Chapter 3 - ĐTTC

chap 3
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1. 1. The trading of stock that was previously A. in the secondary market

issued takes place
A. in the secondary market. Secondary market trans-
B. in the primary market. actions consist of trades
C. usually with the assistance of an investment between investors..
banker.
D. A and B.
E. B and C.
2. 2. A purchase of a new issue of stock takes E. B and C.

place
A. in the secondary market. Funds from the sale of new
B. in the primary market. issues flow to the issuing
C. usually with the assistance of an investment corporation, making this
banker. a primary market transac-
D. A and B. tion. Investment bankers
E. B and C. usually assist by pricing
the issue and finding buy-
ers.
3. 3. Firms raise capital by issuing stock B. in the primary market.

A. in the secondary market.
B. in the primary market. Funds from the sale of new
C. to unwary investors. issues flow to the issuing
D. only on days when the market is up. corporation, making this
E. C and D. a primary market transac-
tion.
4. 4. The following statements regarding the spe- E. A, B, and C are all true.
cialist are true:
A. Specialists maintain a book listing out- The specialists' functions
standing unexecuted limit orders. are all of the items list-
B. Specialists earn income from commissions ed in A, B, and C. In ad-
and spreads in stock prices. dition, specialists trade in
C. Specialists stand ready to trade at quoted their own accounts.
bid and ask prices.
D. Specialists cannot trade in their own ac-
counts.
E. A, B, and C are all true.
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5. 5. Investment bankers D. A and B.

A. act as intermediaries between issuers of The role of the investment
stocks and investors. banker is to assist the firm
B. act as advisors to companies in helping in issuing new securities,
them analyze their financial needs and find both in advisory and mar-
buyers for newly issued securities. keting capacities. The in-
C. accept deposits from savers and lend them vestment banker does not
out to companies. have a role comparable to
D. A and B. a commercial bank, as in-
E. A, B, and C. dicated in C.
6. 6. In a "firm commitment" A. the investment banker

A. the investment banker buys the stock from buys the stock from the
the company and resells the issue to the pub- company and resells the
lic. issue to the public.
B. the investment banker agrees to help the
firm sell the stock at a favorable price. In a "firm commitment"
C. the investment banker finds the best mar- he investment banker buys
keting arrangement for the investment bank- the stock from the compa-
ing firm. ny and resells the issue to
D. B and C. the public.
E. A and B.
7. 7. The secondary market consists of D. A and B.

A. transactions on the AMEX.
B. transactions in the OTC market. The secondary market
C. transactions through the investment consists of transactions on
banker. the organized exchanges
D. A and B. and in the OTC market.
E. A, B, and C. The investment banker is
involved in the placement
of new issues in the prima-
ry market.
8. 8. The use of the Internet to trade and under- C. decreases underwriting

write securities costs for a new security is-
A. is illegal under SEC regulations. sue.
B. is regulated by the New York Stock Ex-
change. The SEC permits trading
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C. decreases underwriting costs for a new se- and underwriting of secu-
curity issue. rities over the Internet, but
D. increases underwriting costs for a new se- has required firms partic-
curity issue. ipating in this activity to
E. is regulated by the National Association of take steps to safeguard in-
Securities Dealers. vestment funds. This form
of underwriting is expect-
ed to grow quickly due to
its lower cost.
9. 9. Initial margin requirements are determined B. the Federal Reserve

