Deck 3: The Marketplace

Question 1

Facilitating the flow of capital from savers to borrowers is the_____ function of the capital markets.

A) economic
B) fair pricing
C) continuous pricing
D) market efficiency

Answer 1

economic

Question 2

Which of the following is not a function of the capital markets?

A) economic
B) fair pricing
C) continuous pricing
D) zero sum gaming

Answer 2

zero sum gaming

Question 3

Capital market is most likely to finance which of the following?

A) plant and equipment
B) seasonal inventory needs
C) dividend payments
D) the sale of common stock

Answer 3

plant and equipment

Question 4

There are_____ national exchanges in the U.S..

A) two
B) four
C) six
D) eight

Question 5

The specialist system is used at the_____ and_____ exchanges.

A) CBOT, NYSE
B) NYSE, CBOE
C) NYSE, AMEX
D) NYSE, OTC

Question 6

The _____ price is the lowest anyone will sell for, and the_____ price is the highest anyone will pay.

A) bid, spread
B) ask, offer
C) ask, spread
D) ask, bid

Question 7

When 100 shares of stock are sold on the New York Stock Exchange, which of the following type(s) of trading mechanism is used?

A) the specialist system
B) the marketmaker system
C) an electronic system
D) the dual listing system

Question 8

Direct trading between institutions is the_____ market.

A) primary
B) secondary
C) third
D) fourth

Question 9

An electronic system often used for institutional trading is

A) NMS.
B) Instinet.
C) OTC.
D) Nasdaq.

Question 10

Congress established the_____ to promote "honest and open securities markets."

A) SEC
B) NYSE
C) SEA
D) SIPC

Question 11

Illegal market activities include all of the following except

A) bucket shops.
B) Ponzi schemes.
C) program trading.
D) churning.

Question 12

Government agencies such as Ginnie Mae and Fanny Mae facilitate sales of_____ .

A) stocks.
B) bonds.
C) mortgages.
D) options.

Question 13

If the issuing firm's financial statements change because of the sale of stock, the trade was done in the _____ market.

A) primary
B) secondary
C) third
D) fourth

Question 14

The _____ was once known as, and is still sometimes called, the curb exchange.

A) NYSE
B) AMEX
C) CBOE
D) CBOT

Question 15

The mathematical difference between the bid and ask prices is the

A) profit margin.
B) premium.
C) offer.
D) spread.

Question 16

_____ is the electronic system enabling NYSE member firms to send orders directly to specialists on the floor.

A) SuperDot
B) Instinet
C) NMS
D) Open Outcry

Question 17

The smallest and most speculative OTC stocks are _____ stocks.

A) pink sheet
B) penny
C) junk
D) limited ownership

Question 18

The first German stock listed on a U.S. stock exchange was

A) Volkswagen.
B) Daimler-Benz.
C) Aerobus.
D) Merck.

Question 19

The _____ originally involved purchasing International Postal Reply Coupons in one country and redeeming them in another.

A) Crash of 1929
B) New Deal
C) Ponzi scheme
D) Harlem Railway scandal

Question 20

The _____ designation is earned by completing a rigorous three-year study on all aspects of the investment business.

A) CFA
B) CPA
C) CFI
D) AIMR

Question 21

Linking to a recent stock quote on Yahoo Finance is an example of the_____ function of capital markets?

A) economic
B) continuous pricing
C) fair pricing
D) intermediation

Question 22

The fair value of a share of stock traded on the NYSE is best found by:

A) finding the present value of future dividends at an appropriate discount rate.
B) balance sheet assets less liabilities divided by the number of shares outstanding.
C) checking a stock quote on Yahoo Finance.
D) averaging the prices traded during the day.

Question 23

The primary difference between the specialist system and marketmakers system of maintaining a fair and orderly market for a security is:

A) the specialist usually trades multiple securities; the marketmaker, just one.
B) the specialist is located at a specific location; the marketmaker is always involved with multiple market places.
C) the specialist is one person; marketmakers include more than one person.
D) the specialist works at an exchange; the marketmakers do not.

Question 24

The national market issues traded on the Nasdaq market are best characterized as:

A) stocks that are traded by investors representing the entire country.
B) a network of dealers from all over the U.S.
C) new stock issues.
D) the largest and most established companies traded in the Nasdaq market.

Question 25

The Nasdaq Small Cap Market trades stocks of companies that:

A) have a limited number of shares outstanding.
B) have a relatively small total market value of equity.
C) have a small number of dealers who trade the stock.
D) have a relatively small level of debt outstanding.

Question 26

A market order for up to 1000 shares of a company listed on Nasdaq would typically be executed over the:

A) SuperDot System.
B) Instinet System.
C) Small Order Execution System.
D) Specialist System.

Question 27

There are_____ regional stock exchanges in the United States:

A) thirteen.
B) eight
C) five.
D) none following the creation of the Nasdaq Stock Exchange.

Question 28

The most important function of the capital markets is the economic function.

Question 29

Households, private trusts, and non-profit organizations own more stock than pension funds.

Question 30

Most security trading occurs in the secondary market.

Question 31

There are four national exchanges in the United States.

Question 32

The number of members of the New York Stock Exchange increases virtually every year.

Question 33

Synonyms for the New York Stock Exchange are the big board and the curb exchange.

Question 34

A stock specialist is an exchange employee, one of whom must be in every brokerage firm office throughout the country.

Question 35

SuperDot is an electronic trading system at the New York Stock Exchange.

Question 36

The over-the-counter market is located in Philadelphia.

Question 37

The smallest OTC stocks trade in the National Market System.

Question 38

A pink sheet stock is one with extensive research material published by the investment management industry.

Question 39

The third market is the same as the over-the-counter market.

Question 40

Congress established the Securities and Exchange Commission in 1978.

Question 41

A Ponzi scheme involves returning principal and called it profit.

Question 42

Brokers should not engage in account churning.

Question 43

The SIPC protects investors against fraud by their broker.

Question 44

The National Association of Securities Dealers administers the CFA exam.

Question 45

In 1999, nearly 10,000 people were registered in the CFA program.

Question 46

The first CFA charter was awarded in 1963.

Question 47

There are more companies listed on the Nasdaq National Market issues list than the Nasdaq Small Cap Market list.

Question 48

The trading of listed securities in the Nasdaq market is called the third market.

Question 49

Unlike the SEC the NASD is a self-regulatory organization.

Question 50

The Certified Financial Analyst, better known as the CFA, is an important professional credential for stock analysts.

Question 51

A broker earns a commission; a dealer, a spread.

Question 52

The SEC was created by the Securities Act of 1933.