Rec - Trading securities
In order to be considered a block trade, an order for common stock must be for at least A)10,000 shares B)100 shares C)1,000 shares D)100,000 shares
A)10,000 shares In the industry, the term block trade refers to a common stock transaction involving at least 10,000 shares.
Buy stop placed
Above market
Which of the following statements about bid and asked prices are TRUE? The bid price is the price a dealer is willing to pay to buy a security. The asked price is the price a dealer is willing to accept to sell a security. The bid price for a security is higher than the asked price for the security. A)I and III. B)I and II. C)I, II and III. D)II and III.
B)I and II. The bid price is the price at which a dealer will buy a security, and the asked price is the price at which a dealer will sell. A dealer will always bid a lower price to buy a stock than to sell it.
A client enters an order as follows: Sell stop 100 shares of LTC at 45 limit 45.50. Following the entry of that order, trades occur in the following sequence: 47; 46; 45.12; 44.97; 45.28; 45.97; 46.05. More than likely, the client received A)46.05 B)45.97 C)45.28 D)44.97
B)45.97 This is really two orders. The first is to stop at 45. That is, once the stock trades at 45 or lower, enter the order. The second order is a sell, but with a limit of 45.50. So, the first time the stock hits 45 (or less), is the trade at 44.97. That triggers the sell limit. The next trade is at 45.28 and that is not acceptable to the limit order at 45.50. Since the limit order is saying, "get me 45.50 or higher," the 45.97 is an acceptable price.
An investor has her agent enter a sell stop order at 60, limit 60. Following the order entry, trades occur at 62.12, 60, 59.95, 60.06, 61. More than likely, the investor received: A)60 B)60.06 C)59.95 D)61
B)60.06 This is really two orders. The first is to "stop" at 60. That is, once the stock trades at 60 or lower, enter my order. That second order is a sell, but with a limit of 60. So, the first time the stock hits 60 (or less), is the trade at 60. That triggers the sell limit. The next trade is a 59.95. Since the limit order is saying, "Get me 60 or higher, the 59.95 is not an acceptable price." But, the next trade, 60.06 will meet the client's goal of receiving no less than 60.
What is the name given to an order to purchase or sell a stock where the investor has specified a price? A)A discretionary order. B)A limit order. C)A market order. D)An all or none order.
B)A limit order. The distinguishing feature of a limit order is that the investor sets a specific price limit. In the case of a buy limit, it is the maximum price he is willing to pay; in the case of a sell limit, it is the lowest price he is willing to accept. Although an all or none order does specify a price, it is categorized as a type of limit order so you must choose the most all encompassing answer.
Mr. Donaldson is short 100 XYZ at $80 and has entered a buy stop XYZ at 82.50 GTC. The current market value for XYZ is $76. A favorable report is released, and XYZ starts to rally. Mr. Donaldson wants to cover immediately. The order ticket should be written as: A)Sell 100 XYZ at market. B)Buy 100 XYZ at market; cancel buy 100 at 82.50 stop GTC. C)Buy 100 XYZ at 76 stop; cancel buy 100 at 82.50 stop GTC. D)Sell short exempt 100 XYZ at market.
B)Buy 100 XYZ at market; cancel buy 100 at 82.50 stop GTC. To change an open order, the open order must be canceled and a new order must be entered. In this case, Mr. Donaldson wants to cover it immediately, which means at the market regardless of the price. As such, he would not enter another stop order; he would enter a market order and cancel the existing stop order.
Which of the following could accelerate a rise in a bull market? A)Buy limit. B)Buy stop. C)Sell stop. D)Sell limit.
B)Buy stop. Buy stop orders are placed above the market and as prices increase, the stops are hit creating additional buying.
Which of the following would be a common use of a stop order? To protect the profit on a long position. To prevent loss in a short position. To buy at a specific price guaranteed by a specialist. To lock in a price with the specialist. A)I and III. B)I and II. C)II and III. D)II and IV.
B)I and II. A buy stop may protect an investor against losses in a short position, and a sell stop may protect an investor's profits on stock she holds long.