by System.
A. the Securities and Exchange Commission.
B. the Federal Reserve System. The Board of Governors
C. the New York Stock Exchange. of the Federal Reserve
D. B and C. System determines initial
E. A and B margin requirements. The
New York Stock Exchange
determines maintenance
margin requirements on
NYSE-listed stocks; how-
ever, brokers usually set
maintenance margin re-
quirements above those
established by the NYSE.
10. 10. You purchased JNJ stock at $50 per share. D. limit-sell order
The stock is currently selling at $65. Your gains
may be protected by placing a __________.
A. stop-buy order With a limit-sell order, your
B. limit-buy order stock will be sold only at
C. market order a specified price, or better.
D. limit-sell order Thus, such an order would
E. none of the above. protect your gains. None
of the other orders are ap-
plicable to this situation.
11. 11. You sold JCP stock short at $80 per share. C. stop-buy order
Your losses could be minimized by placing a
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__________. With a stop-buy order, the
A. limit-sell order stock would be purchased
B. limit-buy order if the price increased to a
C. stop-buy order specified level, thus limit-
D. day-order ing your loss. None of the
E. none of the above other orders are applica-
ble to this situation.
12. 12. Which one of the following statements re- E. None of the above.
garding orders is false?
A. A market order is simply an order to buy
or sell a stock immediately at the prevailing All of the order descrip-
market price. tions above are correct.
B. A limit sell order is where investors specify
prices at which they are willing to sell a secu-
rity.
C. If stock ABC is selling at $50, a limit-buy
order may instruct the broker to buy the stock
if and when the share price falls below $45.
D. A day order expires at the close of the trad-
ing day.
E. None of the above.
13. 13. Restrictions on trading involving insider D. All of the above are sub-
information apply to the following except ject to insider trading re-
A. corporate officers and directors. strictions.
B. relatives of corporate directors and officers.
C. major stockholders. A, B, and C are corporate
D. All of the above are subject to insider trad- insiders and are subject
ing restrictions. to restrictions on trading
E. None of the above is subject to insider trad- on inside information. Fur-
ing restrictions. ther, the Supreme Court
held that traders may not
trade on nonpublic infor-
mation even if they are not
insiders.
14. 14. The cost of buying and selling a stock con- E. A, B, and C.
sists of __________.
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A. broker's commissions All of the above are pos-
B. dealer's bid-asked spread sible costs of buying and
C. a price concession an investor may be selling a stock.
forced to make.
D. A and B.
E. A, B, and C.
15. 15. Assume you purchased 200 shares of GE E. $6,300

common stock on margin at $70 per share from
your broker. If the initial margin is 55%, how 200 shares * $70/share *
much did you borrow from the broker? (1-0.55) = $14,000 * (0.45)
A. $6,000 = $6,300.
B. $4,000
C. $7,700
D. $7,000
E. $6,300
16. 16. You sold short 200 shares of common stock D. $7,200.
at $60 per share. The initial margin is 60%. Your
initial investment was 200 shares * $60/share *
A. $4,800. 0.60 = $12,000 * 0.60 =
B. $12,000. $7,200
C. $5,600.
D. $7,200.
E. none of the above.
17. 17. You purchased 100 shares of IBM common B. $50

stock on margin at $70 per share. Assume the
initial margin is 50% and the maintenance mar-
gin is 30%. Below what stock price level would 100 shares * $70 * .5
you get a margin call? Assume the stock pays = $7,000 * 0.5 = $3,500
no dividend; ignore interest on margin. (loan amount); 0.30 =
A. $21 (100P - $3,500)/100P; 30P
B. $50 = 100P - $3,500; -70P =
C. $49 -$3,500; P = $50.
D. $80
E. none of the above
18. 18. You purchased 100 shares of common E. 0.25

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initial margin is 50% and the stock pays no 100 shares * $45/share
dividend. What would the maintenance margin * 0.5 = $4,500 *
be if a margin call is made at a stock price of 0.5 = $2,250 (loan
$30? Ignore interest on margin. amount); X = [100($30)
A. 0.33 - $2,250]/100($30); X =
B. 0.55 0.25.
C. 0.43
D. 0.23
E. 0.25
19. 19. You purchased 300 shares of common D. -42%

