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Investments & Securities
Q:
In private placements, new securities issues are sold directly to financial institutions.
Q:
A large public offering is often handled by a syndicate of investment banking firms, with one lead managing underwriter.
Q:
The open-outcry system for trading securities is utilized in the:
a. futures market
b. municipal bond market
c. Treasury bond market
d. options market
Q:
The type of bonds with the thinnest secondary market is:
a. agency bonds
b. corporate bonds
c. Treasury bonds
d. municipal bonds
Q:
The yields on corporate bonds issued in the primary market should be___________the yields on similar corporate bonds trading in the secondary market.
a. much less than
b. exactly the same as
c. slightly higher than
d. similar to
Q:
Most secondary bond trading takes place on:
a. the NYSE
b. the American Stock Exchange
c. the OTC
d. the Philadelphia Exchange
Q:
A market capitalization-weighted index obtains the current market value of each stock by:
a. using the closing market price.
b. multiplying price times shares outstanding.
c. multiplying price times daily volume.
d. dividing earnings by shares outstanding.
Q:
Which of the following limits the usefulness of the S&P 500 Index as a market benchmark?
a. It is too weighted with NYSE stocks to be representative.
b. It is too difficult to calculate for the average investor.
c. Its use of a base year in its calculations affects its performance.
d. Its performance can be greatly affected by a small number of stocks.
Q:
A major difference between the Standard & Poor 's 500 Index (S&P) and the Dow-Jones Industrial Average (DJIA) is that:
a. the S&P 500 is more dominated by OTC stocks than the DJIA
b. the S&P 500 is more difficult to calculate than the DJIA
c. the DJIA is a price-weighted rather than value-weighted index like the S&P 500 d. the S&P 500 is more stable than the DJIA
Q:
A criticism of the Dow-Jones Industrial Average (DJIA) is:
a. it has too few stocks in the average
b. it is a value weighted method
c. it adjusts for even small stock dividends
d. it includes too many risky stocks
Q:
The Dow-Jones Industrial Average has historically consisted of high quality stocks that were considered to be:
a. OTC stocks
b. cyclical stock
c. blue-chip stocks
d. defensive stocks
Q:
The difference between the bid and the ask price is known as the:
a. commission
b. premium
c. quote
d. spread
Q:
The largest electronic screen-based equity securities market in the U.S. is known as:
a. Pink Sheets
b. Instinet
c. Amex
d. NASDAQ
Q:
The price that some seller is trying to sell a stock for is known at the:
a. the bid quote
b. the ask quote
c. the closing price
d. the specialist price
Q:
In-house trading refers to:
a. trades made only on the floor of the exchanges
b. direct trades made between OTC dealers
c. trades by fund managers without the use of brokers or exchanges
d. trades made between specialists on the NYSE
Q:
Europe's leading cross border exchange is:
a. Deutsche Boerse
b. Euromarket
c. London Stock Exchange
d. NYSE Euronext
Q:
Which of the following statements about NYSE is true?
a. The NYSE is the oldest and most prominent primary market in the U.S.
b. Specialists account for over 50 percent of the seats on the NYSE.
c. The NYSE is the oldest and most prominent secondary market in the U.S.
d. Institutional investors do not trade on the NYSE
Q:
The fastest growing region in the world is: a. Western Europe. b. Latin America. c. Eastern Europe. d. the Far East.
Q:
Some OTC stocks are traded through the:
a. Blue Sheets.
b. Red Sheets.
c. Pink Sheets
d. Green Sheets.
Q:
NASDAQ tends to list stocks concentrated in this industry: to be concentrated in these two industries:
a. aerospace.
b. energy.
c. technology.
d. telecommunications.
Q:
The original electronic network, started in 1969 for brokers, dealers, exchange specialists and institutional investors only is known as:
a. ReadiMarket
b. National Market System
c. OTC Worldwide
d. lnstinet
Q:
A computerized trading network that matches buy and sell orders electronically entered by customers is a:
a. National Markets System
b. Electronic Communications Network
c. Internet Investment Service
d. Global Investment Network
Q:
Which of the following statements regarding the Nasdaq Stock Market is not true?
a. It was less affected by the 2000-2002 market decline than the NYSE
b. NASDAQ dealers make a market by standing ready to buy and sell securities
c. Stocks listed on the NYSE may also trade on NASDAQ
d. NASDAQ 's electronic trading system provides instantaneous transactions
Q:
Which of the following is not true regarding the NYSE Amex?
a. It specializes in technology and biotech stocks
b. It trades only ETFs
c. It specializes in small- and mid-cap stocks
d. It is an Over-the-Counter (OTC) market
Q:
A type of trading involving a basket of 15 stocks or more and often used in conjunction with arbitrage strategies is called:
a. swapping
b. program trading
c. day trading
d. insider trading
Q:
A block trade is defined as a transaction involving at least:
a. 1,000 shares
b. 5,000 shares
c. 10,000 shares
d. 1 million share
Q:
The NYSE is now part of a:
a. not-for-profit corporation.
b. a quasi-federal agency.
c. a publicly-owned company.
d. a multinational company.