Sell stop placed __ to market
Below
Order if you want to buy at a certain P or better/higher
Buy limit or Buy stop with a limit
If you want to profit from stock prices rising (your assumption that they are)
Buy stop - So if its going up, you buy at that P and then sell at higher P later
If you want to protect against loss in short position
Buy stop - aka if price is rising and you don't want to lose anymore by it continuing to go up
If you want to protect short profit
Buy stop - in case P starts going up again
Mr. Berg has been charting DMF stock prices. The stock usually fluctuates between 71 and 86. The stock is currently at 84, and the increasing upside volume makes him believe that a breakout is possible. Which of the following would he most likely enter? A)A sell stop at 70. B)A buy limit at 85. C)A sell limit at 88. D)A buy stop at 88.
D)A buy stop at 88. A breakout occurs when a security trades outside an established range. In this case, because Mr. Berg has no position, he would want to purchase only if the stock breaks through the resistance level already established.
A broker-dealer must provide a risk disclosure document to a customer before opening which of the following accounts? A)Wrap fee B)Custodial C)Joint D)Margin
D)Margin All customers opening margin accounts must receive a risk disclosure document describing the risks associated with trading on margin (e.g., a customer could lose more than the initial investment, or the firm could sell out securities in the account to meet a maintenance call without providing prior notice to the customer). This document must also be provided to customers on an annual basis.
Stop order =
Pick a price, and when P hits it becomes a market order to buy/sell at next available P
If you want to protect long profit
Sell stop - Price is going down, you want to cut losses
Limit order =
Specific price
An order to immediately buy or sell a security at the best available price is known as a: A)market order. B)short order. C)limit order. D)stop order.
A)market order. A market order to buy is an instruction to purchase a security at the lowest price available in the market; conversely, a market order to sell means to sell at the highest available price.
Market makers are involved in the trading of all of the following EXCEPT: A)new issues. B)common stock. C)municipal bonds. D)preferred stocks.
A)new issues.
Which of the following is an order to purchase at higher than the current market? A)A buy stop. B)A buy, immediate or cancel. C)A buy, fill or kill. D)A buy limit.
A)A buy stop. Buy stop orders are entered above the current market value of the stock.
Which of the following statements about short sales are TRUE? In a short sale, an investor sells securities she does not own. Risks can be minimized by confining short sales to cash accounts rather than margin accounts. In a short sale, an investor hopes that the price of a security will go down. A)I and III B)II and III C)I and II D)I, II and III
A)I and III In a short sale, an investor sells securities she does not own. The investor must later purchase securities to cover the short sale. If the price of the securities drops before the sale must be covered, the investor profits. The investor realizes a loss, though, if the price of the securities goes up. Because borrowing is involved, all short sales must take place in margin accounts, never in a cash account.
When a broker-dealer engages in a customer transaction from its own account, which of the following statements are TRUE? Partners of the broker-dealer are trading in their personal accounts. The broker-dealer is trading from its inventory with customers. The broker-dealer must disclose its capacity as a principal in the transaction. The broker-dealer must disclose its capacity as agent in the transaction. A)II and III. B)III and IV. C)I and IV. D)I and III.
A)II and III. The Uniform Securities Act defines a broker-dealer as a legal person (entity) engaging in the business of effecting securities transactions for the account of others or for its own account. In this context, trading for its own account means that the broker-dealer is trading from its inventory with customers. The broker-dealer has an ethical responsibility to disclose its capacity as a principal in the transaction. When trading for its own account, a broker-dealer is functioning as a principal or dealer. When trading for the accounts of others with no participation as a direct party to the trade, a broker-dealer functions in an agency capacity.
What is the term used to describe a person on the floor of a stock exchange who stands ready to buy or sell shares of specified stocks? A)Specialist. B)Market maker. C)Floor broker. D)Arbitrageur.
A)Specialist This is the basic definition of the specialist. If the question had said the over-the-counter market, it would have been a market maker. A more correct answer would be the DMM (Designated Market Maker), but sometimes NASAA is slow to make changes.
A client of a broker-dealer turns in an order to purchase 10,000 shares of XYZ stock. This would be: A)a block trade. B)arbitrage. C)front running. D)churning.
A)a block trade. In the securities business, trades of 10,000 shares or more are known as block trades.
A stop order can be used to do all of the following EXCEPT: A)give the broker-dealer discretion regarding time and price. B)protect a long position. C)become a market order once the security trades at or through the stop price. D)protect a short position.
A)give the broker-dealer discretion regarding time and price. A stop order becomes a market order when the stop price is reached. Stops can be used to protect both long and short positions. The stop order does not give the agent or the firm any discretion.
