Question 1

Which one of the following statements related to the NYSE Hybrid market is correct?

Accepted Answer

The NYSE Hybrid market is a combination of automated trading and traditional floor trading. Floor brokers operate both electronically and in person, allowing for a mix of human judgement and efficient technology.

Question 2

To be listed on the NYSE, a firm must have at least:

Accepted Answer

The answer of To be listed on the NYSE, a...

Question 3

Which one of the following transactions occurs in the primary market?

Accepted Answer

The primary market is where newly issued securities are sold by the issuer to raise capital. Choice A, B, D, and E are all examples of transactions that occur in the secondary market where already issued securities are being bought and sold among investors.

Question 4

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:

Accepted Answer

Trevor is willing to both sell and purchase shares, which is characteristic of a dealer. A broker would only facilitate the transaction between a buyer and seller, a representative would work on behalf of a firm or investor, an underwriter would facilitate the issuance of new securities, and a floor broker would execute trades on a specific exchange floor.

Question 5

Which one of the following can be assumed when the SEC approves an IPO registration?

Accepted Answer

The SEC approval of an IPO registration means that the issuer has complied with all regulations related to providing full disclosure of information. It does not necessarily guarantee the financial soundness of the issuer or the potential value of the securities offering.

Question 6

How long is the "lock-up" period that is commonly found in an IPO underwriting contract?

Accepted Answer

The "lock-up" period in an IPO underwriting contract typically lasts for six months, during which time company insiders and early investors are not allowed to sell their shares. This is to prevent a flood of shares entering the market immediately after the IPO, which could cause the stock price to drop significantly. After the lock-up period expires, insiders and early investors are free to sell their shares on the open market.

Question 7

What is the current structure of the NYSE?

Accepted Answer

The NYSE is a publicly traded corporation, with its ownership dispersing among shareholders. It was previously a not-for-profit organization owned by its members, but it converted to a for-profit public company in 2006.

Question 8

In 2007, NYSE Holdings merged with which one of the following?

Accepted Answer

NYSE Holdings merged with Euronext, N.V. in 2007.

Question 9

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

Accepted Answer

The duties of a specialist include maintaining an orderly market and providing liquidity to the market. They are not responsible for offering a higher bid price than floor brokers or purchasing all shares offered as limit sells. Therefore, options B, C, D, and E are incorrect.

Question 10

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?

Accepted Answer

When the specialist agrees to "stop" the stock, they are agreeing to purchase the shares if no other buyer is readily available. This ensures that the seller (Lucas) will be able to sell their shares despite there not being an immediate buyer available on the market.

Question 11

Which one of the following has the greatest duty to provide liquidity to the financial market?

Accepted Answer

Designated market makers (DMMs) have the greatest duty to provide liquidity to the financial market. They are responsible for maintaining orderly markets by making continuous, two-sided quotes in assigned securities and facilitating price discovery, among other things.

Question 12

When stocks are held in an index in proportion to their total company market value, the index is:

Accepted Answer

When stocks are held in an index in proportion to their total company market value, it is called value-weighted indexing. This means that the larger the company's market capitalization, the more weight it has in the index.

Question 13

Which one of the following statements concerning the NYSE is correct?

Accepted Answer

The NYSE is part of Intercontinental Exchange, which also operates a stock exchange in Amsterdam among other financial markets and exchanges around the world.

Question 14

Anna is an individual investor. She purchases shares at the _____ price and sells at the _____ price.

Accepted Answer

The answer of Anna is an individual investor. She purchases...

Question 15

Which one of the following statements concerning venture capital is correct?

Accepted Answer

Venture capital is frequently provided in stages with each stage financed by a different venture capitalist. This is known as staged financing and allows venture capitalists to manage risk by providing funding only after certain milestones have been achieved by the startup company. This allows the venture capitalist to limit their exposure while still providing funding to promising startups.

Question 16

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:

Accepted Answer

If some stocks in an index have not traded recently, the index suffers from staleness, meaning it is not up-to-date or current. This can lead to inaccuracies in the overall valuation of the index.

Question 17

In order to currently trade on the floor of the NYSE, members must:

Accepted Answer

The answer of In order to currently trade on the...

Question 18

Which of the following are common sources of venture capital?
I. private individuals
II. NASDAQ
III. university endowment funds
IV. insurance companies

Accepted Answer

Private individuals, university endowment funds, and insurance companies are common sources of venture capital. NASDAQ is a stock exchange and not a source of venture capital.

Question 19

The SuperDOT system has lessened the role of which one of the following?

Accepted Answer

The answer of The SuperDOT system has lessened the role...

Question 20

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?

Accepted Answer

Faith placed a market order because the shares were immediately sold as soon as the order reached the trading floor at the prevailing market price. A limit order specifies a specific price at which the shares should be sold, and a day order only remains active for the trading day. A short order involves borrowing shares and selling them with the expectation of buying them back at a lower price, and a stop order instructs the broker to sell the shares if they fall to a certain price.

Quiz 5: The Stock Market