1、投资学第7版testbank答案03Multiple Choice Questions 1. 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
2、flow to the issuing corporation, 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) Speciali
3、sts earn income from commissions 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 lis
4、ted in A, B, and C. In addition, 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 depos
5、its from savers and lend them out to 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
6、 a commercial bank, as indicated in C. 4. 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 arrange
7、ment for the investment banking firm. D) B and 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 R
8、ationale: The secondary market consists of transactions 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 r
9、egulated by the New York Stock Exchange. C) decreases underwriting 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 underw
10、riting of securities over the Internet, but has required firms 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 Comm
11、ission. B) the Federal Reserve System. C) the New York Stock Exchange. 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
12、on NYSE-listed stocks; however, brokers usually set maintenance margin 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
13、 D) limit-sell order E) none of the above. Answer: D Difficulty: Moderate 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 s
14、hort at $80 per share. Your losses could be minimized by placing a _: A) limit-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,
15、 thus limiting your loss. None of the other orders are applicable to this situation. 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 sp
16、ecify 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 $45. D) A day order expires at the close of the trading day. E) None of the above. Answer: E Difficulty: Mo
17、derate Rationale: All of the order descriptions above are correct. 11. Restrictions on trading involving insider information apply to the following except A) corporate officers and directors. B) relatives of corporate directors and officers. C) major stockholders. D) All of the above are subject to
18、insider trading restrictions. E) None of the above is subject to insider trading restrictions. Answer: D Difficulty: Moderate Rationale: A, B, and C are corporate insiders and are subject to restrictions on trading on inside information. Further, the Supreme Court held that traders may not trade on
19、nonpublic information even if they are not insiders. 12. The cost of buying and selling a stock consists of _. A) brokers commissions B) dealers bid-asked spread C) a price concession an investor may be forced to make. D) A and B. E) A, B, and C. Answer: E Difficulty: Moderate Rationale: All of the
20、above are possible costs of buying and selling a stock. 13. Assume you purchased 200 shares of XYZ common stock on margin at $70 per share from your broker. If the initial margin is 55%, how much did you borrow from the broker A) $6,000 B) $4,000 C) $7,700 D) $7,000 E) $6,300 Answer: E Difficulty: M
21、oderate Rationale: 200 shares * $70/share * = $14,000 * = $6,300. 14. You sold short 200 shares of common stock at $60 per share. The initial margin is 60%. Your initial investment was A) $4,800. B) $12,000. C) $5,600. D) $7,200. E) none of the above. Answer: D Difficulty: Moderate Rationale: 200 sh
22、ares * $60/share * = $12,000 * = $7,200 15. You purchased 100 shares of ABC 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 marg
23、in. A) $21 B) $50 C) $49 D) $80 E) none of the above Answer: B Difficulty: Difficult Rationale: 100 shares * $70 * .5 = $7,000 * = $3,500 (loan amount); = (100P - $3,500)/100P; 30P = 100P - $3,500; -70P = -$3,500; P = $50. 16. You purchased 100 shares of common stock on margin at $45 per share. Assu
24、me the initial margin is 50% and the stock pays no dividend. What would the maintenance margin be if a margin call is made at a stock price of $30 Ignore interest on margin. A) B) C) D) E) Answer: E Difficulty: Difficult Rationale: 100 shares * $45/share * = $4,500 * = $2,250 (loan amount); X = 100(
25、$30) - $2,250/100($30); X = . 17. You purchased 300 shares of common stock on margin for $60 per share. The initial margin is 60% and the stock pays no dividend. What would your rate of return be if you sell the stock at $45 per share Ignore interest on margin. A) 25% B) -33% C) 44% D) -42% E) 54% A
26、nswer: D Difficulty: Difficult Rationale: 300($60) = $10,800 investment; 300($60) = $18,000 X = $7,200 loan; Proceeds after selling stock and repaying loan: $13,500 - $7,200 = $6,300; Return = ($6,300 - $10,800)/$10,800 = - %. 18. Assume you sell short 100 shares of common stock at $45 per share, wi
27、th initial margin at 50%. What would be your rate of return if you repurchase the stock at $40/share The stock paid no dividends during the period, and you did not remove any money from the account before making the offsetting transaction. A) 20% B) 25% C) 22% D) 77% E) none of the above Answer: C D
28、ifficulty: Moderate Rationale: Profit on stock = ($45 - $40) * 100 = $500, $500/$2,250 (initial investment) = %. 19. You sold short 300 shares of common stock at $55 per share. The initial margin is 60%. At what stock price would you receive a margin call if the maintenance margin is 35% A) $51 B) $
29、65 C) $35 D) $40 E) none of the above Answer: B Difficulty: Difficult Rationale: Equity = 300($55) * = $26,400; = ($26,400 - 300P)/300P; 105P = 26,400 - 300P; 405P = 26,400; P = $ 20. Assume you sold short 100 shares of common stock at $50 per share. The initial margin is 60%. What would be the main
30、tenance margin if a margin call is made at a stock price of $60 A) 40% B) 33% C) 35% D) 25% E) none of the above Answer: B Difficulty: Difficult Rationale: $5,000 X = $8,000; $8,000 - 100($60)/100($60) = 33%. 21. Specialists on stock exchanges perform the following functions A) Act as dealers in the
31、ir own accounts. B) Analyze the securities in which they specialize. C) Provide liquidity to the market. D) A and B. E) A and C. Answer: E Difficulty: Moderate Rationale: Specialists are both brokers and dealers and provide liquidity to the market; they are not analysts. 22. Shares for short transactions A) are usually borrowed from other brokers. B) are typically shares held by the short sellers broker in street name. C) are borrowed fr
