Q&A Hero

Q: The price-book ratio is computed as the market value per share divided by the per share book value of: A. total assets. B. long-term debt. C. equity. D. long-term debt plus equity. E. net working capital.

Q: Growth stocks are frequently described as having which one of the following characteristics? A. high dividends B. a value orientation C. high P/E ratios D. low cash flows per share E. low retention ratios

Q: The net income per share divided by the market price per share is called the: A. profit margin. B. profit yield. C. market yield. D. earnings yield. E. income ratio.

Q: Describe the primary advantage and disadvantage of a limit sell order.

Q: Describe some of the recent changes in the structure and operations of the NYSE.

Q: An order book displays the following information:You place an order to sell 100 shares. At what price will your order be executed?A. $18.05B. $18.06C. $18.07D. $18.11E. $18.12

Q: An order book displays the following information:You place a market order to buy 100 shares. At what price will your order be executed?A. $18.13B. $18.14C. $18.16D. $18.17E. $18.18

Q: Yesterday, the DJIA closed at 12,309.16. The divisor is 0.123017848. Today, every one of the stocks in the index increased in value by $0.40 a share. What is the value of today's closing DJIA? A. 12,367 B. 12,407 C. 12,442 D. 12,564 E. 12,571

Q: Assume the DJIA closed at 15,150 last night. The divisor is 0.123017848. Assume that 29 of the stocks in the index were unchanged today. One stock increased in value from $44.80 a share yesterday to $47.90 a share today. What is the DJIA index value at the close of trading today? A. 15,175.20 B. 15,208.30 C. 15,365.60 D. 15,412.20 E. 15,524.10

Q: An index has a market value of $689,400 at the beginning of the period and $722,009 at the end of the period. If you want the beginning index value to be 100, what is the ending index value? A. 104.73 B. 105.42 C. 105.67 D. 105.89 E. 106.13

Q: You have the following information:You want the beginning price-weighted index of these two stocks to be 500. Given this, what is the ending index value?A. 408.33B. 487.08C. 511.19D. 576.09E. 612.24

Q: You have the following information:You want the beginning price-weighted index of these two stocks to be 100. Given this, what is the ending index value?A. 93.44B. 98.10C. 107.02D. 108.36E. 110.40

Q: An index consists of the following securities. What is the value-weighted index return?A. 3.72 percentB. 5.09 percentC. 6.61 percentD. 8.75 percentE. 10.07 percent

Q: An index consists of the following securities. What is the value-weighted index return?A. -0.43 percentB. -1.46 percentC. 4.43 percentD. 4.51 percentE. 4.62 percent

Q: An index consists of the following securities. What is the value-weighted index return?A. 12.75 percentB. 15.00 percentC. 16.50 percentD. 18.75 percentE. 25.00 percent

Q: A price-weighted index consists of stocks A, B, and C which are priced at $27, $11, and $18 a share, respectively. The current index divisor is 2.24. If stock B undergoes a 1-for-3 reverse stock split, the new index divisor will be: A. 1.9467. B. 2.1806. C. 2.2000. D. 3.0842. E. 3.1200.

Q: A price-weighted index consists of stocks A, B, and C which are priced at $50, $35, and $15 a share, respectively. The current index divisor is 2.75. What will the new index advisor be if stock A undergoes a 5-for-1 stock split? A. 0.40 B. 0.65 C. 1.00 D. 1.65 E. 1.85

Q: A price-weighted index consists of stocks A, B, and C which are priced at $38, $21, and $26 a share, respectively. The current index divisor is 2.7. What will the new index divisor be if stock B undergoes a 3-for-1 stock split? A. 2.1684 B. 2.2553 C. 2.5890 D. 2.7000 E. 3.1447

Q: An index consists of the following securities and has an index divisor of 2.0. What is the price-weighted index return?A. -0.69 percentB. -0.18 percentC. 0.00 percentD. 0.22 percentE. 0.31 percent

Q: An index consists of the following securities and has an index divisor of 3.0. What is the price-weighted index return?A. -4.76 percentB. -2.05 percentC. 3.09 percentD. 5.17 percentE. 7.48 percent

Q: An index consists of the following securities and has an index divisor of 3.0. What is the price-weighted index return?A. 9.33 percentB. 10.35 percentC. 11.54 percentD. 12.33 percentE. 13.00 percent

Q: An index consists of the following securities and has an index divisor of 3.0. What is the price-weighted index return?A. 9.43 percentB. 9.67 percentC. 10.53 percentD. 10.91 percentE. 11.03 percent

Q: Juno Markets is offering 900 shares in a Dutch auction IPO. The following bids have been received:How much will Bidder B have to spend to purchase all of the shares that have been allocated to him?A. $4,050.00B. $4,212.00C. $4,800.00D. $5,200.00E. $5,700.00

