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Exam 3: Securities Markets

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Question 21

Multiple Choice

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

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

E) A) and B)
F) A) and C)

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Question 22

Multiple Choice

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On a given day a share dealer maintains a bid price of $1000.50 for a bond and an ask price of $1003.25. The dealer made 10 trades which totaled 500 bonds traded that day. What was the dealer's gross trading profit for this security?

A) $1 375
B) $500
C) $275
D) $1 450

E) B) and C)
F) All of the above

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Question 23

Multiple Choice

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Transactions that do not involve the original issue of securities take place in ________.

Which one of the following types of markets requires the greatest level of trading activity to be cost effective?

You find that the bid and ask prices for a share are $10.25 and $10.30 respectively. If you purchase or sell the share you must pay a flat commission of $25. If you buy 100 shares of the share and immediately sell them, what is your total implied and actual transaction cost in dollars?

The commission structure on a share purchase is $20 plus $0.02 per share. If you purchase 4 round lots of a share selling for $56, what is your commission?

Linking a/an ________ to a placement can address concerns about ownership dilution that may result from a placement alone.

You sold-short 300 shares at $30 per share. The initial margin is 50%. You must put up ________.

You short-sell 200 shares of Rock Creek Fly Fishing Co., now selling for $50 per share. If you wish to limit your loss to $2 500, you should place a stop-buy order at ________.

Which one of the following statements about IPOs is not true?

The commission structure on a share purchase is $50 plus $0.03 per share. If you purchase 600 shares of a share selling for $65, what is your commission?

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

The ________ price is the price at which a dealer is willing to sell a security.

If you want the trade done quickly, which type of trading order might you give to your broker?

An investor buys $8 000 worth of a share priced at $40 per share using 50% initial margin. The broker charges 6% on the margin loan and requires a 30% maintenance margin. In one year the investor gets a margin call. At the time of the margin call the share's price must have been ________.

Margin is the amount contributed by ________.

The margin requirement on a share purchase is 25%. You fully use the margin allowed to purchase 100 shares of MSFT at $25. If the price drops to $22, what is your percentage loss?

The drawback of a ________ is that it may take time to organise and complete and may also require the release of a prospectus.

What is the capital raising process referred to in the situation where an investor has been offered the option of buying a number of shares unrelated to the size of her existing holding?

The allowable margin depends on ________.