Q:
According to its website, NYSE Euronext accounts for nearly what percent of the world 's publicly traded equity securities?
a. nearly 25%
b. nearly 33%
c. nearly 40%
d. nearly 50%
Q:
Which exchange member is assigned to a specific trading post?
a. Commission broker
b. Floor trader
c. Specialist
d. Dealer
Q:
NASDAQ stocks:
a. are generally foreign stocks.
b. trade via the Blue Sheets.
c. are not generally listed on organized exchanges.
d. represent less than 1,000 companies.
Q:
Investment bankers operate in the:
a. primary market
b. secondary market
c. tertiary market
d. fourth market
Q:
Automatic Shelf Registration refers to the practice of allowing:
a. well-seasoned issuers to file shelf registration statements with the SEC that become effective immediately, or the filing of a 'base prospectus,' enabling efficient stock issue
b. well-seasoned issuers to file shelf registration statements with the SEC that become effective immediately, or the filing of a 'base prospectus,' enabling efficient debt issue
c. well-seasoned issuers to file shelf registration statements with the SEC that become effective immediately, or the filing of a 'base prospectus,' enabling efficient stock or debt issue
d. well-seasoned issuers to file shelf registration statements with the SEC that become effective immediately upon filing of a 'red herring prospectus,' enabling efficient stock or bond issue
Q:
A major appeal for U.S. firms selling bonds in private placements is potential:
a. lower interest expense
b. greater regulatory protection
c. savings from not registering with the SEC or incurring an underwriting spread
d. fewer restrictions on subsequent borrowing activities
Q:
The ___________ summarizes information about a new security issue.
a. syndicate offer
b. IPO
c. prospectus
d. shelf rule
Q:
Investment bankers are compensated by:
a. the underwriting spread
b. commissions paid by the buyers of the security
c. commission paid by the sellers of the security
d. guaranteed investment contracts
Q:
In a firm commitment underwriting arrangement, the risk of placing the security is typically assumed by the:
a. issuer of the security
b. investment bankers
c. commercial bankers
d. institutional investors
Q:
The sale of a new issue of common stock of which there are already shares publicly held is known as:
a. an IPO.
b. a secondary market issue.
c. an EPO.
d. a seasoned new issue.
Q:
In order to avoid paying income taxes, an investment company must:be classified as a non-profit organizationinvest only in municipal bonds.pass on interest, dividends, and capital gains to the stockholders.be registered as a closed-end investment company.
Q:
Which of the following is not a characteristic of investments companies?
a. pooled investing
b. diversification
c. managed portfolios
d. reduced expenses
Q:
The most popular type of investment company is a:unit investment trust.mutual fund.closed-end investment companyreal estate investment trust.
Q:
Investment companies must register with the SEC under the provisions of the:Securities Act of 1933Securities Exchange Act of 1934Maloney Act of 1938Investment Company Act of 1940
Q:
A major difference between a closed-end investment company and an open-end investment company is that:closed-end investment companies are generally much riskier.their security portfolios are substantially different.closed-end investment companies are passive investments and open-ends are not.closed-end companies have a more fixed capitalization.
Q:
Which of the following is a major objective of unit investment trusts?
a. capital preservation
b. capital gains
c. current income
d. tax deferment
Q:
An unmanaged fixed income security portfolio handled by an independent trustee is known as a:junk bond fundclosed-end investment company.unit investment trust.hedge fund.
Q:
Which of the following generally do not trade on stock exchanges?unit investment trustsclosed-end investment companiesopen-end investment companiesexchange traded funds
Q:
Which of the following statements concerning the trend in investment company growth is true?The recent trend shows more growth in closed-end investment companies.The recent trend shows more growth in unit investment trusts.The recent trend shows more growth in open-end investment companies.The recent trend shows more growth in exchange traded funds.
Q:
Which of the following is not one of the characteristics of exchange traded funds (ETFs)?
a. They are mostly passive portfolios.
b. They are sometimes managed portfolios.
c. They often track a particular sector of the market.
d. They are priced based on Net Asset Value.
Q:
It is not important to have a secondary market for mutual funds because:investors hold the securities till maturity.investors trade between themselves.investors sell their shares back to the company.banks will cash their shares as long as they have accounts at the bank.
