Question 1

According to SEC Rule 415 regarding shelf registration, firms can gradually sell securities to the public for ________ following initial registration.

Accepted Answer

A)   1 year
B)   2 years
C)   3 years
D)   4 yearsE) A) and D)
F) A) and C)

Question 2

The bid-ask spread exists because of ________.

Accepted Answer

A)   market inefficiencies
B)   discontinuities in the markets
C)   the need for dealers to cover expenses and make a profit
D)   lack of trading in thin marketsE) A) and B)
F) All of the above

Question 3

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.)

Accepted Answer

A)   10%
B)   20%
C)   6.67%
D)   15%E) A) and B)
F) C) and D)

Question 4

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 ________.

Accepted Answer

A)   $37.50
B)   $62.50
C)   $56.25
D)   $59.75E) All of the above
F) B) and C)

Question 5

The ________ was established to protect investors from losses if their brokerage firms fail.

Accepted Answer

A)   CFTC
B)   SEC
C)   SIPC
D)   AIMRE) C) and D)
F) A) and C)

Question 6

The market share held by the NYSE Arca system in February 2011 was approximately ________.

Accepted Answer

A)   65%
B)   45%
C)   25%
D)   10%E) All of the above
F) A) and C) D

Question 7

The process of polling potential investors regarding their interest in a forthcoming initial public offering (IPO)  is called ________.

Accepted Answer

A)   interest building
B)   book building
C)   market analysis
D)   customer identificationE) None of the above
F) B) and C)

Question 8

You hold 5,000 shares of the 1 million outstanding shares of Wealthy Wranglers common stock. You've just learned that the company plans to issue more shares, so that 2 million shares will be outstanding. This is called ________.

Accepted Answer

A)   an advanced equity offering
B)   a weathered equity offering
C)   a seasoned equity offering
D)   a veteran equity offeringE) A) and B)
F) None of the above

Question 9

If an investor uses the full amount of margin available, the equity in a margin account used for a stock purchase can be found as ________.

Accepted Answer

A)   market value of the stock - amount owed on the margin loan
B)   market value of the stock + amount owed on the margin loan
C)   market value of the stock ÷ margin loan
D)   margin loan × market value of the stockE) C) and D)
F) B) and D)

Question 10

You short-sell 200 shares of Tuckerton Trading Co., now selling for $50 per share. What is your maximum possible loss?

Accepted Answer

A)   $50
B)   $150
C)   $10,000
D)   unlimitedE) All of the above
F) A) and D)

Question 11

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

Accepted Answer

A)   I and II only
B)   II and III only
C)   I and III only
D)   I, II, and IIIE) All of the above
F) A) and B)

Question 12

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.)

Accepted Answer

A)   $28.85
B)   $35.71
C)   $31.50
D)   $32.25E) C) and D)
F) B) and D)

Question 13

Which one of the following is a false statement regarding NYSE specialists?

Accepted Answer

A)   On a stock exchange most buy or sell orders are executed via an electronic system rather than through specialists.
B)   Specialists cannot trade for their own accounts.
C)   Specialists maintain limit order books, which contain the outstanding unexecuted limit orders.
D)   Specialists stand ready to trade at narrower bid-ask spreads in cases where the spread has become too wide.E) None of the above
F) C) and D)

Question 14

Which one of the following is not an example of a brokered market?

Accepted Answer

A)   residential real estate market
B)   market for large block security transactions
C)   primary market for securities
D)   NASDAQE) A) and B)
F) A) and C)

Question 15

In 2007, the NASDAQ stock market merged with ________.

Accepted Answer

A)   Euronext
B)   OMX, which operates seven Nordic and Baltic stock exchanges
C)   the International Securities Exchange (IS
E)  
D)   BATSE) A) and D)
F) All of the above B

Question 16

If an investor places a ________ order, the stock will be sold if its price falls to the stipulated level. If an investor places a ________ order, the stock will be bought if its price rises above the stipulated level.

Accepted Answer

A)   buy stop; stop-loss
B)   market; limit
C)   stop-loss; buy stop
D)   limit; marketE) A) and D)
F) C) and D)

Question 17

In 2014, BATS advertised average latency times of approximately ________.

Accepted Answer

A)   100 microseconds
B)   200 microseconds
C)   1 second
D)   5 secondsE) A) and C)
F) None of the above A

Question 18

The ________ requires full disclosure of relevant information relating to the issue of new securities.

Accepted Answer

A)   Insider Trading Act of 1931
B)   Securities Act of 1933
C)   Securities Exchange Act of 1934
D)   Investment Company Act of 1940E) None of the above
F) B) and C)

Question 19

Privately held firms may have only ________ shareholders.