stock on margin for $60 per share. The initial
margin is 60% and the stock pays no dividend. 300($60)(0.60) = $10,800
What would your rate of return be if you sell investment; 300($60) =
the stock at $45 per share? Ignore interest on $18,000 X (0.40) = $7,200
margin. loan; Proceeds after sell-
A. 25% ing stock and repaying
B. -33% loan: $13,500 - $7,200 =
C. 44% $6,300; Return = ($6,300
D. -42% - $10,800)/$10,800 = -
E. -54% 41.67%.
20. 20. Assume you sell short 100 shares of com- C. 22%
mon stock at $45 per share, with initial margin
at 50%. What would be your rate of return if you Profit on stock = ($45
repurchase the stock at $40/share? The stock - $40) * 100 = $500,
paid no dividends during the period, and you $500/$2,250 (initial invest-
did not remove any money from the account ment) = 22.22%.
before making the offsetting transaction.
A. 20%
B. 25%
C. 22%
D. 77%
21. 21. You sold short 300 shares of common stock B. $65
at $55 per share. The initial margin is 60%. At
what stock price would you receive a margin Equity = 300($55) * 1.6 =
call if the maintenance margin is 35%? $26,400; 0.35 = ($26,400
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A. $51 - 300P)/300P; 105P =
B. $65 26,400 - 300P; 405P =
C. $35 26,400; P = $65.18
D. $40
22. 22. Assume you sold short 100 shares of com- B. 33%
mon stock at $50 per share. The initial margin
is 60%. What would be the maintenance margin $5,000 X 1.6 =
if a margin call is made at a stock price of $60? $8,000; [$8,000 -
A. 40% 100($60)]/100($60) =
B. 33% 33%.
C. 35%
D. 25%
23. 23. Specialists on stock exchanges perform E. A and C.

the following functions
A. Act as dealers in their own accounts.
B. Analyze the securities in which they special- Specialists are both bro-
ize. kers and dealers and pro-
C. Provide liquidity to the market. vide liquidity to the market;
D. A and B. they are not analysts.
E. A and C.
24. 24. Shares for short transactions B. are typically shares held
A. are usually borrowed from other brokers. by the short seller's broker
B. are typically shares held by the short seller's in street name.
broker in street name.
C. are borrowed from commercial banks.
D. B and C. Typically, the only source
E. none of the above. of shares for short trans-
actions is those held by
the short seller's broker in
street name; often these
are margined shares.
25. 25. Which of the following orders is most use- D. Stop-buy order
ful to short sellers who want to limit their po-
tential losses? By issuing a stop-buy or-
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A. Limit order der, the short seller can
B. Discretionary order limit potential losses by as-
C. Limit-loss order suring that the stock will be
D. Stop-buy order purchased (and the short
E. None of the above position closed) if the price
increases to a certain lev-
el.
26. 26. Which of the following orders instructs the E. Market order
broker to buy at the current market price?
A. Limit order Market orders are to be ex-
B. Discretionary order ecuted immediately at the
C. Limit-loss order best prevailing price.
D. Stop-buy order
E. Market order
27. 27. Which of the following orders instructs the C. Limit-buy order
broker to buy at or below a specified price?
A. Limit-loss order Limit-buy orders are to
B. Discretionary order be executed if the mar-
C. Limit-buy order ket price decreases to the
D. Stop-buy order specified limit price.
E. Market order
28. 28. Which of the following orders instructs the B. Stop-loss

broker to sell at or below a specified price?
A. Limit-sell order Stop-loss orders are to
B. Stop-loss be executed if the mar-
C. Limit-buy order ket price decreases to the
E. Market order
29. 29. Which of the following orders instructs the C. Limit-sell order
broker to sell at or above a specified price?
A. Limit-buy order Limit-sell orders are to
C. Limit-sell order ket price increases to the
E. Market order
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30. 30. Which of the following orders instructs the D. Stop-buy order
broker to buy at or above a specified price?
A. Limit-buy order Stop-buy orders are to
C. Limit-sell order ket price increases to the
E. Market order
31. 31. Shelf registration D. A and B.

