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Exam 3: Securities Markets

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Question 41

Multiple Choice

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The market share held by the "Other" category (which includes dark pools) constitutes roughly ________% of trading volume in NYSE-listed shares.

A) 5%
B) 10%
C) 30%
D) 50%

E) B) and C)
F) None of the above

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Question 42

Multiple Choice

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In a ________ underwriting arrangement, the underwriter assumes the full risk that shares may not be sold to the public at the stipulated offering price.

A) best-efforts
B) firm-commitment
C) private placement
D) none of these options

E) All of the above
F) A) and B)

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Question 43

Multiple Choice

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An investor puts up $5,000 but borrows an equal amount of money from his broker to double the amount invested to $10,000. The broker charges 7% on the loan. The stock was originally purchased at $25 per share, and in 1 year the investor sells the stock for $28. The investor's rate of return was ________.

Restrictions on trading involving insider information apply to: I. Corporate officers and directors II. Major stockholders III. Relatives of corporate directors and officers

On a given day a stock dealer maintains a bid price of $1,000.50 for a bond and an ask price of $1003.25. The dealer made 10 trades that totaled 500 bonds traded that day. What was the dealer's gross trading profit for this security?

Barnegat Light sold 200,000 shares in an initial public offering. The underwriter's explicit fees were $90,000. The offering price for the shares was $35, but immediately upon issue, the share price jumped to $43. What is the best estimate of the total cost to Barnegat Light of the equity issue?

Which one of the following statements about IPOs is not true?

Transactions that do not involve the original issue of securities take place in ________.

You purchased 200 shares of ABC common stock on margin at $50 per share. Assume the initial margin is 50% and the maintenance margin is 30%. You will get a margin call if the stock drops below ________. (Assume the stock pays no dividends, and ignore interest on the margin loan.)

Specialists try to maintain a narrow bid-ask spread because: I. If the spread is too large, they will not participate in as many trades, losing commission income. II. The exchange requires specialists to maintain price continuity. III. Specialists are nonprofit entities designed to facilitate market transactions rather than make a profit.

All major stock markets today are effectively ________.

The ________ is the most important dealer market in the United States, and the ________ is the most important auction market.

Advantages of ECNs over traditional markets include all but which one of the following?

The cost of buying and selling a stock includes: I. Broker's commissions II. Dealer's bid-asked spread III. Price concessions that investors may be forced to make

The commission structure on a stock purchase is $50 plus $.03 per share. If you purchase 600 shares of a stock selling for $65, what is your commission?

You short-sell 200 shares of Tuckerton Trading Co., now selling for $50 per share. What is your maximum possible gain, ignoring transactions cost?

A level ________ subscriber to the NASDAQ system may enter bid and ask prices.

Purchases of new issues of stock take place ________.

The NYSE Hybrid Market allows ________.

SIPC ensures investors against failure of a brokerage firm up to a limit of ________.