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40. The _________ price is the price at which a dealer is willing to purchase a security.
41. The _________ price is the price at which a dealer is willing to sell a security.
42. The difference between the price at which a dealer is willing to buy and the price at which
a dealer is willing to sell is called the _________.
43. The bid-ask spread exists because of _______________.
44. The NYSE has lost market share to ECNs in recent years. Part of the NYSE's response to
the growth of ECNs has been to:
I. Purchase Archipelago, a major ECN, and rename it NYSE Arca
II. Enable automatic trade execution through its new Market Center
III. Impose a tighter limit on bid-ask spreads
45. The cost of buying and selling a stock includes:
I. Broker's commissions
II. Dealer's bid-asked spread
III. Price concessions that investors may be forced to make
46. Which of the following is (are) true about dark pools?
I. They allow anonymity in trading.
II. They often involve large blocks of stocks.
III. Trades made through them might not be reported.
47. You purchased XYZ stock at $50 per share. The stock is currently selling at $65. Your
gains could be protected by placing a _________.
48. Consider the following limit order book of a specialist. The last trade in the stock occurred
at a price of $40. If a market buy order for 100 shares comes in, at what price will it be filled?
49. You find that the bid and ask prices for a stock are $10.25 and $10.30, respectively. If you
purchase or sell the stock, you must pay a flat commission of $25. If you buy 100 shares of the
stock and immediately sell them, what is your total implied and actual transaction cost in dollars?
50. According to SEC Rule 415 regarding shelf registration, firms can gradually sell securities
to the public for __________ following initial registration.
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?
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 _________.
53. You sold short 300 shares of common stock at $30 per share. The initial margin is 50%.
You must put up _________.
54. You short-sell 200 shares of Tuckerton Trading Co., now selling for $50 per share. What is
your maximum possible loss?
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?
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 ____.
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.)
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.
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.)
60. Transactions that do not involve the original issue of securities take place in _________.
61. What was the result of high-frequency traders' leaving the market during the flash crash
of 2010?
62. __________ often accompany short sales and are used to limit potential losses from the
short position.
63. The market share held by the NYSE Arca system in February 2011 was approximately
____.