A. is a way of placing issues in the primary
market. Shelf registration lowers
B. allows firms to register securities for sale transactions costs to the
over a two-year period. firm as the firm may regis-
C. increases transaction costs to the issuing ter issues for a longer pe-
firm. riod than in the past, and
D. A and B. thus requires the services
E. A and C. of the investment banker
less frequently.
32. 32. Block transactions are transactions for D. 10,000; 30

more than _______ shares and they account
for about _____ percent of all trading on the Block transactions are de-
NYSE. fined as trades of 10,000
A. 1,000; 5 or more shares and they
B. 500; 10 account for 30 percent of
C. 100,000; 50 NYSE trading.
D. 10,000; 30
E. 5,000; 23
33. 33. A program trade is D. a coordinated purchase

A. a trade of 10,000 (or more) shares of a stock. or sale of an entire portfo-
B. a trade of many shares of one stock for one lio of stocks.
other stock.
C. a trade of analytic programs between finan- Program trading is a co-
cial analysts. ordinated purchase or sale
D. a coordinated purchase or sale of an entire of an entire portfolio of
portfolio of stocks. stocks.
E. not feasible with current technology but is
expected to be popular in the near future.
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34. 34. When stocks are held in street name E. C and D.
A. the investor receives a stock certificate with
the owner's street address. When stocks are held
B. the investor receives a stock certificate in street name, the in-
without the owner's street address. vestor does not receive a
C. the investor does not receive a stock certifi- stock certificate; the bro-
cate. ker holds the stock in
D. the broker holds the stock in the brokerage the brokerage firms' name
firms' name on behalf of the client. on behalf of the client.
E. C and D. This arrangement speeds
transfer of securities.
35. 35. NASDAQ subscriber levels E. A, B, and C.

A. permit those with the highest level, 3, to
"make a market" in the security. NASDAQ links dealers in
B. permit those with a level 2 subscription to a loosely organized net-
receive all bid and ask quotes, but not to enter work with different levels
their own quotes. of access to meet different
C. permit level 1 subscribers to receive general needs.
information about prices.
D. include all OTC stocks.
E. A, B, and C.
36. 36. You want to buy 100 shares of Hotstock C. market order
Inc. at the best possible price as quickly as
possible. You would most likely place a A market order is for imme-
A. stop-loss order diate execution at the best
B. stop-buy order possible price.
C. market order
D. limit-sell order
E. limit-buy order
37. 37. You want to purchase XON stock at $60 A. 100 shares
from your broker using as little of your own
money as possible. If initial margin is 50% and .5 = [(Q * $60) - $3,000] /
you have $3000 to invest, how many shares (Q * $60); $30Q = $60Q -
can you buy? $3,000; $30Q = $3,000; Q
A. 100 shares = 100.
B. 200 shares
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C. 50 shares
D. 500 shares
E. 25 shares
A. 100 shares
38. 38. A sale by IBM of new stock to the public B. seasoned equity offer-
would be a(n) ing.
A. short sale.
B. seasoned equity offering. When a firm whose stock
C. private placement. already trades in the sec-
D. secondary market transaction. ondary market issues new
E. initial public offering. shares to the public this is
referred to as a seasoned
equity offering.
39. 39. The finalized registration statement for new C. the prospectus
securities approved by the SEC is called
A. a red herring The prospectus is the fi-
B. the preliminary statement nalized registration state-
C. the prospectus ment approved by the
D. a best-efforts agreement SEC.
E. a firm commitment
40. 40. The minimum market value required for an E. 100,000,000

initial listing on the New York Stock Exchange
is A. $2,000,000 See Table 3.2.
B. $2,500,000
C. $1,100,000
D. $60,000,000
E. 100,000,000
41. 41. In 2005, the price of a seat on the NYSE B. $4,000,000