Q: Mason Materials is offering 800 shares in a Dutch auction IPO. The following bids have been received:How many shares will be allocated to Bidder A?A. 0B. 80C. 125D. 145E. 200

Q: Cee The Moon is offering 700 shares in a Dutch auction IPO. The following bids have been received:How much will Cee The Moon receive from this offering if the underwriter's fee is 5.5 percent?A. $9,905.75B. $9,440.60C. $10,184.25D. $11,245.50E. $12,095.30

Q: DT Metals is offering 700 shares in a Dutch auction IPO. The following bids have been received:What will the gross proceeds be for this offering?A. $12,000B. $12,600C. $13,200D. $13,300E. $14,700

Q: ML Underwriters paid an issuer $37,694,528 as IPO proceeds. The IPO offered 1.86 million shares of which 1.835 million were sold at an offer price of $21.85 a share. The underwriting spread was 7.25 percent. What type of underwriting was this? A. best efforts B. variable C. firm commitment D. plain vanilla E. stand-by

Q: A best efforts IPO underwriting consisted of 2.2 million shares at an offer price of $17 a share. The underwriter's fee was set at 6.65 percent. How many shares were sold if the issuer received $31,926,260.10? A. 2,011,800 shares B. 1,878,015 shares C. 1,760,915 shares D. 2,346,300 shares E. 2,053,700 shares

Q: In a recent IPO, the Sausage Co. offered 1.4 million shares of stock at an offer price of $16 a share. The underwriting was conducted on a best efforts basis with a spread of 7.0 percent. The Sausage Co. received a total of $20,079,868.00 in sale proceeds. How many shares were sold? A. 1,349,453 shares B. 1,486,500 shares C. 1,498,200 shares D. 1,505,700 shares E. 1,508,400 shares

Q: Reliant Underwriters has agreed to a firm commitment underwriting in which they will pay $36.75 million in exchange for 3 million shares of stock for an IPO offering. The offering price is expected to be $13.50 a share. How much will the underwriters earn if all of the shares can be sold? A. $1.25 million B. $2.75 million C. $3.75 million D. $4.25 million E. $4.50 million

Q: Alco Metals just sold 2.5 million shares through an IPO offering. The shares were offered at $25.50 a share and all shares were sold. The firm received a total of $67,250,000 for this issue. What was the spread? A. 5.49 percent B. 6.25 percent C. 6.40 percent D. 7.00 percent E. 7.20 percent

Q: Which one of the following statements related to stock indexes is correct? A. The index divisor increases in value whenever a stock in the index undergoes a stock split. B. A value-weighted index includes both dividends and capital gains. C. The S&P 500 index is value-weighted. D. The DJIA is value-weighted. E. Index staleness is more apt to be a problem for the DJIA than for the Wilshire 5000.

Q: Which one of the following is the primary flaw of a price-weighted index? A. Price-weighted indexes ignore stock splits which affect stock prices. B. The effect a company has on the index is dependent solely on the price per share. C. Only a small number of stocks can be included in a price-weighted index. D. If the number of shares outstanding of an index stock changes, the index divisor must be recomputed. E. The index can only be computed once the trading day is over.

Q: Stock market indexes: A. are all computed using the same methodology. B. all react the same to a change in the price of a particular stock. C. all cover the same market sectors. D. are all price-weighted. E. vary in the type of stocks included.

Q: The DJIA is an index of the stock prices of _____ firms. A. 25 B. 30 C. 50 D. 100 E. 500

Q: Which of the following are common characteristic of the OTCBB market? I. low stock prices II. dual listings with NASDAQ III. high percentage price changes IV. thinly traded securities A. I and III only B. I, II, and III only C. I, III, and IV only D. II, II, and IV only E. I, II, III, and IV

Q: The stocks listed on the Pink Sheets: A. are those stocks trading on the NASDAQ CAPITAL MARKET. B. do not have to file financial statements with the SEC. C. have all been delisted by the NYSE. D. are the highest priced stocks listed on NASDAQ. E. must file financial statements with the SEC but do not have to meet any listing requirements.

Q: Stocks which are listed on the NYSE can:A. not be listed on any other exchange.B. only be dual listed on a regional exchange.C. only be dual listed on Instinet.D. only be dual listed on the Archipelago Exchange.E. also be listed on NASDAQ.

Q: The orders displayed on NASDAQ are placed by: A. individuals on ECNs only. B. market makers only. C. both market makers and individuals on ECNs. D. brokerage firms. E. floor brokers.

