Chap003_Text bank(1)_Solution

Chap003_Text bank(1)_Solution - Chapter 03 How Securities...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Chapter 03 - How Securities are Traded Chapter 03 How Securities are Traded Multiple Choice Questions 3. Firms raise capital by issuing stock A. in the secondary market. B. in the primary market. C. to unwary investors. D. only on days when the market is up. E. C and D. Funds from the sale of new issues flow to the issuing corporation, making this a primary market transaction. Difficulty: Easy 4. The following statements regarding the spet are true : A. Spets maintain a book listing outstanding unexecuted limit orders. B. Spets earn income from commissions and spreads in stock prices. C. Spets stand ready to trade at quoted bid and ask prices. D. Spets cannot trade in their own accounts. E. A, B, and C are all true. 3-1 The spets' functions are all of the items listed in A, B, and C. In addition, spets trade in their own accounts. Difficulty: Moderate 7. 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. 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. Difficulty: Moderate 8. 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 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. The SEC permits trading and underwriting 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. Difficulty: Moderate 9. Initial margin requirements are determined by A. the Securities and Exchange Commission. B. the Federal Reserve System. C. the New York Stock Exchange. D. B and C. E. A and B Chapter 03 - How Securities are Traded 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 margin requirements above those established by the NYSE. Difficulty: Moderate 10. You purchased JNJ 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. 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....
View Full Document

{[ snackBarMessage ]}

Page1 / 13

Chap003_Text bank(1)_Solution - Chapter 03 How Securities...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online