Q&A Hero

Q: Insider trading often occurs when mergers and takeovers are imminent.

Q: The Securities and Exchange Commission is a division of the Department of Justice.

Q: Most securities are sold on a regular way basis, which means the settlement date is one week after the trade date.

Q: A sell stop loss order is placed above the current market price.

Q: The use of stock certificates, compared to book-entry systems, is on the rise due, in part, to increased computer fraud.

Q: 'Street names' are the nicknames used for commonly-held securities, such as 'IBM' for International Business Machines.

Q: The Specialist's Electronic Book, which is part of the SuperDot system, records and reports limit and market orders.

Q: Specialist trading on the NYSE now accounts for the majority of share volume on a yearly basis.

Q: Buying Treasury securities through the Treasury Direct Program eliminates all brokerage commissions and other fees.

Q: Dollar cost averaging, in which more shares are purchased at low prices than at high prices, is one advantage of dividend reinvestment plans.

Q: Negotiated commissions are the norm for institutional investors; whereas most individual investors pay specified commissions set by the brokerage firms.

Q: All asset management accounts offer automatic reinvestment of credit balances in shares of a money market or other fund.

Q: Charles Schwab, Fidelity and Vanguard are examples of premium discount brokers.

Q: Most full-service stockbrokers derive over 80% of their income from customer commissions.

Q: The NYSE regulatory triad consists of: _____________________________, _________________, and _______________________________________.

Q: The SIPC limit for insurance coverage on cash is _____________________.

Q: Which of the following statements regarding the short interest ratio is true? a. It is calculated by the total shares sold short divided by total shares outstanding b. It indicates the dollar amount needed to cover all short positions c. The higher the ratio, the more bullish investors are d. It is the amount of shares sold short divided by average trading volume

Q: Which of the following statements is true regarding short sales? a. An investor can only remain in a short sale 6 months or less. b. Short sales can be done on either a cash or margin account. c. Short sellers borrow the stock sold short from the exchanges. d. Dividends paid during the short sale must be covered by the seller.

Q: An investor buys 100 shares of Walmart at $45 per share on margin with an initial margin of 70 percent and a maintenance margin of 25% percent. In two months, the stock goes to $56. Below what price will a margin call occur?$13.50$54.00$42.00$18.00

Q: An investor buys 100 shares of Walmart at $45 per share on margin with an initial margin of 70 percent and a maintenance margin of 25% percent. In two months, the stock goes to $56. What is the actual margin of the stock when it's at $56?65.9%75.9%79.9% 80.9%

Q: If maintenance margin is not maintained, the broker will place: a. a sell order on sufficient securities to ensure the portfolio is compliant with maintenance margin requirements b. a sell order on sufficient securities to ensure the portfolio is compliant with initial margin requirements c. contact the investor with a margin put d. contact the investor with a margin call

Q: Margin Call price is the amount borrowed divided by: a. number of shares x (1 - initial margin proportion) b. number of shares x (1 - maintenance margin proportion) c. current value of the shares purchased x (1 - initial margin proportion) d. current value of the shares purchased x (1 - maintenance margin proportion)

Q: The interest rate charged on margin accounts is determined by: a. adding a percentage to the broker call rate. b. adding a percentage to the margin interest rate. c. subtracting a percentage to the broker call rate. d. subtracting a percentage to the margin interest rate.

Q: Since 1974, the current initial margin requirement on stock is: a. 30 percent.b. 40 percent.c. 50 percent.d. 60 percent.

Q: The initial margin requirement on security trades is set by the: a. SECb. FINRAc. SIPCd. Federal Reserve

Q: Which of the following statements regarding arbitration of broker-client disputes is not true? a. There is a cost to arbitration. b. Arbitration is a binding process that can determine damages. c. It is advised that investors hire a lawyer for the arbitration process. d. Arbitration rulings are frequently appealed.

