Question 1

The advantage of buying on margin is:

Accepted Answer

A)   larger potential profit
B)   using more of your own money
C)   deductible loss
D)   non-taxable capital gainE) B) and C)
F) A) and D)

Question 2

Market stabilization is:

Accepted Answer

A)   disallowed under the Securities Act of 1934
B)   permitted for underwriters if the market price falls below the offering price
C)   prohibited by the Securities Exchange Commission
D)   required by the Securities Act of 1948E) A) and B)
F) A) and C)

Question 3

An order for immediate purchase or sale at the best possible price is called a:

Accepted Answer

A)   market order
B)   limit order
C)   stop loss order
D)   margin orderE) All of the above
F) A) and D)

Question 4

A pre-emptive right refers to the right of existing shareholders to sue management in order to head off potential actions by management that would adversely affect the price of the stock.

Accepted Answer

A) True 
 B)False

Question 5

Existing securities are traded in the primary market.

Accepted Answer

A) True 
 B)False

Question 6

A syndicate is:

Accepted Answer

A)   a firm that assists in specialist transactions
B)   an organization of market makers
C)   the largest group of members on the NYSE
D)   a group of investment banks all working together to place an offeringE) B) and C)
F) A) and D)

Question 7

If a General Electric January 20 call option with a strike price of $45 were about to expire and the market price of the underlying GE stock was $51.17, the price of the call option would have to be __________ to eliminate arbitrage opportunities.

Accepted Answer

A)   $11.17
B)   $33.83
C)   $45.00
D)   $51.17E) A) and C)
F) A) and B)

Question 8

Insider trading laws regulate the behavior of

Accepted Answer

A)   corporate officers only
B)   investment bankers only
C)   anyone with nonpublic information about a firm
D)   none of the above.E) A) and B)
F) A) and C)

Question 9

A dealer is one who assists the trading process by buying or selling securities in the market for an investor.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is not a reason to sell securities in a private placement?

Accepted Answer

A)   to keep current shareholders from suspecting "sweetheart deals"
B)   to forestall a hostile takeover
C)   to fulfill a need for an emergency infusion of equity
D)   to reduce dividend payouts to shareholdersE) B) and C)
F) A) and D)

Question 11

An agreement whereby an investment banker tries to sell securities of an issuing corporation, but assumes no risk if the flotation is unsuccessful is called a:

Accepted Answer

A)   due diligence agreement
B)   best-effort agreement
C)   firm commitment price agreement
D)   shelf registration agreementE) A) and B)
F) None of the above

Question 12

The process whereby an underwriting syndicate steps in to buy back securities to prevent a larger price drop than that which has already occurred is called:

Accepted Answer

A)   market stabilization
B)   price normalization
C)   dollar cost averaging
D)   best effortsE) B) and D)
F) A) and B)

Question 13

Which of the following is not an advantage of shelf registration?

Accepted Answer

A)   saving time on issuing securities
B)   allows issuer to determine which investment bank offers the best service
C)   eliminates filing fees
D)   allows issuing new securities multiple timesE) A) and B)
F) All of the above

Question 14

Exchange-traded options are liquid because they are standardized in terms of:

Accepted Answer

A)   expiration dates
B)   exercise prices
C)   documentation
D)   quality of the underlying assetE) B) and D)
F) A) and D)

Question 15

The lead investment banker:

Accepted Answer

A)   is elected by members of the syndicate
B)   is appointed by the SEC
C)   originates and handles a flotation
D)   cannot participate in future offerings by the issuing companyE) C) and D)
F) A) and B)

Question 16

SLPs are assigned dealers who have the responsibility of making a market in an assigned security.

Accepted Answer

A) True 
 B)False

Question 17

An order to sell stock at the market price when the price of the stock falls to a specified level is called a:

Accepted Answer

A)   limit order
B)   market order
C)   short sale
D)   stop-loss orderE) B) and C)
F) B) and D)

Question 18

Only brokers can purchase an equity during an IPO.

Accepted Answer

A) True 
 B)False

Question 19

A commission broker and an independent broker are the same thing.

Accepted Answer

A) True 
 B)False

Question 20

The Dow-Jones Industrial Average is made up of 30 large blue-chip stocks.

Accepted Answer

A) True 
 B)False

Exam 11: Securities and Markets

Which of the following is not a reason to sell securities in a private placement?

Correct AnswerverifiedShow Answer

An order to sell stock at the market price when the price of the stock falls to a specified level is called a:

Correct AnswerverifiedShow Answer

If a General Electric January 20 call option with a strike price of $45 were about to expire and the market price of the underlying GE stock was $51.17, the price of the call option would have to be __________ to eliminate arbitrage opportunities.

Correct AnswerverifiedShow Answer

The advantage of buying on margin is:

Correct AnswerverifiedShow Answer

A pre-emptive right refers to the right of existing shareholders to sue management in order to head off potential actions by management that would adversely affect the price of the stock.

Correct AnswerverifiedShow Answer

Insider trading laws regulate the behavior of

Correct AnswerverifiedShow Answer

Exchange-traded options are liquid because they are standardized in terms of:

Correct AnswerverifiedShow Answer

Only brokers can purchase an equity during an IPO.

Correct AnswerverifiedShow Answer

The Dow-Jones Industrial Average is made up of 30 large blue-chip stocks.

Correct AnswerverifiedShow Answer

The process whereby an underwriting syndicate steps in to buy back securities to prevent a larger price drop than that which has already occurred is called:

Correct AnswerverifiedShow Answer

An order for immediate purchase or sale at the best possible price is called a:

Correct AnswerverifiedShow Answer

Existing securities are traded in the primary market.

Correct AnswerverifiedShow Answer

An agreement whereby an investment banker tries to sell securities of an issuing corporation, but assumes no risk if the flotation is unsuccessful is called a:

Correct AnswerverifiedShow Answer

SLPs are assigned dealers who have the responsibility of making a market in an assigned security.

Correct AnswerverifiedShow Answer

The lead investment banker:

Correct AnswerverifiedShow Answer

A syndicate is:

Correct AnswerverifiedShow Answer

Market stabilization is:

Correct AnswerverifiedShow Answer

A commission broker and an independent broker are the same thing.

Correct AnswerverifiedShow Answer

A dealer is one who assists the trading process by buying or selling securities in the market for an investor.

Correct AnswerverifiedShow Answer

Which of the following is not an advantage of shelf registration?

Correct AnswerverifiedShow Answer

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