Q:
Which of the following ETF 's (exchange traded fund) provides exposure to 500 U.S.large-capitalization companies?
a. Spider
b. Clubs
c. Cubes
d. Diamonds
Q:
A group of mutual funds with a common management are known as:fund syndicates.fund conglomerates.fund families.fund complexes.
Q:
Which of the following is not true regarding ETFs?
a. They trade on exchanges like individual stocks.
b. They can be bought on margin or sold short.
c. ETFs have been adversely affected by growth in closed end funds.
d. Assets held in ETFs exceed assets held in mutual funds.
Q:
Which of the following is not true regarding money market funds?
a. They charge no sales charge, redemption fee or management fee.
b. Their maximum average maturity is 90 days.
c. Normally, there are no capital gains or losses on their shares.
d. They represent a relatively low risk investment.
Q:
Which of the following is true regarding value funds and growth funds?
a. Value funds seek stocks that are cheap by fundamental standards while growth funds seek stocks with high current earnings.
b. Growth funds typically outperform value funds.
c. Value funds and growth funds tend to perform well at different times.
d. Value funds typically have higher P/E ratios than growth funds.
Q:
If a mutual fund holds a substantial amount of Treasury bills, it is probably atax-exempt fund.conservative bond fund.bond income fundmoney market mutual fund.
Q:
Index funds provide low-cost, passive investment exposure in a similar fashion to:hybrid mutual fundsmoney market mutual fundsexchange-traded fundsequity income funds
Q:
Net asset value takes into account:both realized and unrealized capital gains.only realized capital gains.only unrealized capital gains.neither realized or unrealized capital gains.
Q:
A loading fee is a:type of income tax.management fee.origination fee.sales charge.
Q:
If NAV > market price of a fund, then the fund:
a. is selling at a discount.
b. is selling at a premium.
c. is an index fund.
d. is an ETF.
Q:
A 12b-1 fee is a:redemption fee.sales chargedistribution fee.loading fee.
Q:
No-load funds sell:at net asset value.below net asset value.above net asset value.at a discount.
Q:
No-loads charge no sales fee because:they are legally prohibited from doing so.they charge a redemption fee instead.they have no sales force.they charge a 12b-1 fee instead.
Q:
Which of the following types of mutual fund shares typically does not charge a front-end sales charge but does impose a redemption fee that declines over time?
a. Class A shares
b. Class B shares
c. Class C shares
d. Class D shares
Q:
Which brokerage firm was charged in 2004 with allowing late trading of mutual funds for some of its clients?
a. Merrill Lynch
b. E. F. Hutton
c. Charles Schwab
d. Edward D. Jones
Q:
Which of the following statements regarding fund expenses and performance is true?The higher-performing funds generally have the highest expenses.The stock funds generally have higher expenses than bond funds.The index funds generally have higher expenses than non-index funds.The lower performing funds generally have the highest expenses.
Q:
In the mutual fund industry, the most common performance measure is a hypothetical rate of return which assumes performance is constant over the entire period and is known as the:
a. cumulative total return.
b. average annual total return.
c. total indexed return.
d. compounded geometric return.
Q:
On average, which type of mutual fund is expected to have the highest performance?
a. money market funds
b. bond funds
c. equity funds
d. municipal bond funds
Q:
Single-country funds have traditionally:outperformed international funds.underperformed international funds.been open-end.been closed-end.
Q:
Which of the following types of funds tends to keep 25% of its assets in the securities of U.S. companies?.emerging markets fundssingle-country fundsinternational fundsglobal funds
Q:
The 2 largest fund supermarkets are:
a. Merrill Lynch and Charles Schwab
b. Edward D. Jones and Vanguard
c. Vanguard and Fidelity
d. Charles Schwab and Fidelity
Q:
A portfolio of directly-owned individual securities guided by an investment manager is known as a:
a. IRA.
b. IMA.
c. SMA.
d. DCA.
Q:
Unregulated companies that seek to exploit various market opportunities and require a substantial investment from investors are known as:
a. derivatives.
b. options.
c. hedge funds.
d. SMAs.
Q:
Each investment company investor shares in the returns of the fund's portfolio and also shares in the cost of running the fund.
Q:
To qualify as a regulated investment company, a fund must distribute at least 50 percent of its taxable income to the shareholders.
Q:
Buying shares of a mutual fund is an example of indirect investing.
Q:
Most unit investment trusts are considered active investments.
Q:
Under the Securities Act of 1933, investment companies are required to register with the SEC.
Q:
ETFs are managed investment portfolios that offer investors targeted diversification.
Q:
Many ETFs report little or no capital gains over the years giving them greater tax efficiency than many mutual funds.
Q:
Almost 70 percent of all U.S. households owned mutual funds as of 2005.
Q:
Closed-end investment companies typically sell additional shares of their own stock every few years.