is more apt to be a problem for the DJIA than for the Wilshire 5000.
77) Alcorn Metals just sold 1.5 million shares through an IPO offering. The shares were offered
at $31.50 a share and all shares were sold. The firm received a total of $50,200,000 for this issue.
What was the spread?
A) 5.49 percent
B) 6.24 percent
C) 6.40 percent
D) 7.00 percent
E) 7.12 percent
78) Reliant Underwriters has agreed to a firm commitment underwriting in which they will pay
$36.75 million in exchange for 3 million shares of stock for an IPO offering. The offering price
is expected to be $13.50 a share. How much will the underwriters earn if all of the shares can be
sold?
A) $1.25 million
B) $2.75 million
C) $3.75 million
D) $4.25 million
E) $4.50 million
79) In a recent IPO, the Sausage Co. offered 1.4 million shares of stock at an offer price of $16 a
share. The underwriting was conducted on a best efforts basis with a spread of 7.0 percent. The
Sausage Co. received a total of $20,079,868.00 in sale proceeds. How many shares were sold?
A) 1,349,453 shares
B) 1,486,500 shares
C) 1,498,200 shares
D) 1,505,700 shares
E) 1,508,400 shares
80) A best efforts IPO underwriting consisted of 1.5 million shares at an offer price of $25 a
share. The underwriter’s fee was set at 6.65 percent. How many shares were sold if the issuer
received $42,900,000?
A) 2,011,800 shares
B) 1,838,243 shares
C) 1,760,915 shares
D) 2,346,300 shares
E) 2,053,700 shares
81) ML Underwriters paid an issuer $37,694,528 as IPO proceeds. The IPO offered 1.86 million
shares of which 1.835 million were sold at an offer price of $21.85 a share. The underwriting
spread was 7.25 percent. What type of underwriting was this?
A) best efforts
B) variable
C) firm commitment
D) plain vanilla
E) stand-by
82) DT Metals is offering 700 shares in a Dutch auction IPO. The following bids have been
received:
Bidder
Quantity
Price
A
100
$
24
B
200
22
C
200
22
D
300
21
E
600
20
What will the gross proceeds be for this offering?
A) $12,000
B) $12,600
C) $13,200
D) $13,300
E) $14,700
83) Moonlight is offering 1,100 shares in a Dutch auction IPO. The following bids have been
received:
Bidder
Quantity
Price
A
200
$
18
B
100
18
C
400
17
D
400
16
E
200
16
How much will Moonlight receive from this offering if the underwriter’s fee is 6.5 percent?
A) $12,905.75
B) $13,440.60
C) $15,184.25
D) $17,484.50
E) $19,095.30