The execution of a market order to sell occurs at the: A)highest bid. B)highest offer. C)lowest offer. D)lowest bid.
A)highest bid. A market order to sell is filled at the highest bid while a market order to buy is filled at the lowest offer.
An agent's client calls on Monday to discuss the current market situation. They discuss how 100 shares of Kapco common stock would be an appropriate addition to the client's portfolio. On Thursday, the client calls and tells the agent to place an order for the Kapco stock at whatever price the agent feels is best. The agent waits until Friday, purchasing the stock at a price $2 per share below Thursday's low. In this case the agent acted A)improperly; the order should have been placed on Thursday B)properly because the agent saved the client money C)properly because the agent used discretion as to price and time D)improperly; the order should have been placed on Monday
A)improperly; the order should have been placed on Thursday In this question, the client specified that the agent should determine the best price. Nothing other than oral permission is necessary in order for an agent to use discretion as to time or price. However, time or price discretion are only good for that day - those are considered "day" orders, so the agent is able to use judgment, but the order must be placed during the day it was received.
A member of a stock exchange who is responsible for maintaining a fair and orderly market by buying and selling for his own account to reduce any temporary disparities between supply and demand is best described as a: A)specialist. B)Nasdaq market maker. C)two-dollar broker. D)trading supervisor.
A)specialist. The specialist's role is to maintain a fair and orderly market in the stocks in which he is appointed specialist. The term, "specialist" has been replaced with Designated Market Maker (DMM), but it is likely that specialist will be the term used on the exam.
A "margin account" is a type of brokerage account in which the broker-dealer lends the investor cash to purchase securities using marginable securities in the account as collateral. Which of the account documents authorizes the use of those securities as collateral for that loan? A)The secured agreement B)The credit agreement C)The loan consent agreement D)The hypothecation agreement
B)The credit agreement It is the credit agreement, sometimes referred to as the margin agreement, which authorizes the broker-dealer to use the value of the securities in the account as collateral for the margin loan to the client. The hypothecation agreement permits the broker-dealer to pledge the client's margin securities as collateral for a loan that the BD takes out. It is the credit agreement that, in addition to all of the other terms of the loan, contains the stipulation that the broker-dealer may use the client's margin securities as collateral for the loan that it makes to the client. In simple terms, there are two loans taking place: The loan from the BD to the client with the client's securities used as collateral. That is covered in the credit agreement The loan from a bank to the BD with the client's securities used as collateral for the BD's loan. The authorization for the BD to use those securities is found in the hypothecation agreement.
Margin is borrowing money from a broker-dealer to buy a stock using the investment as collateral. In many cases, the brokerage firm then uses that collateral for a loan from a bank. Which of the following account documents authorizes the firm to pledge the customer's stock? A)The securities pledge agreement B)The hypothecation agreement C)The loan consent agreement D)The credit agreement
B)The hypothecation agreement The hypothecation agreement gives permission to the broker-dealer to pledge a customer's margin securities as collateral. The firm hypothecates customer securities to the bank, and the bank loans money to the broker-dealer on the basis of the loan value of these securities.
It is often said that the backbone of the over-the-counter market is the market-maker. A good description of a market maker would be: A)an investment banker who participates in a firm underwriting. B)a broker-dealer who stands ready to buy or sell at least the standard unit of a specific stock traded in the over-the-counter market. C)a broker-dealer who stands ready to buy or sell at least the standard unit of a specific stock traded on a listed exchange. D)a subscriber to the Nasdaq system.
B)a broker-dealer who stands ready to buy or sell at least the standard unit of a specific stock traded in the over-the-counter market. This is the basic definition of a market maker. Specialists perform essentially the same service on the listed exchanges.
In general, it could be said that an investor is exposed to the greatest potential risk of loss when maintaining A)a cash account B)a margin account C)a discretionary account D)a wrap fee account
B)a margin account Of the accounts listed, the only one for which customers must receive a risk disclosure document before trading in the account is the margin account. Using leverage always increases the potential risk.
An order to sell securities where immediate execution is more important than price is called A)a limit order B)a market order C)a discretionary order D)an unsolicited order
B)a market order The market order is executed as soon as possible at the best price in the market at that moment. Limit orders specify a price.
If a client places an order to buy 300 DWQ at 140 stop, but not over 144, and the order is left with a specialist, this is a: A)buy stop order. B)buy stop limit order. C)market order. D)buy limit order.
