mid-term paper and ans.docx

mid-term paper and ans.docx

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1. Money Market securities a. are short term b. are highly marketable c. are generally very low risk d. are highly marketable and are generally very low risk e. all of the options 2. Which of the following statements is true regarding a corporate bond? a. A corporate callable bond gives the holder the right to exchange it for a specified number of the company's common shares. b. A corporate debenture is a secured bond. c. A corporate indenture is a secured bond. d. A corporate convertible bond gives the holder the right to exchange the bond for aspecified number of the company's common shares. e. Holders of corporate bonds have voting rights in the company 3. Which of the following statements regarding the Dow Jones Industrial Average (DJIA) is false? a. The DJIA is not very representative of the market as a whole. b. The DJIA consists of 30 blue chip stocks. c. The DJIA is affected equally by changes in low and high priced stocks. d. The DJIA divisor needs to be adjusted for stock splits. e. The value of the DJIA is much higher than individual stock prices 4. The ___ index represents the performance of the Japanese stock market. a. DAX b. FTSE c. Nikkei d. Hang Seng e. DJIA 5. A U.S. dollar-denominated bond that is sold in Singapore is a a. Eurobond b. Yankee bond c. Samurai bond d. Bulldog bond e. None of the options 1
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6. You sold JCP stock short 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 options 7. You purchased 100 shares of common stock on margin at $45 per share. Assume 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. 0.33 b. 0.55 c. 0.43 d. 0.23 e. 0.25 8. You want to purchase XON stock at $60 from your broker using as little of your own money as possible. If initial margin is 50% and you have $3000 to invest, how many shares can you buy? a. 100 shares b. 200 shares c. 50 shares d. 500 shares e. 25 shares 9. A sale by IBM of new stock to the public would be a(n) a. short sale. b. seasoned equity offering. c. private placement. d. secondary market transaction. e. initial public offering. 10. You purchased 100 shares of common stock on margin for $50 per share. The initial margin is 50% and the stock pays no dividend. What would your rate of return be if you sell the stock at $56 per share? Ignore interest on margin.
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