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1、Multiple Choice Questions1.A purchase of a new issue of stock takes place A)in the secondary market. B)in the primary market. C)usually with the assistance of an investment banker. D)A and B. E)B and C. Answer: E Difficulty: Easy Rationale: Funds from the sale of new issues flow to the issuing corpo
2、ration, making this a primary market transaction. Investment bankers usually assist by pricing the issue and finding buyers.2.The following statements regarding the specialist are true: A)Specialists maintain a book listing outstanding unexecuted limit orders. B)Specialists earn income from commissi
3、ons and spreads in stock prices. C)Specialists stand ready to trade at quoted bid and ask prices. D)Specialists cannot trade in their own accounts. E)A, B, and C are all true. Answer: E Difficulty: Moderate Rationale: The specialists functions are all of the items listed in A, B, and C. In addition,
4、 specialists trade in their own accounts.3.Investment bankers A)act as intermediaries between issuers of stocks and investors. B)act as advisors to companies in helping them analyze their financial needs and find buyers for newly issued securities. C)accept deposits from savers and lend them out to
5、companies. D)A and B. E)A, B, and C. Answer: D Difficulty: Moderate Rationale: The role of the investment banker is to assist the firm in issuing new securities, both in advisory and marketing capacities. The investment banker does not have a role comparable to a commercial bank, as indicated in C.4
6、.In a firm commitment A)the investment banker buys the stock from the company and resells the issue to the public. B)the investment banker agrees to help the firm sell the stock at a favorable price. C)the investment banker finds the best marketing arrangement for the investment banking firm. D)B an
7、d C. E)A and B. Answer: A Difficulty: Moderate 5.The secondary market consists of A)transactions on the AMEX. B)transactions in the OTC market. C)transactions through the investment banker. D)A and B. E)A, B, and C. Answer: D Difficulty: Moderate Rationale: The secondary market consists of transacti
8、ons on the organized exchanges and in the OTC market. The investment banker is involved in the placement of new issues in the primary market.6.The use of the Internet to trade and underwrite securities A)is illegal under SEC regulations. B)is regulated by the New York Stock Exchange. C)decreases und
9、erwriting costs for a new security issue. D)increases underwriting costs for a new security issue. E)is regulated by the National Association of Securities Dealers. Answer: C Difficulty: Moderate Rationale: The SEC permits trading and underwriting of securities over the Internet, but has required fi
10、rms participating in this activity to take steps to safeguard investment funds. This form of underwriting is expected to grow quickly due to its lower cost.7.Initial margin requirements are determined by A)the Securities and Exchange Commission. B)the Federal Reserve System. C)the New York Stock Exc
11、hange. D)B and C. E)A and B Answer: B Difficulty: Moderate Rationale: The Board of Governors of the Federal Reserve System determines initial margin requirements. The New York Stock Exchange determines maintenance margin requirements on NYSE-listed stocks; however, brokers usually set maintenance ma
12、rgin requirements above those established by the NYSE.8.You purchased XYZ stock at $50 per share. The stock is currently selling at $65. Your gains may be protected by placing a _ A)stop-buy order B)limit-buy order C)market order D)limit-sell order E)none of the above. Answer: D Difficulty: Moderate
13、 Rationale: With a limit-sell order, your stock will be sold only at a specified price, or better. Thus, such an order would protect your gains. None of the other orders are applicable to this situation.9.You sold ABC stock short at $80 per share. Your losses could be minimized by placing a _: A)lim
14、it-sell order B)limit-buy order C)stop-buy order D)day-order E)none of the above. Answer: C Difficulty: Moderate Rationale: With a stop-buy order, the stock would be purchased if the price increased to a specified level, thus limiting your loss. None of the other orders are applicable to this situat
15、ion.10.Which one of the following statements regarding orders is false? A)A market order is simply an order to buy or sell a stock immediately at the prevailing market price. B)A limit sell order is where investors specify prices at which they are willing to sell a security. C)If stock ABC is selling at $50, a limit-buy order may instruct the broker to buy the stock if and when the share price falls below $
