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WorksheetsEquity 1.8 01.05
Total questions: 10
Worksheet time: 20mins
Name
Class
Date
1.
Q. Which of the following is not a function of the financial system?
a)
A. To regulate arbitrageurs’ profits (excess returns).
b)
B. To help the economy achieve allocational efficiency.
c)
C. To facilitate borrowing by businesses to fund current operations.
2.
A trader who owns shares of a stock currently trading at $100 per share places a “GTC, stop $90, limit $85 sell” order (GTC means good till cancelled). Assuming the specified stop condition is satisfied and the order becomes executed, which of the following statements is most accurate?
a)
A. The order becomes a market order when the price falls below $85 and remains valid for execution.
b)
B. The trader faces a maximum realized loss of $15.
c)
C. The order will be executed at either $90 or $85.
3.
A trader buys a stock at $64 on margin with a leverage ratio of 2.5 and a maintenance margin of 30%. Below what price will a margin call most likely occur?
a)
A. $36.57.
b)
B. $54.86.
c)
C. $44.80.
4.
a)
A. take the market.
b)
B. make the market.
c)
C. make a new market.
5.
Q. A financial analyst is examining whether a country’s financial market is well functioning. She finds that the transaction costs in this market are low and trading volumes are high. She concludes that the market is quite liquid. In such a market:
a)
A. traders will find it hard to make use of their information.
b)
B. traders will find it easy to trade and their trading will make the market less informationally efficient.
c)
C. traders will find it easy to trade and their trading will make the market more informationally efficient.
6.
Dark pools are best described as:
a)
A. trading venues that exercise little regulatory authority over their subscribers.
b)
B. operated by investment dealers that specialize in high-risk securities.
c)
C. certain groups of similar assets that issue securities representing shared ownership.
7.
Q. A British company listed on AIM (formerly the Alternative Investment Market) of the London Stock Exchange announced the sale of 6,686,665 shares to a small group of qualified investors at £0.025 per share. Which of the following best describes this sale?
a)
A. Shelf registration.
b)
B. Private placement.
c)
C. Initial public offering.
8.
a)
A. £19.70.
b)
B. £19.92.
c)
C. £20.05.
9.
Q. You own shares of a company that are currently trading at $30 a share. Your technical analysis of the shares indicates a support level of $27.50. That is, if the price of the shares is going down, it is more likely to stay above this level rather than fall below it. If the price does fall below this level, however, you believe that the price may continue to decline. You have no immediate intent to sell the shares but are concerned about the possibility of a huge loss if the share price declines below the support level. Which of the following types of orders could you place to most appropriately address your concern?
a)
A. Short sell order.
b)
B. Good-till-cancelled stop sell order.
c)
C. Good-till-cancelled stop buy order.
10.
Q. An investor primarily invests in stocks of publicly traded companies. The investor wants to increase the diversification of his portfolio. A friend has recommended investing in real estate properties. The purchase of real estate would best be characterized as a transaction in the:
a)
A. derivative investment market.
b)
B. traditional investment market.
c)
C. alternative investment market.
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