投资学第7版Test-Bank答案03

Chapter3HowSecuritiesAreTraded42MultipleChoiceQuestions1.ApurchaseofanewissueofstocktakesplaceA)inthesecondarymarket.B)intheprimarymarket.C)usuallywiththeassistanceofaninvestmentbanker.D)AandB.E)BandC.Answer:EDifficulty:EasyRationale:Fundsfromthesaleofnewissuesflowtotheissuingcorporation,makingthisaprimarymarkettransaction.Investmentbankersusuallyassistbypricingtheissueandfindingbuyers.2.Thefollowingstatementsregardingthespecialistaretrue:A)Specialistsmaintainabooklistingoutstandingunexecutedlimitorders.B)Specialistsearnincomefromcommissionsandspreadsinstockprices.C)Specialistsstandreadytotradeatquotedbidandaskprices.D)Specialistscannottradeintheirownaccounts.E)A,B,andCarealltrue.Answer:EDifficulty:ModerateRationale:Thespecialists'functionsarealloftheitemslistedinA,B,andC.Inaddition,specialiststradeintheirownaccounts.3.InvestmentbankersA)actasintermediariesbetweenissuersofstocksandinvestors.B)actasadvisorstocompaniesinhelpingthemanalyzetheirfinancialneedsandfindbuyersfornewlyissuedsecurities.C)acceptdepositsfromsaversandlendthemouttocompanies.D)AandB.E)A,B,andC.Answer:DDifficulty:ModerateRationale:Theroleoftheinvestmentbankeristoassistthefirminissuingnewsecurities,bothinadvisoryandmarketingcapacities.Theinvestmentbankerdoesnothavearolecomparabletoacommercialbank,asindicatedinC.Chapter3HowSecuritiesAreTraded434.InafirmcommitmentA)theinvestmentbankerbuysthestockfromthecompanyandresellstheissuetothepublic.B)theinvestmentbankeragreestohelpthefirmsellthestockatafavorableprice.C)theinvestmentbankerfindsthebestmarketingarrangementfortheinvestmentbankingfirm.D)BandC.E)AandB.Answer:ADifficulty:Moderate5.ThesecondarymarketconsistsofA)transactionsontheAMEX.B)transactionsintheOTCmarket.C)transactionsthroughtheinvestmentbanker.D)AandB.E)A,B,andC.Answer:DDifficulty:ModerateRationale:ThesecondarymarketconsistsoftransactionsontheorganizedexchangesandintheOTCmarket.Theinvestmentbankerisinvolvedintheplacementofnewissuesintheprimarymarket.6.TheuseoftheInternettotradeandunderwritesecuritiesA)isillegalunderSECregulations.B)isregulatedbytheNewYorkStockExchange.C)decreasesunderwritingcostsforanewsecurityissue.D)increasesunderwritingcostsforanewsecurityissue.E)isregulatedbytheNationalAssociationofSecuritiesDealers.Answer:CDifficulty:ModerateRationale:TheSECpermitstradingandunderwritingofsecuritiesovertheInternet,buthasrequiredfirmsparticipatinginthisactivitytotakestepstosafeguardinvestmentfunds.Thisformofunderwritingisexpectedtogrowquicklyduetoitslowercost.Chapter3HowSecuritiesAreTraded447.InitialmarginrequirementsaredeterminedbyA)theSecuritiesandExchangeCommission.B)theFederalReserveSystem.C)theNewYorkStockExchange.D)BandC.E)AandBAnswer:BDifficulty:ModerateRationale:TheBoardofGovernorsoftheFederalReserveSystemdeterminesinitialmarginrequirements.TheNewYorkStockExchangedeterminesmaintenancemarginrequirementsonNYSE-listedstocks;however,brokersusuallysetmaintenancemarginrequirementsabovethoseestablishedbytheNYSE.8.YoupurchasedXYZstockat$50pershare.Thestockiscurrentlysellingat$65.Yourgainsmaybeprotectedbyplacinga__________A)stop-buyorderB)limit-buyorderC)marketorderD)limit-sellorderE)noneoftheabove.Answer:DDifficulty:ModerateRationale:Withalimit-sellorder,yourstockwillbesoldonlyataspecifiedprice,orbetter.Thus,suchanorderwouldprotectyourgains.Noneoftheotherordersareapplicabletothissituation.9.YousoldABCstockshortat$80pershare.Yourlossescouldbeminimizedbyplacinga__________:A)limit-sellorderB)limit-buyorderC)stop-buyorderD)day-orderE)noneoftheabove.Answer:CDifficulty:ModerateRationale:Withastop-buyorder,thestockwouldbepurchasedifthepriceincreasedtoaspecifiedlevel,thuslimitingyourloss.Noneoftheotherordersareapplicabletothissituation.Chapter3HowSecuritiesAreTraded4510.Whichoneofthefollowingstatementsregardingordersisfalse?A)Amarketorderissimplyanordertobuyorsellastockimmediatelyattheprevailingmarketprice.B)Alimitsellorderiswhereinvestorsspecifypricesatwhichtheyarewillingtosellasecurity.C)IfstockABCissellingat$50,alimit-buyordermayinstructthebrokertobuythestockifandwhenthesharepricefallsbelow$45.D)Adayorderexpiresatthecloseofthetradingday.E)Noneoftheabove.Answer:EDifficulty:ModerateRationale:Alloftheorderdescriptionsabovearecorrect.11.RestrictionsontradinginvolvinginsiderinformationapplytothefollowingexceptA)corporateofficersanddirectors.B)relativesofcorporatedirectorsandofficers.C)majorstockholders.D)Alloftheabovearesubjecttoinsidertradingrestrictions.E)Noneoftheaboveissubjecttoinsidertradingrestrictions.Answer:DDifficulty:ModerateRationale:A,B,andCarecorporateinsidersandaresubjecttorestrictionsontradingoninsideinformation.Further,theSupremeCourtheldthattradersmaynottradeonnonpublicinformationeveniftheyarenotinsiders.12.Thecostofbuyingandsellingastockconsistsof__________.A)broker'scommissionsB)dealer'sbid-askedspreadC)apriceconcessionaninvestormaybeforcedtomake.D)AandB.E)A,B,andC.Answer:EDifficulty:ModerateRationale:Alloftheabovearepossiblecostsofbuyingandsellingastock.Chapter3HowSecuritiesAreTraded4613.Assumeyoupurchased200sharesofXYZcomm