reached a high of
A. $1,000,000 Seat prices have changed
B. $4,000,000 radically from $4,000 in
C. $1,750,000 1878 to $4 million in 2005.
D. $2,225,000
E. $3,000,000
42.
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chap 3
42. The floor broker is best described as A. an independent mem-
A. an independent member of the exchange ber of the exchange who
who owns a seat and handles overload work owns a seat and handles
for commission brokers. overload work for commis-
B. someone who makes a market in one or sion brokers.
more securities.
C. a representative of a brokerage firm who is The floor broker is an
on the floor of the exchange to execute trade. independent member of
D. a frequent trader who performs no public the exchange who handles
function but executes trades for himself. work for commission bro-
E. any counter party to a trade executed on the kers when they have too
floor of the exchange. many orders to handle.
43. 43. You sell short 100 shares of Loser Co. at a B. unlimited
market price of $45 per share. Your maximum
possible loss is A short seller loses money
A. $4500 when the stock price ris-
B. unlimited es. Since there is no upper
C. zero limit on the stock price, the
D. $9000 maximum theoretical loss
E. cannot tell from the information given is unlimited.
44. 44. You buy 300 shares of Qualitycorp for $30 B. 40%
per share and deposit initial margin of 50%.
The next day Qualitycorp's price drops to $25 AM = [300 ($25) - .5 (300)
per share. What is your actual margin? ($30)] / [300 ($25)] = .40
A. 50%
B. 40%
C. 33%
D. 60%
E. 25%
45. 45. When a firm markets new securities, a pre- B. the Securities and Ex-
liminary registration statement must be filed change Commission.
with
A. the exchange on which the security will be The SEC requires the
listed. registration statement and
B. the Securities and Exchange Commission. must approve it before the
C. the Federal Reserve. issue can take place.
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chap 3
D. all other companies in the same line of busi-
ness.
E. the Federal Deposit Insurance Corporation.
46. 46. In a typical underwriting arrangement the A. I, II, and III

investment banking firm
I) sells shares to the public via an underwriting A typical underwriting
syndicate. arrangement is made on a
II) purchases the securities from the issuing firm commitment basis.
company.
III) assumes the full risk that the shares may
not be sold at the offering price.
IV) agrees to help the firm sell the issue to
the public but does not actually purchase the
securities.
A. I, II, and III
B. I, III, and IV
C. I and IV
D. II and III
E. I and II
47. 47. Which of the following is true regarding D. The shares are sold di-
private placements of primary security offer- rectly to a small group of
ings? institutional or wealthy in-
A. Extensive and costly registration state- vestors.
ments are required by the SEC.
B. For very large issues, they are better suited
than public offerings. Firms can save on regis-
C. They trade in secondary markets. tration costs, but the result
D. The shares are sold directly to a small group is that the securities can-
of institutional or wealthy investors. not trade in the secondary
E. They have greater liquidity than public offer- markets and therefore are
ings. less liquid. Public offerings
are better suited for very
large issues.
48. 48. A specialist on the AMEX Stock Exchange B. Route the order to the
is offering to buy a security for $37.50. A broker NYSE.
in Oklahoma City wants to sell the security
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chap 3
for his client. The Intermarket Trading System The broker should try to
shows a bid price of $37.375 on the NYSE. obtain the best price for
What should the broker do? his client. Since the client
A. Route the order to the AMEX Stock Ex- wants to sell shares and
change. the bid price is higher on
B. Route the order to the NYSE. the AMEX, he should route
C. Call the client to see if she has a preference. the order there.
D. Route half of the order to AMEX and the
other half to the NYSE.
E. It doesn't matter - he should flip a coin and
go with it.
49. 49. You sold short 100 shares of common stock C. $2,250.
A. $4,800. 0.50 = $4,500 * 0.50 =
B. $12,000. $2,250
C. $2,250.
D. $7,200.
50. 50. You sold short 150 shares of common stock D. $1,822.50
A. $4,800.60. 0.45 = $4,050 * 0.45 =
B. $12,000.25. $1,822.50
C. $2,250.75.
D. $1,822.50.
51. 51. You purchased 100 shares of XON common A. $42.86

initial margin is 50% and the maintenance mar- 100 shares * $60 * .5
gin is 30%. Below what stock price level would = $6,000 * 0.5 = $3,000
you get a margin call? Assume the stock pays (loan amount); 0.30 =
no dividend; ignore interest on margin. (100P - $3,000)/100P; 30P
A. $42.86 = 100P - $3,000; -70P =
B. $50.75 -$3,000; P = $42.86
C. $49.67
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D. $80.34
52. 52. You purchased 1000 shares of CSCO com- D. $13.57

