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Unformatted text preview: Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) ________ exists in a market where the price of a security reflects all information, whether it is publicly available or known only to insiders such as the firm's managers or directors. 1) A) Strong- form efficiency B) Weak efficiency C) Weak- form efficiency D) Semistrong- form efficiency 2) A transaction in which an investor borrows to buy shares using the shares themselves as collateral is called ________. 2) A) buying on loan. B) selling on margin. C) selling on loan. D) buying on margin. 3) Which of the below statements is FALSE? 3) A) From a dealer's perspective, program trades can be conducted in only one way and this on a principal basis. B) The growth of mutual fund sales and massive equity investments by pension funds and insurance companies during the 1990s have all given an impetus to such methods to trade baskets or bundles of stocks efficiently. C) Program trading is used for a strategy called index arbitrage. D) Several commission arrangements are available to an institution for a program trade, and each arrangement has numerous variants. 4) Investors often choose their ________ based on who will give them the best execution at the ________ on a specific transaction, and also based on who will provide ________ over a period of time. 4) A) broker/dealer; highest transaction cost; required services B) broker/dealer; lowest transaction cost; complementary services C) customers; lowest transaction cost; complementary services D) customers; highest transaction cost; required services 5) Which of the below statements is FALSE? 5) A) Trades are executed by individuals (wholesale investors) and institutions. B) Consistent with their larger size, institutions typically pay lower commissions than individuals. C) Institutions typically transact much larger orders than individuals. D) Although both an individual and an institution can trade through a broker- dealer, the ways in which their orders are entered and executed may be considerably different, even if the trades are through the same broker- dealer. 6) ________ involves the sale of a security not owned by the investor at the time of sale. 6) A) Short selling B) Long buying C) Long selling D) Short buying 7) The ________ is a conditional order and is executed only if the limit price or a better price can be obtained. Another type of conditional order is the ________, which specifies that the order is not to be executed until the market moves to a designated price, at which time it becomes a ________. 7) A) limit order; stop order; market order B) limit order; market order; stop order C) stop order; limit order; market order D) market order; stop order; limit order 1 8) ________ means that the price of the security fully reflects all public information (which includes but is not limited to historical price and trading patterns)....
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- Spring '09