Quiz 1/2

Assume you sell short 100 shares of common stock at $45 per share, with initial margin at 50%. What would be your rate of return if you repurchase the stock at $40 per share? The stock paid no dividends during the period, and you did not remove any money from the account before making the offsetting transaction.

0.2222

An example of a derivative security is

a call option on Intel stock and a commodity futures contract.

Freddie Mac and Ginnie Mae were organized to provide

liquidity for the mortgage market.

According to the CFA Institute Standards of Professional Conduct, CFA Institute members have responsibilities to all of the following, except

the government

When stocks are held in street name

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

The finalized registration statement for new securities approved by the SEC is called

the prospectus

Corporate shareholders are best protected from incompetent management decisions by

the threat of takeover by other firms.

You purchased 100 shares of IBM common stock on margin at $70 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.

50

Specialists on stock exchanges perform which of the following functions?

Act as dealers in their own accounts and provide liquidity to the market

Investment bankers perform which of the following role(s)

All of the options

Which one of the following terms best describes Eurodollars

Dollar-denominated deposits at foreign banks and branches of American banks outside the U.S.

Which of the following is not a component of the money market?

Real estate investment trusts

Which of the following orders instructs the broker to sell at or below a specified price?

Stop-loss

Which of the following is true regarding private placements of primary security offerings?

The shares are sold directly to a small group of institutional or wealthy investors

The material wealth of a society is a function of

all real assets.

Bond market indexes can be difficult to construct because

bonds tend to trade infrequently, making price information difficult to obtain.

You purchased JNJ stock at $50 per share. The stock is currently selling at $65. Your gains may be protected by placing a

limit-sell order.

Firms raise capital by issuing stock

in the primary market

Financial assets

indirectly contribute to the country's productive capacity.