mon stock on margin at $19 per share. Assume
the initial margin is 50% and the maintenance 1000 shares * $19 * .5
margin is 30%. Below what stock price level = $19,000 * 0.5 = $9,500
would you get a margin call? Assume the stock (loan amount); 0.30 =
pays no dividend; ignore interest on margin (1000P - $9,500)/1000P;
A. $12.86 300P = 1000P - $9,500;
B. $15.75 -700P = -$9,500; P =
C. $19.67 $13.57
D. $13.57
53. 53. You purchased 100 shares of common C. 0.20

initial margin is 50% and the stock pays no 100 shares * $40/share
dividend. What would the maintenance margin * 0.5 = $4,000 *
be if a margin call is made at a stock price of 0.5 = $2,000 (loan
$25? Ignore interest on margin. amount); X = [100($25)
A. 0.33 - $2,000]/100($25); X =
B. 0.55 0.20.
C. 0.20
D. 0.23
E. 0.25
54. 54. You purchased 1000 shares of common B. 0.375

initial margin is 50% and the stock pays no
dividend. What would the maintenance margin 1000 shares * $30/share
be if a margin call is made at a stock price of * 0.5 = $30,000 *
$24? Ignore interest on margin. 0.5 = $15,000 (loan
A. 0.33 amount); X = [1000($24)
B. 0.375 - $15,000]/1000($24); X =
C. 0.20 0.375.
D. 0.23
E. 0.25
55.
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chap 3
55. You purchased 100 shares of common E. 24%
What would your rate of return be if you sell investment; gain on stock
the stock at $56 per share? Ignore interest on sale = (56 - 50)(100)
margin. = $600; Return =
A. 28% ($600/$2,500) = 24%.
B. 33%
C. 14%
D. 42%
E. 24%
56. 56. You purchased 100 shares of common D. 40%

What would your rate of return be if you sell investment; gain on stock
the stock at $42 per share? Ignore interest on sale = (42 - 35)(100)
margin. = $700; Return =
A. 28% ($700/$1,750) = 40%.
B. 33%
C. 14%
D. 40%
E. 24%
57. 57. Assume you sell short 1000 shares of com- C. 57.14%
at 50%. What would be your rate of return if you Profit on stock =
repurchase the stock at $25/share? The stock ($35 - $25)(1,000) =
paid no dividends during the period, and you $10,000; initial invest-
did not remove any money from the account ment = ($35)(1,000)(.5)
before making the offsetting transaction. = $17,500; return
A. 20.47% = $10,000/$17,500 =
B. 25.63% 57.14%.
C. 57.14%
D. 77.23%
58. 58. Assume you sell short 100 shares of com- A. -33.33%
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chap 3
at 50%. What would be your rate of return if you Profit on stock = ($30 -
repurchase the stock at $35/share? The stock $35)(100) = -500; initial in-
paid no dividends during the period, and you vestment = ($30)(100)(.5)
did not remove any money from the account = $1,500; return = $-
before making the offsetting transaction. 500/$1,500 = -33.33%.
A. -33.33%
B. -25.63%
C. -57.14%
D. -77.23%
59. 59. You want to purchase GM stock at $40 from B. 200 shares
your broker using as little of your own money
as possible. If initial margin is 50% and you you can buy ($4000/$40)
have $4000 to invest, how many shares can = 100 shares outright and
you buy? you can borrow $4,000 to
A. 100 shares buy another 100 shares.
B. 200 shares
C. 50 shares
D. 500 shares
E. 25 shares
60. 60. You want to purchase IBM stock at $80 from C. 50 shares
your broker using as little of your own money
as possible. If initial margin is 50% and you You can buy ($2000/$80) =
have $2000 to invest, how many shares can 25 shares outright and you
you buy? can borrow $2,000 to buy
A. 100 shares another 25 shares.
B. 200 shares
C. 50 shares
D. 500 shares
E. 25 shares
61. 61. Assume you sold short 100 shares of com- B. 20%
is 50%. What would be the maintenance margin $4,000 X 1.5 =
if a margin call is made at a stock price of $50? $6,000; [$6,000 -
A. 40% 100($50)]/100($50) =
B. 20% 20%.
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C. 35%
D. 25%
62. 62. Assume you sold short 100 shares of com- D. 23.5%
is 50%. What would be the maintenance margin $7,000 X 1.5
if a margin call is made at a stock price of $85? = $10,500; [$10,500
A. 40.5% - 100($85)]/100($85) =
B. 20.5% 23.5%.
C. 35.5%
D. 23.5%
63. 63. You sold short 100 shares of common stock A. $50
call if the maintenance margin is 35%? $6,750; 0.35 = ($6,750 -
A. $50 100P)/100P; 35P = 6,750
B. $65 - 100P; 135P = 6,750; P =
C. $35 $50.00
D. $40
64. 64. You sold short 100 shares of common stock C. $86.54
call if the maintenance margin is 30%? $11,250; 0.30 = ($11,250 -
A. $90.23 100P)/100P; 30P = 11,250
B. $88.52 - 100P; 130P = 11,250; P =
C. $86.54 $86.54
D. $87.12
65. 65. IPO average first-day returns are largest in D. China