Q: Which one of the following statements concerning NASDAQ is correct?A. The NASDAQ Capital Market has the most stringent listing requirements of any of the NASDAQ companies.B. NASDAQ is actually comprised of four separate markets.C. Microsoft shares are listed on the NASDAQ Global Market.D. NASDAQ has more total dollar volume of trading than does the NYSE.E. There are more companies listed on NASDAQ than on NYSE.

Q: NASDAQ has which of the following characteristics? I. trading floor II. computer network III. specialist system IV. multiple market makers A. I and IV only B. II and IV only C. I, III, and IV only D. II, III, and IV only E. I, II, III, and IV

Q: NASDAQ dealers post which one of the following in addition to their bid and ask prices? A. commission rates B. front-end load charges C. number of shares they will commit to buy or sell D. total trades for the day E. trading fees

Q: Marcus just placed a stop limit order to sell 100 shares at $21 stop, $18 limit. Which one of the following statements is correct concerning this order if the current market price is $16? A. As soon as the price rises to $18, the stock will be sold. B. The stock will sell for at least $18 but less than $21. C. The stock will sell for $18 a share as soon as the price hits $21. D. The order will become a limit order to sell at $21 once the market price reaches $18. E. The order will become a limit order to sell at $18 once the market price reaches $21.

Q: Which one of the following orders is frequently used as a means to limit losses resulting from a short sale? A. limit B. market C. day D. stop-sell E. stop-buy

Q: After the trigger point is reached, a stop-loss order will be executed at the: A. trigger price. B. stop price. C. trigger price or better. D. stop price or better. E. market price.

Q: Kelly wants to sell 600 shares of DeLux stock at the going market price after the stock reaches $42 a share. Which type of order should she place? A. stop B. limit C. market D. fixed E. loss

Q: Steve placed a limit order to sell 500 shares of stock at $14 a share. Which of the following does Steve know for sure? I. His order will execute but the time of execution is unknown. II. His order may never execute. III. He will receive exactly $7,000 if his order executes. IV. He could receive more, but not less, than $14 a share. A. I and III only B. I and IV only C. II and III only D. II and IV only E. I only

Q: Faith placed an order to sell 7,500 shares of stock she currently owned. As soon as the order reached the trading floor, the shares were immediately sold. Which type of order did Faith place? A. limit B. day C. market D. short E. stop

Q: The duties of a specialist include which of the following? I. maintain an orderly market II. offer a higher bid price than the floor brokers III. provide liquidity to the market IV. purchase all shares offered as limit sells A. I and III only B. II and III only C. I, II, and III only D. I, III, and IV only E. I, II, III, and IV

Q: Lucas wants to sell 9,000 shares of stock and places a market order. The floor broker is unable to arrange the sale with another floor broker so the specialist agrees to "stop" the stock. What has the specialist agreed to do? A. cancel the order B. place the order into the order book to hold until an order to buy 9,000 shares is received C. purchase the shares if no other buyer is readily available D. sell the shares to the next available buyer regardless of the price received E. sell the shares at the end of the trading day at the best price available at that time

Q: To be listed on the NYSE, a firm must have at least: A. 2,500 shareholders B. 100,000 shares traded on an average day C. 1.5 million shares held by the public D. $75 million in market value for an IPO E. pre-tax aggregate earnings of $10 million in the previous 3 years

Q: Which one of the following statements related to the NYSE Hybrid market is correct? A. Floor brokers operate both electronically and in person. B. The Hybrid system replaces the market specialists. C. The automated system works better than the specialist for stocks with minimal liquidity. D. The automated system will only replace the specialist in times of market duress. E. Investors can automatically trade an unlimited number of shares.

Q: The SuperDOT system has lessened the role of which one of the following? A. personal financial advisers B. floor traders C. specialists D. floor brokers E. underwriters

Q: Which one of the following has the greatest duty to provide liquidity to the financial market? A. floor broker B. independent broker C. dealer D. designated market maker E. floor trader

Q: In order to currently trade on the floor of the NYSE, members must: A. be registered as a floor trader B. own a seat C. purchase a trading license D. be a specialist E. be designated as a floor broker

Q: In 2007, NYSE Holdings merged with which one of the following? A. NASDAQ B. AMEX C. Chicago Stock Exchange D. London Stock Exchange E. Euronext, N.V.

Q: What is the current structure of the NYSE? A. general partnership B. limited partnership C. non-profit organization D. publicly traded corporation E. government agency

Q: Anna is an individual investor. She purchases shares at the _____ price and sells at the _____ price. A. asked; bid B. average; asked C. bid; asked D. bid; average E. asked; average

Q: Trevor currently owns 545,000 shares of ABC stock. He will sell those shares for $17.10 a share. He is also willing to purchase additional shares for $17.07 a share. Trevor is a securities: A. broker. B. representative. C. underwriter. D. floor broker. E. dealer.