Accepted Answer

A)   10
B)   99
C)   250
D)   2,000E) B) and C)
F) A) and B)

Question 20

Rank the following types of markets from least integrated and organized to most integrated and organized:
I. Brokered markets
II. Continuous auction markets
III. Dealer markets
IV. Direct search markets

Accepted Answer

A)   IV, II, I, III
B)   I, III, IV, II
C)   II, III, IV, I
D)   IV, I, III, IIE) A) and B)
F) A) and C)

Exam 3: Securities Markets

According to SEC Rule 415 regarding shelf registration, firms can gradually sell securities to the public for ________ following initial registration.

Correct Answer
verified

The bid-ask spread exists because of ________.

Correct Answer
verified

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.)

Correct Answer
verified

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 ________.

Correct Answer
verified

The ________ was established to protect investors from losses if their brokerage firms fail.

Correct Answer
verified

The market share held by the NYSE Arca system in February 2011 was approximately ________.

Correct Answer
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D

The process of polling potential investors regarding their interest in a forthcoming initial public offering (IPO) is called ________.

Correct Answer
verified

You hold 5,000 shares of the 1 million outstanding shares of Wealthy Wranglers common stock. You've just learned that the company plans to issue more shares, so that 2 million shares will be outstanding. This is called ________.

Correct Answer
verified

If an investor uses the full amount of margin available, the equity in a margin account used for a stock purchase can be found as ________.

Correct Answer
verified

You short-sell 200 shares of Tuckerton Trading Co., now selling for $50 per share. What is your maximum possible loss?

Correct Answer
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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

Correct Answer
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Correct Answer
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Which one of the following is a false statement regarding NYSE specialists?

Correct Answer
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Which one of the following is not an example of a brokered market?

Correct Answer
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In 2007, the NASDAQ stock market merged with ________.

Correct Answer
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B

If an investor places a order, the stock will be sold if its price falls to the stipulated level. If an investor places a order, the stock will be bought if its price rises above the stipulated level.

Correct Answer
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In 2014, BATS advertised average latency times of approximately ________.

Correct Answer
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A

The ________ requires full disclosure of relevant information relating to the issue of new securities.

Correct Answer
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Privately held firms may have only ________ shareholders.

Correct Answer
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Rank the following types of markets from least integrated and organized to most integrated and organized: I. Brokered markets II. Continuous auction markets III. Dealer markets IV. Direct search markets

Correct Answer
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Exam 3: Securities Markets

According to SEC Rule 415 regarding shelf registration, firms can gradually sell securities to the public for ________ following initial registration.

Correct AnswerverifiedShow Answer

The bid-ask spread exists because of ________.

Correct AnswerverifiedShow Answer

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.)

Correct AnswerverifiedShow Answer

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 ________.

Correct AnswerverifiedShow Answer

The ________ was established to protect investors from losses if their brokerage firms fail.

Correct AnswerverifiedShow Answer

The market share held by the NYSE Arca system in February 2011 was approximately ________.

Correct AnswerverifiedD

The process of polling potential investors regarding their interest in a forthcoming initial public offering (IPO) is called ________.

Correct AnswerverifiedShow Answer

You hold 5,000 shares of the 1 million outstanding shares of Wealthy Wranglers common stock. You've just learned that the company plans to issue more shares, so that 2 million shares will be outstanding. This is called ________.

Correct AnswerverifiedShow Answer

If an investor uses the full amount of margin available, the equity in a margin account used for a stock purchase can be found as ________.

Correct AnswerverifiedShow Answer

You short-sell 200 shares of Tuckerton Trading Co., now selling for $50 per share. What is your maximum possible loss?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which one of the following is a false statement regarding NYSE specialists?

Correct AnswerverifiedShow Answer

Which one of the following is not an example of a brokered market?

Correct AnswerverifiedShow Answer

In 2007, the NASDAQ stock market merged with ________.

Correct AnswerverifiedB

If an investor places a ________ order, the stock will be sold if its price falls to the stipulated level. If an investor places a ________ order, the stock will be bought if its price rises above the stipulated level.

Correct AnswerverifiedShow Answer

In 2014, BATS advertised average latency times of approximately ________.

Correct AnswerverifiedA

The ________ requires full disclosure of relevant information relating to the issue of new securities.

Correct AnswerverifiedShow Answer

Privately held firms may have only ________ shareholders.

Correct AnswerverifiedShow Answer

Rank the following types of markets from least integrated and organized to most integrated and organized: I. Brokered markets II. Continuous auction markets III. Dealer markets IV. Direct search markets

Correct AnswerverifiedShow Answer

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D

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B

If an investor places a order, the stock will be sold if its price falls to the stipulated level. If an investor places a order, the stock will be bought if its price rises above the stipulated level.

Correct Answer
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Correct Answer
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A

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