____________.
A. The United States See Figure 3.2.
B. Denmark
C. Japan
18 / 22
chap 3
D. China
E. France
66. 66. Despite large first-day IPO returns, average A. 6.7

first-year returns in the US are approximately
____________ percent. See Figure 3.3.
A. 6.7
B. 18.2
C. 26.4
D. 4.8
E. 9.1
67. 67. Average second-year IPO returns in the US D. 5.3

are approximately ____________ percent.
A. 6.7 See Figure 3.3.
B. 18.2
C. 26.4
D. 5.3
E. 9.1
68. 68. Average third-year IPO returns in the US are E. 10.3

approximately ____________ percent.
A. 6.7 See Figure 3.3.
B. 18.2
C. 26.4
D. 5.3
E. 10.3
69. 69. The preliminary prospectus is referred to A. red herring

as a ____________.
A. red herring See Table 3.2.The pre-
B. indenture liminary prospectus is re-
C. green mail ferred to as a red herring.
D. tombstone
E. headstone
70. 70. The minimum revenue required for an initial D. $75,000,000

listing on the New York Stock Exchange is A.
$2,000,000
B. $25,000,000
19 / 22
chap 3
C. $50,000,000
D. $75,000,000
E. 100,000,000
71. 71. The minimum annual pretax income in the A. $2,000,000

previous two years required for an initial listing
on the New York Stock Exchange is See Table 3.2.
A. $2,000,000
B. $25,000,000
C. $50,000,000
D. $75,000,000
E. 100,000,000
72. 72. The daily dollar volume of trading A. $75 billion

on the NYSE in 2006 was approximately
____________ dollars. The trading volume of the
A. $75 billion NYSE averaged 1.8 bil-
B. $4 trillion lion shares with an approx-
C. $12 billion imate value of $75 billion.
D. $4 billion
73. 73. The average daily number of shares trad- A. 1.8 billion
ed on the NYSE in 2006 was approximately
____________ dollars. The trading volume of the
A. 1.8 billion NYSE averaged 1.8 bil-
B. 1.8 trillion lion shares with an approx-
C. 12 billion imate value of $75 billion.
D. 4 trillion
74. 74. The ____________ had the largest trading B. NYSE

volume of securities in 2006.
A. NASDAQ E. Hong Kong See Figure
B. NYSE 3.6.
C. London
D. Tokyo
75. 75. The securities act of 1933 ____________. A. I, II and III

I) requires full disclosure of relevant informa-
20 / 22
chap 3
tion relating to the issue of new securities The securities act of 1933
II) requires registration of new securities requires full disclosure of
III) requires issuance of a prospectus detailing relevant information relat-
financial prospects of the firm ing to the issue of new
IV) established the SEC securities, requires regis-
V) requires periodic disclosure of relevant fi- tration of new securities,
nancial information and requires issuance of a
VI) empowers SEC to regulate exchanges, OTC prospectus detailing finan-
trading, brokers, and dealers cial prospects of the firm.
A. I, II and III
B. I, II, III, IV, V, and VI
C. I, II and V
D. I, II and IV
E. IV only
76. 76. The securities act of 1934 ____________. E. IV, V, and VI

