Checkpoint 16 Exam Questions- SIE

A client entering a sell limit order at 43 would accept which of these trades? A) 42.50 B) 44 C) 42.90 D) 42

B) 44 LO 16.b- A sell limit at 43 means the investor will only accept a price of 43 or better (higher). Certainly, if the client is willing to sell at 43, she would be even happier to receive 44.

Narcissus, Inc., a social media company, has shares selling at $52. Your customer likes the company but thinks it is currently a bit too high and would like to buy the stock if the price declines to $50 per share. Which of the following orders meets this customer's request? A) Buy stop at 55, limit 50 B) Buy stop at 50 C) Buy puts with a 50 strike D) Buy limit @ 50

D) Buy limit @ 50 LO 16.b- This order instructs the broker to buy at a price of $50 or better. Entering a buy stop at 50 would trigger the order immediately, becoming a market order to buy at the current price. The stop limit would not trigger until the stock rose to 55, then it would be an order to buy at 50, so the stock would have to rise to at least 55 then drop to 50 or below. Owning the puts gives him the right to sell the stock at the strike of 50, not buy it.

The market for Dizzy Rides Inc., is at $52 per share. Your customer would like to sell his shares for $55, and believes the stock will climb to that level in the next two to three weeks. What order should he place? A) Sell limit 55 B) Sell limit 55 AON C) Sell limit 55 FOK D) Sell limit 55 GTC

D) Sell limit 55 GTC LO 16.d- Only the good-til-canceled (GTC) order will live past today. All the others will cancel if unexecuted by the end of the day. If there is no qualifier then it is a day order. Fill-or-dill (FOK) orders that cannot be filled immediately or cancelled. An all-or-none order would need to also be marked GTC to go into the next day.

Is BL i SS(L) above or below CMV?

below

order will be placed when next price after market rises above trigger price

buy stop

Your customer is quite nervous about the stock market but expresses his belief that equities are still the place to save for retirement over the long term. He places a trade for 500 shares of an equity index fund. Overall your customer is likely: A) a bear. B) a bull. C) unsure of where the market is going. D) a tiger.

B) a bull. LO 16.a- This customer has expressed confidence in stocks and has invested money to back up his belief. He is not confused at all. He recognizes that the equities can produce nerve-wracking consequences but have the best record of long-term growth, He is a bull.

Your customer, Ellesha, places a sell stop at 50 on DEZ stock while it is trading at $53 per share. After the order is elected, Ellesha may sell her shares at which of the following prices? I. $48 II. $49 III. $50 IV. $51 A) I and II B) I, II, and III C) I, II, III, and IV D) III and IV

C) I, II, III, and IV LO 16.c- Once triggered (i.e., elected), this becomes a market order to sell. Market orders may sell at any price.

A bearish sentiment means that a person believes: A) the firm appears to be slow and lumbering. B) the company will devour its competition. C) the security will increase in value. D) the security will decline in value.

D) the security will decline in value. LO 16.a- Bearish means one believes the security will decline in value.

Is SL o BS(L) above or below CMV?

above

Sell stop limit order becomes a sell limit when?

once triggered

order will be placed when next price after market falls below trigger price

sell stop

Sell stop order becomes an order to sell at the market?

when triggered

An investor has her registered representative enter a sell stop limit order at 50. Following the order entry, trades occur at 52, 50, 49, 51, and 53. The investor would receive: A) 51 B) 53 C) 50 D) 49

A) 51 LO 16.c- This is really two orders. The first is to stop at 50. That is, once the stock trades at 50 or lower, the order is elected (triggered) and becomes a live working order. That order is to sell at 50 or better. Therefore, the first time the stock hits 50 (or less), is the trade at 50. That triggers the sell limit order to sell at 50 or better. The next trade is at 49 and that is not an acceptable price given the limit order set at 50. The following price, however, at 51, is the next acceptable price after the order is triggered and that is where the order would be executed.

Your customer places an order to buy 500 shares of Narcissus, Inc., (the ticker is NCS) at $50 per share fill-or-kill (FOK). When the order is entered, there are 450 shares available at $50 per share. What happens to the order? A) She will do nothing, but the order stays open until the end of the day if more inventory becomes available. B) She will buy 450 shares, and the remainder of the order remains open until filled. C) The order will be canceled and nothing is done. D) She will buy 450 shares, the rest of the order will be canceled

C) The order will be canceled and nothing is done. LO 16.d- A fill-or-kill order (FOK) instructs that the order be filled in its entirety and immediately. As there are insufficient shares available to fill this order, it will be canceled and nothing is done.

Narcissus, Inc., a social media company, has shares selling at $50. Your customer is bearish. He would like to sell the stock short, but not until it retreats at least 10% from its current price. In order to catch the drop he could: A) sell calls at strike price of 45. B) enter a buy stop at 45. C) enter a sell short at stop 45. D) enter a sell long at 50.

C) enter a sell short at stop 45. LO 16.b- The uncovered call does not help. If exercised he would have to buy the shares before he delivers them, leaving him flat (no position). The buy stop at 45 would trigger immediately and would become a market order to buy. As there is nothing that indicated he owns the shares now, the sell long would be rejected. The sell stop short at $45 would become a market order to sell the stock short when it trades at 45.

An order that when triggered becomes a market order is called a: A) market order. B) stop order. C) limit order. D) stop limit order.

C) limit order. LO 16.c- This is the basic purpose of a stop order.