Question 1

You purchased 100 shares of common stock on margin at $40 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 $25? Ignore interest on margin.

Accepted Answer

A)  0.33
B)  0.55
C)  0.20
D)  0.23

Question 2

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.

Accepted Answer

A)  0.33
B)  0.55
C)  0.43
D)  0.23
E)  0.25

Question 3

Which of the following orders is most useful to short sellers who want to limit their potential losses?

Accepted Answer

A)  Limit order
B)  Discretionary order
C)  Limit-loss order
D)  Stop-buy order

Question 4

All of the following are considered new trading strategies, except

Accepted Answer

A)  high frequency trading.
B)  algorithmic trading.
C)  dark pools.
D)  short selling.

Question 5

You buy 300 shares of Qualitycorp for $30 per share and deposit initial margin of 50%.The next day, Qualitycorp's price drops to $25 per share.What is your actual margin?

Accepted Answer

A)  50%
B)  40%
C)  33%
D)  60%

Question 6

Which of the following is not required under the CFA Institute Standards of Professional Conduct?

Accepted Answer

A)  Knowledge of all applicable laws, rules, and regulations
B)  Disclosure of all personal investments, whether or not they may conflict with a client's investments
C)  Disclosure of all conflicts to clients and prospects
D)  Reasonable inquiry into a client's financial situation

Question 7

You purchased 1000 shares of CSCO common stock on margin at $19 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.

Accepted Answer

A)  $12.86
B)  $15.75
C)  $19.67
D)  $13.57 D

Question 8

You sold short 200 shares of common stock at $60 per share.The initial margin is 60%.Your initial investment was

Accepted Answer

A)  $4,800.
B)  $12,000.
C)  $5,600.
D)  $7,200. 200 shares * $60/share * 0.60 = $12,000 * 0.60 = $7,200.

Question 9

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.

Accepted Answer

A)  25.00%
B)  -33.33%
C)  44.31%
D)  -41.67% D

Question 10

Shares for short transactions

Accepted Answer

A)  are usually borrowed from other brokers.
B)  are typically shares held by the short seller's broker in street name.
C)  are borrowed from commercial banks.
D)  are typically shares held by the short seller's broker in street name and are borrowed from commercial banks.

Question 11

You want to purchase XON stock at $60 from your broker using as little of your own money as possible.If initial margin is 50% and you have $3,000 to invest, how many shares can you buy?

Accepted Answer

A)  100 shares
B)  200 shares
C)  50 shares
D)  500 shares

Question 12

The cost of buying and selling a stock consists of

Accepted Answer

A)  broker's commissions.
B)  dealer's bid-asked spread.
C)  a price concession an investor may be forced to make.
D)  broker's commissions and dealer's bid-asked spread.
E)  broker's commissions, dealer's bid-asked spread, and a price concession an investor may be forced to make.

Question 13

One outcome from the SEC investigation of the "Flash Crash of 2010" was

Accepted Answer

A)  a prohibition of short selling.
B)  higher margin requirements.
C)  approval of new circuit breakers.
D)  establishment of electronic communications networks (ECNs) .

Question 14

Which of the following orders instructs the broker to buy at the current market price?

Accepted Answer

A)  Limit order
B)  Discretionary order
C)  Limit-loss order
D)  Stop-buy order
E)  Market order E

Question 15

You purchased 1,000 shares of common stock on margin at $30 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 $24? Ignore interest on margin.

Accepted Answer

A)  0.33
B)  0.375
C)  0.20
D)  0.23

Question 16

An explicit trading cost is

Accepted Answer

A)  commission
B)  Execution cost
C)  Bid-ask spread
D)  Annual fee

Question 17

Firms raise capital by issuing stock

Accepted Answer

A)  in the secondary market.
B)  in the primary market.
C)  to unwary investors.
D)  only on days when the market is up.

Question 18

You purchased 100 shares of common stock on margin for $35 per share.The initial margin is 50%, and the stock pays no dividend.What would your rate of return be if you sell the stock at $42 per share? Ignore interest on margin.

Accepted Answer

A)  28%
B)  33%
C)  14%
D)  40%

Question 19

You sold short 100 shares of common stock at $45 per share.The initial margin is 50%.At what stock price would you receive a margin call if the maintenance margin is 35%?

Accepted Answer

A)  $50
B)  $65
C)  $35
D)  $40

Question 20

When stocks are held in street name,

Accepted Answer

A)  the investor receives a stock certificate with the owner's street address.
B)  the investor receives a stock certificate without the owner's street address.
C)  the investor does not receive a stock certificate.
D)  the broker holds the stock in the brokerage firm's name on behalf of the client.
E)  the investor does not receive a stock certificate, and the broker holds the stock in the brokerage firm's name on behalf of the client.

Exam 3: How Securities Are Traded

You purchased 100 shares of common stock on margin at $40 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 $25? Ignore interest on margin.

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

Which of the following orders is most useful to short sellers who want to limit their potential losses?

Correct AnswerverifiedShow Answer

All of the following are considered new trading strategies, except

Correct AnswerverifiedShow Answer

You buy 300 shares of Qualitycorp for $30 per share and deposit initial margin of 50%.The next day, Qualitycorp's price drops to $25 per share.What is your actual margin?

Correct AnswerverifiedShow Answer

Which of the following is not required under the CFA Institute Standards of Professional Conduct?

Correct AnswerverifiedShow Answer

You purchased 1000 shares of CSCO common stock on margin at $19 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.

Correct AnswerverifiedD

You sold short 200 shares of common stock at $60 per share.The initial margin is 60%.Your initial investment was

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedD

Shares for short transactions

Correct AnswerverifiedShow Answer

You want to purchase XON stock at $60 from your broker using as little of your own money as possible.If initial margin is 50% and you have $3,000 to invest, how many shares can you buy?

Correct AnswerverifiedShow Answer

The cost of buying and selling a stock consists of

Correct AnswerverifiedShow Answer

One outcome from the SEC investigation of the "Flash Crash of 2010" was

Correct AnswerverifiedShow Answer

Which of the following orders instructs the broker to buy at the current market price?

Correct AnswerverifiedE

You purchased 1,000 shares of common stock on margin at $30 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 $24? Ignore interest on margin.

Correct AnswerverifiedShow Answer

An explicit trading cost is

Correct AnswerverifiedShow Answer

Firms raise capital by issuing stock

Correct AnswerverifiedShow Answer

You purchased 100 shares of common stock on margin for $35 per share.The initial margin is 50%, and the stock pays no dividend.What would your rate of return be if you sell the stock at $42 per share? Ignore interest on margin.

Correct AnswerverifiedShow Answer

You sold short 100 shares of common stock at $45 per share.The initial margin is 50%.At what stock price would you receive a margin call if the maintenance margin is 35%?

Correct AnswerverifiedShow Answer

When stocks are held in street name,

Correct AnswerverifiedShow Answer

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