Q: A trading halt on the NYSE occurs: a. when the SEC declares oneb. when the market declines more than 10 percent during the dayc. typically lasts less than an hour but can be longer'is called during the trading day to allow a company to announce important news or where there is a significant order imbalance between buyers and sellers in a security.d. any time specialists exhaust their capital

Q: Which of the following statements regarding the SEC is not true? a. The SEC is an independent, quasi-judicial agency of the U.S. government b. The SEC has the power to disapprove securities for lack of merit c. The SEC has nine regional offices and approximately 200 examiners d. The SEC administers all U.S. securities laws

Q: The law that requires that all new issues being offered for public sale to be registered with the SEC is the: a. Securities Act of 1933 b. Securities Exchange Act of 1934 c. Maloney Act of 1936 d. Securities Investor Protection Act of 1970

Q: Which of the following has helped to eliminate the use of stock certificates by placing stock transactions on computers. a. Federal Reserve b. Securities Exchange Commission c. Depository Trust Company d. Federal Depository Insurance Corporation

Q: A sell stop order is placed: a. above the current price. b. below the current price. c. at the current price. d. at the breakeven point.

Q: Mr. King has researched a small company, whose stock is selling at $7.50. He wants to buy 1,000 shares but thinks that he might get the stock at $7. To try to buy the stock at the lower price, he should place a a. sell stop order at $7.25. b. buy stop order at $7.25. c. sell limit order at $7.25. d. buy limit order at $7.25.

Q: Ms. Brown sold short 100 shares of common stock at $78 per share. The price has declined to $69. The outlook for the stock is mixed, so she would cover her short position if the stock moves up as much as $1 but hold if it continues down. Ms. Brown should place a a. sell stop order at $70. b. buy stop order at $70. c. sell limit order at $70. d. buy limit order at $70.

Q: Which of the following statements regarding specialists is FALSE? Specialists: a. are expected to maintain a fair and orderly market in their assigned stocks. b. perform a dual role as brokers and dealers. c. must be approved by the Federal Reserve Board. d. must often go "against the market."

Q: The independent, quasi-judicial agency of the U.S. government that administers laws in the securities field and protects investors and the public in securities transactions is: a. FINRA b. SIPC c. The Federal Reserve Bank d. SEC

Q: The NYSE is: a. a free agent market. b. an agency auction market. c. a negotiated market. d. a dealer market.

Q: If an investor is attempting to buy a stock that is very volatile, it would be best to use a: a. market orderb. limit orderc. stop-loss orderd. contingency order

Q: An order that must be filled immediately in its entirety, or otherwise must be canceled, is known as: a. an immediate or cancel order. b. an all or none order. c a fill or kill order. d. a full or bust order.

Q: Open orders, if not cancelled or renewed, remain in effect for:a. one week.b. one month.c. six monthsd. twelve months.

Q: Margin accounts cannot be used to:a. purchase securities using leverageb. borrow money from a brokerage account to fund a frivolous vacationc. provide overdraft protectiond. take physical delivery of an underlying asset on maturity of a futures contract

Q: The NYSE requires customers to deposit a minimum of how much in securities for margin accounts a. $2,000b. $2,500c. $5,000d. $10,000

Q: The Securities Investor Protection Corporation (SIPC) insures customer accounts at member brokers against brokerage failure as follows: a. securities totaling $250,000, cash totaling $100,000 b. securities totaling $250,000, cash totaling $250,000 c. securities totaling $500,000, cash totaling $100,000 d. securities totaling $500,000, cash totaling $250,000

Q: The Financial Industry Regulatory Authority (FINRA) created in 2007 is the largest regulator for securities firms in the U.S. FINRA's objective is to:a. protect the bid-ask spread and exchange participants' profitsb. protect corporations and investorsc. protect investors and ensure market integrityd. ensure market integrity

Q: The NYSE maintains circuit breakers to protect investors from unusual market activity. One of these circuit breakers is: a. trading haltb. strict adherence to market openingc. strict adherence to market closingd. Stockwatch

Q: NYSE Specialists are required to a. maintain a bid-ask spread no greater than 1 cent per shareb. maintain a fair and orderly market.c. buy when most others are selling, or vice versa.d. selling off inventory and maintaining strictly neutral positions

Q: Algorithmic trading is: a. technical analysis, also called chartingb. high frequency trading in ECNsc. analysisarbitraged. involve the use of computer programs to initiate trade orders, including decision-making on security, quantity, price, and timing