I) requires full disclosure of relevant informa-
tion relating to the issue of new securities The securities act of 1934
II) requires registration of new securities established the SEC, re-
III) requires issuance of a prospectus detailing quires periodic disclosure
financial prospects of the firm of relevant financial in-
IV) established the SEC formation, and empow-
V) requires periodic disclosure of relevant fi- ers SEC to regulate ex-
nancial information changes, OTC trading,
VI) empowers SEC to regulate exchanges, OTC brokers, and dealers.
trading, brokers, and dealers
A. I, II and III
B. I, II, III, IV, V, and VI
C. I, II and V
D. I, II and IV
E. IV, V, and VI
77. 77. Which of the following is not required un- B. disclosure of all person-
der the CFA Institute standards of professional al investments whether or
conduct? not they may conflict with
A. knowledge of all applicable laws, rules and a client's investments
regulations
B. disclosure of all personal investments
whether or not they may conflict with a client's
21 / 22
chap 3
investments
C. disclosure of all conflicts to clients and
prospects
D. reasonable inquiry into a client's financial
situation
E. All of the above are required under the CFA
Institute standards.
78. 78. According to the CFA Institute Standards of A. the government

Professional Conduct, CFA Institute members
have responsibilities to all of the following ex- See "Excerpts from CFA
cept: Institute Standards of Pro-
A. the government fessional Conduct".
B. the profession
C. the public
D. the employer
E. clients and prospective clients
22 / 22

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HÍc trñc tuy¿n t¡i https://quizlet.com/_e76o6b

1. 1. The trading of stock that was previously A. in the secondary market

2. 2. A purchase of a new issue of stock takes E. B and C.

3. 3. Firms raise capital by issuing stock B. in the primary market.

5. 5. Investment bankers D. A and B.

6. 6. In a "firm commitment" A. the investment banker

7. 7. The secondary market consists of D. A and B.

8. 8. The use of the Internet to trade and under- C. decreases underwriting

9. 9. Initial margin requirements are determined B. the Federal Reserve

15. 15. Assume you purchased 200 shares of GE E. $6,300

17. 17. You purchased 100 shares of IBM common B. $50

18. 18. You purchased 100 shares of common E. 0.25

19. 19. You purchased 300 shares of common D. -42%

23. 23. Specialists on stock exchanges perform E. A and C.

28. 28. Which of the following orders instructs the B. Stop-loss

31. 31. Shelf registration D. A and B.

32. 32. Block transactions are transactions for D. 10,000; 30

33. 33. A program trade is D. a coordinated purchase

35. 35. NASDAQ subscriber levels E. A, B, and C.

40. 40. The minimum market value required for an E. 100,000,000

41. 41. In 2005, the price of a seat on the NYSE B. $4,000,000

46. 46. In a typical underwriting arrangement the A. I, II, and III

51. 51. You purchased 100 shares of XON common A. $42.86

52. 52. You purchased 1000 shares of CSCO com- D. $13.57

53. 53. You purchased 100 shares of common C. 0.20

54. 54. You purchased 1000 shares of common B. 0.375

56. 56. You purchased 100 shares of common D. 40%

65. 65. IPO average first-day returns are largest in D. China

66. 66. Despite large first-day IPO returns, average A. 6.7

67. 67. Average second-year IPO returns in the US D. 5.3

68. 68. Average third-year IPO returns in the US are E. 10.3

69. 69. The preliminary prospectus is referred to A. red herring

70. 70. The minimum revenue required for an initial D. $75,000,000

71. 71. The minimum annual pretax income in the A. $2,000,000

72. 72. The daily dollar volume of trading A. $75 billion

74. 74. The ____________ had the largest trading B. NYSE

75. 75. The securities act of 1933 ____________. A. I, II and III

76. 76. The securities act of 1934 ____________. E. IV, V, and VI

78. 78. According to the CFA Institute Standards of A. the government

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