Chaminade MBA754/MBA 754 quiz 2 - 87731

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Question 1.1. Exchange traded funds are (Points : 1) mutual funds that trade on the Big Board. baskets of securities that trade like a single stock. index funds that trade on the NYSE. groups of securities that trade only on regional exchanges. Question 2.2.Federal laws that control the sale of securities are called blue sky laws. (Points : 1) True False Question 3.3.Margin trading will magnify losses on a percentage basis. (Points : 1) True False Question 4.4.When a person sells a common stock short, she or he is betting on a price increase within a short period of time. (Points : 1) True False Question 5.5.The primary market for futures is the (Points : 1) Kansas City Board of Trade. New York Mercantile Exchange. Chicago Board of Trade. Chicago Board Options Exchange. Question 6.6.Short selling requires the borrowing of securities. (Points : 1) True False Question 7.7.Which one of the following is a major disadvantage of margin trading? (Points : 1) reduction in potential diversification reduction in potential profits on a percentage basis possibility of magnified losses on a percentage basis high rate of interest charged on the loans Question 8.8. Jennifer expects the price of a stock to decrease over the next month. Which one of the following strategies would allow Jennifer to earn a profit if the expected decrease actually occurs? (Points : 1) take a long position in the stock today sell the stock short today buy the stock on margin today take a long position in the stock one month from today Question 9.9. Options are contracts that guarantee the delivery of a specified commodity or financial instrument at a specific future date at an agreed-upon price. (Points : 1) True False Question 10.10.The financial markets are becoming more globally integrated. (Points : 1) True False Question 11.11. A company must observe a quiet period from the time it files a registration statement with the SEC until at least one month after an IPO is complete. (Points : 1) True False Question 12.12.The majority of bonds trade in the OTC market. (Points : 1) True False Question 13.13.The price an individual investor will pay to purchase a stock in the OTC market is the (Points : 1) spread. ask price. bid price broker price Question 14.14.Only U.S. corporations can list their stocks on the NYSE. (Points : 1) True False Question 15.15.The automated system for trading highly active OTC securities is the (Points : 1) Big Board. Kansas City Board Chicago Board of Trade Nasdaq Question 16.16.The Sarbanes-Oxley Act of 2002 focuses on (Points : 1) insider trading. IPOs accounting and other public disclosures of information. regulation of the OTC markets. Question 17.17. Assume the foreign exchange rate for the euro was US $1.00 = 1.13 euro last month. This month, the exchange rate is US $1.00 = 1.09 euro. This information indicates that over the past month the (Points : 1) US dollar remained unchanged relative to the euro. US dollar appreciated relative to all foreign currencies. euro appreciated relative to the dollar. euro depreciated relative to the dollar. Question 18.18. It can be argued that an IPO was underpriced when the IPO produces extraordinarily high rates of return on its first day of trading. (Points : 1) True False Question 19.19.Which one of the following statements about foreign investments is true? (Points : 1) In general, major foreign markets always tend to underperform the US market. Investing in foreign markets may involve specific risks not encountered with domestic securities. Investing in foreign markets will always produce higher returns because of exchange rate fluctuations. Foreign markets include equity securities only. Question 20.20.Margin trading requires the borrowing of securities. (Points : 1) True False
Solution Description

Question 1.1. Exchange traded funds are (Points : 1)

mutual funds that trade on the Big Board.

baskets of securities that trade like a single stock.

index funds that trade on the NYSE.

groups of securities that trade only on regional exchanges.

Question 2.2.Federal laws that control the sale of securities are called blue sky laws. (Points : 1)

True

False

Question 3.3.Margin trading will magnify losses on a percentage basis. (Points : 1)
True

False

Question 4.4.When a person sells a common stock short, she or he is betting on a price increase within a short period of time. (Points : 1)

True

False

Question 5.5.The primary market for futures is the (Points : 1)

Kansas City Board of Trade.

New York Mercantile Exchange.
Chica

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