B)buy stop limit order. The customer has placed a buy stop limit order. If the stock rises to the stop price of $140, the order will be triggered and becomes a buy limit order at $144, meaning an order to buy at $144 or better (lower).
An exchange specialist is a(n): A)floor broker on the New York Stock Exchange who only executes trades for other brokers in return for commissions. B)dealer on the New York Stock Exchange who executes orders for other brokers and who also acts as a market maker with the responsibility of keeping an orderly market in designated stocks. C)trader who makes a market in OTC stocks and ADRs. D)electronic brokerage concern that executes trades online and through specialized trading order executing services.
B)dealer on the New York Stock Exchange who executes orders for other brokers and who also acts as a market maker with the responsibility of keeping an orderly market in designated stocks. A specialist is a dealer on the NYSE who executes orders for other brokers and who also acts as a market maker with the responsibility of keeping an orderly market in designated stocks. A specialist must have sufficient capital to buy and sell from his own account in order to maintain a liquid and orderly market.
Investors open margin accounts to A)save on taxes B)leverage their investment dollars C)increase the reliability of returns D)obtain reduced commissions
B)leverage their investment dollars Margin accounts employ the use of leverage—borrowed money. If the investment is successful, the leverage magnifies returns. However, if unsuccessful, the losses are magnified and can even be greater than the amount invested.
One of the risks of investing on margin is that a severe decline in the market price of one of the securities in the account can trigger a call for additional funds. If this happens and the investor does not supply the money when demanded, the broker-dealer can A)grant the client an extension of time to procure the needed funds B)liquidate its choice of securities in the account to bring the account back to the needed level C)make a short-term loan to the client to prevent the liquidation of securities in the account D)liquidate only the security that has caused the decline
B)liquidate its choice of securities in the account to bring the account back to the needed level Leverage works two ways. It is great when the stock's price is rising, but can be painful when going the other way. When it drops below a certain point, the firm will need more money. In the risk disclosure document, it is made clear that the client is not entitled to choose which securities can be sold if a call for additional funds is not met.
All of the following are advantages of a margin account EXCEPT A)money is borrowed B)losses are minimized C)less cash is needed to purchase securities D)leveraging is possible
B)losses are minimized The leveraging involved through the use of borrowed money works both ways. Gains are magnified, but so are losses. In fact, in a margin account, the investor can lose more funds than have been deposited into the account.
In a margin account, broker-dealers lend money to clients to enable them to leverage their investments. The account document that is evidence of the debtor-creditor relationship is A)the IOU agreement B)the credit agreement C)the loan consent agreement D)the hypothecation agreement
B)the credit agreement The credit agreement, sometimes simply referred to as the margin agreement, is the written agreement between the client and the broker-dealer evidencing the loan. The loan consent agreement is the optional portion of the account documentation which allows the broker-dealer to lend out the client's margin securities.
A new client is opening a margin account and notices the following wording in the documentation: "You are authorized to lend to yourself or others any securities held by you in my margin account and to carry all securities lent as general loans, and you shall have no obligation to retain under your possession and control a like amount of such securities". When the client asks you what this is about, you would respond that A)if the client does not sign the document, the account cannot be opened B)this is the loan consent agreement C)this is the hypothecation agreement D)this is the credit agreement
B)this is the loan consent agreement No broker-dealer shall lend securities that are held on margin for a customer and that are eligible to be pledged or loaned, unless the broker-dealer shall first have obtained a written authorization from such customer permitting the lending of such securities. That written authorization is known as the loan consent agreement and is the only one of the margin documents that is optional.
A client's margin account has the following positions: Long stock at market $50,000 Dr Balance $20,000 Short Stock at market $30,000 Cr Balance $70,000 What is the net equity in the client's account? A)$30,000. B)-$10,000. C)$70,000. D)$10,000.
C)$70,000. The net, or combined equity in a mixed margin account (one that has long and short positions) is computed by adding the market value of the long stock to the credit balance ($50k + $70k) and subtracting from that total, the sum of the debit balance + the market value of the short position ($20k + $30k). That results in $120,000 - $50,000 = $70,000 net equity. Alternatively, you can compute the equity on each side and add them together. The equity in a long account is the market value minus the debit balance ($50,000 - $20,000) or $30,000. The equity in a short account is the credit balance minus the short market value ($70,000 - $30,000), or $40,000. When added together, you arrive at the same total equity of $70,000.