Q: Treasury bond buyers can purchase bonds transaction cost free through: a. U.S. Federal Reserve Bankb. Treasury Directc. DSPsd. discount brokers

Q: Direct stock purchase programs (DSPs) are an outgrowth of : a. electronic tradingb. dividend reinvestment plansc. increased NASDAQ tradingd. decreased regulation

Q: Which of the following laws eliminated all fixed commissions? a. Securities Exchange Act of 1934 b. Securities Acts Amendments of 1975 c. Investor Advisor Act of 1940 d. Securities Investor Protection Act of 1970

Q: A newer variation of the wrap account is the: a. mutual fund wrap account b. asset allocation wrap account c. small-cap wrap account d. index wrap account

Q: Which of the following requires a relatively large minimum investment, usually $100,000 or higher? a. a cash accountb. an asset management accountc. a margin accountd. a wrap account at a large brokerage firm

Q: Which of the following accounts often requires an annual fee? a. a cash accountb. a wrap accountc. a margin accountd. All of the above require an annual fee.

Q: Which of the following statements regarding discount brokers is true?a. All discount brokers offer on-line trading.b. Discount brokers only execute orders on stock transactions.c. Discount brokers may offer little investment advice.d. Discount brokers do not offer SIPC protection.

Q: Which of the following statements regarding commissions charged by full-service brokers is not true? a. Commissions vary by product. b. The more complicated the transaction, the higher the commission. c. The commission on many bonds is already built into the trade. d. There is no commission on U.S. Treasury securities.

Q: Which of the following statements is true regarding full-service brokers? a. They typically seek clients with at least $10,000 in their accounts. b. They derive only a small percentage of their revenues from commissions. c. They compete primarily on price and services offered. d. Less than 10 percent of U.S. households now use a full-service broker.

Q: Merrill Lynch and UBS are examples of: a. discount brokers b. wholesale brokers c. full-service brokers d. blue-chip brokers

Q: Global Stock Index is a value weighted index with just 2 stocks in the index: ABC stock and XYZ stock. ABC ended 2005 at a price of $55 and had 1 million shares outstanding. XYZ stock ended 2005 at a price of $32 and had 4 million shares outstanding. ABC ended 2006 at a price of $29 (after a 2-for-1 split). XYZ stock closed at $35 for 2006. Calculate the new value of the index.

Q: An NYSE Euronext market maker awaits news of a major merger involving one of the stocks he/she makes a market in. Why does he/she set the bid-ask spread higher?

Q: What impact does the increasing amount of institutional investing have on securities markets today and what role do you think institutional investors will play in the future?

Q: How do you think the globalization of the securities markets will impact the NYSE and the Nasdaq? What specific developments do you foresee happening soon for the global marketplace?

Q: What is Instinet and what does it offer for investors?

Q: Why do the DJIA and the S&P 500 have a high correlation?

Q: What is the difference between a price-weighted index and a market-value index?

Q: What is the Nasdaq National Market System?

Q: What factors does the NYSE consider important in determining if a company should be listed on the exchange?

Q: What are the major similarities and differences between a specialist and a dealer?

Q: What are the major advantages of a private placement for the issuer of securities?

Q: What is the difference between a seasoned new issue and an initial public offering?

Q: The DJIA is a ______________-weighted index.

Q: The S&P 500 comprises approximately ________________ percent of the market capitalization of all U.S. publicly traded companies.

Q: The Dow Jones averages handle stock splits by adjusting the market value of the stocks.

Q: Normal stock exchange hours in the U.S. are 9:30 a.m. to 4 p.m.

Q: ECNs offer the advantages of automation, lower costs and anonymity to its members.

Q: By 2005, program trading accounted for over 70 percent of total NYSE volume.

Q: All OTC stocks are included in the Nasdaq.

Q: Orders on Nasdaq come from market makers, ECNs and on-line brokers.

Q: Prices of stocks traded on the NYSE are determined through supply and demand.

Q: Smaller companies with fewer publicly held shares are more likely to meet the listing requirements of the NYSE.

Q: The NASDAQ 100 Composite Index is a value-weighted index.

Q: Stocks traded on NASDAQ are bought and sold from specialists, who are often affiliated with brokerage firms.