Chapter 03 How Securities Are Traded Key
Multiple Choice Questions
1.
The trading of stock that was previously issued takes place
2.
A purchase of a new issue of stock takes place
3.
Firms raise capital by issuing stock
4.
Which of the following statements regarding the specialist are true?
5.
Investment bankers
6.
In a “firm commitment,” the investment banker
7.
The secondary market consists of
8.
Initial margin requirements are determined by
9.
You purchased JNJ stock at $50 per share. The stock is currently selling at $65. Your gains
may be protected by placing a
10.
You sold JCP stock short at $80 per share. Your losses could be minimized by placing a
11.
Which one of the following statements regarding orders is false?
12.
Restrictions on trading involving insider information apply to the following except
13.
The cost of buying and selling a stock consists of
14.
Assume you purchased 200 shares of GE common stock on margin at $70 per share from
your broker. If the initial margin is 55%, how much did you borrow from the broker?
15.
You sold short 200 shares of common stock at $60 per share. The initial margin is 60%.
Your initial investment was
16.
You purchased 100 shares of IBM common stock on margin at $70 per share. Assume the
initial margin is 50% and the maintenance margin is 30%. Below what stock price level
would you get a margin call? Assume the stock pays no dividend; ignore interest on
margin.
17.
You purchased 100 shares of common stock on margin at $45 per share. Assume the initial
margin is 50% and the stock pays no dividend. What would the maintenance margin be if a
margin call is made at a stock price of $30? Ignore interest on margin.
18.
You purchased 300 shares of common stock on margin for $60 per share. The initial margin
is 60% and the stock pays no dividend. What would your rate of return be if you sell the
stock at $45 per share? Ignore interest on margin.
19.
Assume you sell short 100 shares of common stock at $45 per share, with initial margin at
50%. What would be your rate of return if you repurchase the stock at $40 per share? The
stock paid no dividends during the period, and you did not remove any money from the
account before making the offsetting transaction.
20.
You sold short 300 shares of common stock at $55 per share. The initial margin is 60%. At
what stock price would you receive a margin call if the maintenance margin is 35%?
21.
Assume you sold short 100 shares of common stock at $50 per share. The initial margin is
60%. What would be the maintenance margin if a margin call is made at a stock price of
$60?
22.
Specialists on stock exchanges perform which of the following functions?
23.
Shares for short transactions
24.
Which of the following orders is most useful to short sellers who want to limit their
potential losses?
25.
Which of the following orders instructs the broker to buy at the current market price?
26.
Which of the following orders instructs the broker to buy at or below a specified price?
27.
Which of the following orders instructs the broker to sell at or below a specified price?
28.
Which of the following orders instructs the broker to sell at or above a specified price?
29.
Which of the following orders instructs the broker to buy at or above a specified price?
30.
Shelf registration
31.
Block transactions are transactions for more than _______ shares and they account for
about _____ percent of all trading on the NYSE.
32.
A program trade is
33.
When stocks are held in street name
34.
NASDAQ subscriber levels
35.
You want to buy 100 shares of Hotstock Inc. at the best possible price as quickly as
possible. You would most likely place a