Which of the following orders would be used to protect a short sale profit? A)A buy limit. B)A sell stop. C)A buy stop. D)A sell short.
C)A buy stop. For a short sale to earn a profit, the current market value must be lower than the sale price. An investor must buy the stock at a lower price to realize a profit. To protect denotes buying if the market starts to rise. Therefore, a buy stop would be entered above the current market value to protect the profit and trigger a purchase in the event the market starts to rise.
Which of the following statements about stock exchanges is TRUE? A)A securities exchange market is one in which prices are established by negotiations between buyers and sellers. B)Any stock can be listed on any exchange. C)A securities exchange market is an auction market in which prices are established by auction. D)A stock exchange buys and sells stocks itself.
C)A securities exchange market is an auction market in which prices are established by auction. A stock exchange does not buy or sell stocks itself; it simply supplies the facilities for its members to trade. Prices are established in an auction process rather than by direct negotiations between buyer and sellers, as occurs in the over-the-counter (OTC) market. Only stocks that satisfy the exchange's standards can be listed on the exchange.
Which of the following orders may be used to acquire a security at a specific price or better? A buy stop limit. A buy limit. A sell stop. A sell limit. A)I and III. B)II and III. C)I and II. D)II and IV.
C)I and II. Only buy orders can acquire stock. Only buy limit orders (or buy stop orders with a limit attached) can acquire stock at a specific price or better.
Which of the following statements about stop orders are TRUE? A stop order will become a market order once a security trades at or through a specified price. A sell stop order is always placed at a price that is below the current market price. A stop order to buy is always set at a price that is higher than the current market price. A)I and II B)I and III C)I, II and III D)II and III
C)I, II and III Stop orders become market orders once the security trades at or through a specific price. A sell stop order is typically used to protect a profit or limit a loss on a security the investor has already purchased at a higher price. Therefore, sell stop orders are always entered at a price that is below the current market price. Conversely, a stop order to buy is always placed at a price that is higher than the current price and is used to protect a short sale.
A "margin account" is a type of brokerage account in which the broker-dealer lends the investor cash to purchase securities using marginable securities in the account as collateral. Which of the account documents authorizes the use of those securities as collateral for that loan? A)The hypothecation agreement B)The secured agreement C)The credit agreement D)The loan consent agreement
C)The credit agreement It is the credit agreement, sometimes referred to as the margin agreement, which contains all of the terms of the loan. In addition to explaining how the interest is charged and the right of the firm to liquidate collateral if a call for additional funds is not made, the credit agreement contains the terminology which authorizes the broker-dealer to use the value of the account as collateral for the margin loan made by the BD to the client. The hypothecation agreement permits the broker-dealer to pledge the client's margin securities as collateral for a loan that the BD takes out. In simple terms, there are two loans taking place: The loan from the BD to the client with the client's securities used as collateral. That is covered in the credit agreement The loan from a bank to the BD with the client's securities used as collateral for the BD's loan. The authorization for the BD to use those securities is found in the hypothecation agreement.
A day order is entered to buy 500 LMN at 24.35. By the close, the firm has 100 shares at 24.25 and 200 at 24.35. If the remainder is unfilled, what is the outcome? A)The customer may reject the incomplete order unless the broker-dealer can guarantee filling the remainder by the end of the day. B)The customer may demand that the firm deliver the remaining shares at 24.35. C)The customer must accept the execution for 300 shares, and the remainder of the order is canceled after the close. D)The customer may reject the incomplete order unless the remainder can be filled within 3 business days.
C)The customer must accept the execution for 300 shares, and the remainder of the order is canceled after the close. The customer must accept the order for 300 shares. The representative cannot guarantee that the order will be filled by the end of day.
The Securities Exchange Act of 1934 defines a market maker is a(n): A)agent for the issuer. B)agent whose clients are institutions. C)dealer who, with respect to a security, holds himself out as being willing to buy and sell that security for his own account on a regular or continuous basis. D)person who buys and sells securities for her own account or for the accounts of others.
C)dealer who, with respect to a security, holds himself out as being willing to buy and sell that security for his own account on a regular or continuous basis. A market maker is a dealer who holds himself out as being willing to buy or sell a security at a quoted price on a regular and continuous basis.