Q: Which one of the following transactions occurs in the primary market? A. sale of stock by Shareholder A to Shareholder B B. gift of shares from a grandmother to her granddaughter C. sale of newly issued shares by the issuer to a shareholder D. sale of shares in the third market E. purchase of shares by a dealer from a shareholder

Q: Which one of the following can be assumed when the SEC approves an IPO registration? A. The securities offering will provide value to the shareholders. B. The issuer is financially sound. C. The issuer will remain solvent. D. All rules have been followed to allow for full disclosure of information. E. The stock price is set at a level which will allow shareholders to earn a positive rate of return.

Q: How long is the "lock-up" period that is commonly found in an IPO underwriting contract? A. one month B. three months C. six months D. one year E. eighteen months

Q: Which one of the following statements concerning venture capital is correct?A. Venture capital is frequently provided in stages with each stage financed by a different venture capitalist.B. Most venture capitalists are passive investors.C. The founders of a firm generally realize substantial payoffs as soon as the firm receives venture financing.D. Venture capitalists generally compete with banks to find projects to finance.E. Well established firms tend to absorb most of the available venture capital.

Q: Which of the following are common sources of venture capital? I. private individuals II. NASDAQ III. university endowment funds IV. insurance companies A. I and II only B. III and IV only C. I, III, and IV only D. I, II, and IV only E. I, II, III, and IV

Q: Which one of the following statements concerning the NYSE is correct? A. The NYSE was created based on the Walnut Tree Agreement. B. The average daily trading volume on the NYSE in 2007 was approximately one billion shares. C. The NYSE and NASDAQ merged in 2007. D. The NYSE is part of a firm that also operates a stock exchange in Amsterdam. E. The NYSE merged with NASDAQ in 2007.

Q: An index is valued on a daily basis. However, some stocks in this particular index have not traded recently. As a result, this index suffers from index: A. fatigue. B. devaluation. C. flatness. D. staleness. E. weighting.

Q: When stocks are held in an index in proportion to their total company market value, the index is: A. dollar-weighted. B. front-weighted. C. back-weighted. D. price-weighted. E. value-weighted.

Q: Which of the following types of indexes is a stock market index in which stocks are held in proportion to their share price? A. balanced B. market-weighted C. dollar-weighted D. price-weighted E. value-weighted

Q: The market where individual investors directly trade exchange-listed securities with other individual investors is referred to as the _____ market. A. home B. independent C. third D. fourth E. SuperDot

Q: The off-exchange market in which exchange-listed securities trade is referred to as the _____ market. A. independent B. secondary C. fourth D. third E. primary

Q: Inside quotes are the: A. highest asked and lowest bid quotes offered by securities dealers. B. highest bid and lowest asked quotes offered by securities dealers. C. latest prices at which corporate insiders have purchased or sold securities. D. bid and asked prices which are offered only to institutional traders or large private investors. E. latest price at which a security traded.

Q: Which one of the following describes an ECN? A. Web site used by investors to trade directly with other investors B. Web site limited to use by professional brokers and dealers C. computerized trading floor D. communications network used by specialists E. cellular trading network

Q: A market centered on dealers buying and selling for their own inventories is called a(n): A. exchange floor. B. SuperDot. C. OTC market. D. subscriber market. E. Big Board.

Q: An order to sell that involves a preset trigger point is called a _____ order. A. limit B. day C. stop D. short E. market

Q: An order to buy shares of stock at a stated price or less is called a _____ order. A. limit B. stop C. market D. short E. bid

Q: You want to sell shares of stock at the current price. Which type of order should you place? A. limit B. post C. market D. short E. stop

Q: The location on an exchange floor where a particular security trades is called a(n): A. specialist's post. B. broker's terminal. C. floor spot. D. exchange spot. E. market pit.

Q: A NYSE member who trades only for his or her own account is called a(n): A. floor trader. B. specialist. C. individual broker. D. floor broker. E. house broker.

Q: The NYSE's Super Display Book is an electronic system which:A. maintains the historical records of each customer's trading activity.B. transmits the latest market information to the news media.C. allows floor traders to execute trades via cell phones.D. tracks the activity on an exchange floor to ensure regulatory compliance.E. is based on NYSE's ARCA electronic trading engine.

Q: A trading floor broker: A. is a NYSE member who trades on the floor for his or her personal account. B. executes orders on behalf of commission brokers in exchange for a fee. C. executes customers' orders in exchange for a commission. D. trades a limited number of securities and is obligated to maintain an orderly market for those securities. E. is any party who owns a NYSE trading license.