A customer opens a margin account with a broker-dealer and signs a loan consent agreement. The loan consent agreement allows the firm to A)lend the customer money B)commingle the customer's securities with securities owned by the firm C)loan out the customer's margin securities D)hypothecate securities in the account
C)loan out the customer's margin securities A signed loan consent agreement permits a firm to loan out a customer's margin securities. This is the only part of the margin documentation that is optional.
An investor with a short position enters an order marked, "buy DMF at 25.50 stop." It would be most correct to state A)the order will be triggered if the market price goes below 25.50 B)this order cannot be executed C)the order will be triggered if the market price goes to or above 25.50 D)the order need not be triggered, but it must be executed at 25.50
C)the order will be triggered if the market price goes to or above 25.50 ' Buy stop orders are usually entered to protect short sales. The stop would trigger the order when DMF reached 25.50 or higher.
A buy stop order may be used for all of the following EXCEPT: A)to protect a profit in a short position. B)to acquire a long position as a stock breaks through resistance. C)to protect a profit in a long position. D)to protect against loss in a short position.
C)to protect a profit in a long position. Buy stop orders go into effect when the price of the security reaches or exceeds the specified "stop" price. As such, they are commonly used by short sellers who either wish to protect a profit they've already made, or protect against a loss if the stock should go up. Buy stops can also be used by those wishing to acquire stock when it breaks through a resistance level. However, when one is already long the stock, turning in an order to buy more is not going to offer any protection
Opening a margin account involves significant documentation. Which of those documents discloses the interest rate charged by the broker-dealer, including the method of interest computation and situations under which interest rates may change? A)The hypothecation agreement B)The loan consent agreement C)The interest computation agreement D)The credit agreement
D)The credit agreement It is the credit agreement that discloses the terms of the credit extended by the broker-dealer, including the method of interest computation and situations under which interest rates may change.
Which of the following reasons is appropriate justification for selling a stock short? A)To benefit from a rise in the price of the stock. B)To cut losses on a long position. C)To seek a modest potential reward with limited risk. D)To benefit from a decline in the price of the stock.
D)To benefit from a decline in the price of the stock. The appropriate time to sell short is when (one believes) a stock price is about to drop. The investor sells borrowed stock at current prices and then buys the stock later at a lower price to replace the borrowed stock. Selling short does not reduce the risk of a long position; the investor is selling borrowed, not owned, stock. If the stock moves up, the short investor can lose a great deal of money. If the stock price moves up, the risk of loss is unlimited.
Under the Securities Exchange Act of 1934, a market maker is: A)a marketplace to bring together buyers and sellers of securities. B)any person who buys and sells securities for his own account or for the accounts of others. C)a security in high demand. D)a dealer who holds itself out as being ready at all times to buy or sell shares of a specified security at a quoted price.
D)a dealer who holds itself out as being ready at all times to buy or sell shares of a specified security at a quoted price. A market maker is a dealer who holds itself out as being willing to buy or sell a security at a quoted price on a regular and continuous basis.
An investor owns a long-term US Treasury bond with a 6% coupon and 21 years to maturity. The client wishes to sell and receives a quote from a dealer of 96.13. This number represents the A)discount B)offer price C)markdown D)bid price
D)bid price If you want to sell, the dealer will pay you his bid price. Had the question said the client wanted to buy, the quote would have been the offer (ask) price. What does the 6% coupon and the 21 years to maturity have to do with the question? Nothing. Knowing that treasuries are quoted in 32nds has nothing to do with it either. Also, the price quote is below 100 so it is at a discount, but the better answer is bid price because the question is referring to the quote.
An investor owns a long-term U.S. Treasury bond with a 5% coupon and 15 years to maturity. The client wishes to sell and receives a quote from a dealer of 104.22. This number represents the: A)offer price. B)yield to maturity. C)premium. D)bid price.
D)bid price. If you are looking to sell, the dealer will pay you his bid price. Had the question said the client wanted to buy, then the quote would have been the offer (ask) price. What does the 5% coupon and the 15 years to maturity have to do with the question? NOTHING. And, knowing that treasuries are quoted in 32nds has nothing to do with it either. And, one more thing. The price quote is above 100 so it is at a premium, BUT, the better answer is bid price because the question is referring to the quote.
Stock prices in the over-the-counter market are determined by: A)an auction. B)the five percent markup policy. C)a competitive bid. D)negotiation.
D)negotiation. The five percent markup policy regulates commissions and markups, not prices. The OTC market is considered to be a negotiated market in contrast to a stock exchange, which is an auction market.
