Question 1

A ________ order is an order to execute a transaction to buy or sell a stock at its prevailing price.

Accepted Answer

A market order is an order to buy or sell a stock at its current market price. It is executed immediately and filled at the best available price. This is different from a limit order, where the investor specifies a price at which they are willing to buy or sell the stock.

Question 2

A round lot of stock is ________ shares.

Accepted Answer

A round lot of stock is typically considered to be 100 shares.

Question 3

A ________ is an order for a brokerage firm to sell a stock when the price falls to a specified level.

Accepted Answer

A sell stop order is an order for a brokerage firm to sell a stock when the price falls to a specified level. A stop order becomes a market order once the stop price is reached, and it will be executed at the next available market price, which may be different from the stop price. A buy stop order is an order to purchase a stock at a specified price above the current market price, while a go order is not a recognized term in the stock market.

Question 4

The Federal Reserve currently limits the margin rate,the amount that can be borrowed from the brokerage firm,to ________ percent.

Accepted Answer

The Federal Reserve currently limits the margin rate, or the amount that can be borrowed from the brokerage firm, to 50%. This means that an investor can borrow up to 50% of the total value of securities they want to purchase, but they must put up the other 50% as collateral. This is done to reduce the risk of investor losses and prevent excessive speculation in the market.

Question 5

To start an online brokerage account,you need to do all of the following except

Accepted Answer

Depositing a minimum number of shares already owned is not a requirement for opening an online brokerage account. The other options are necessary steps for setting up an account.

Question 6

A ________ order is an order to execute a transaction to buy or sell a stock only if the price is within the range specified.

Accepted Answer

A limit order is an order to execute a transaction to buy or sell a stock only if the price is within the range specified. Limit orders provide investors with more control over the price at which their trade is executed.

Question 7

You made a $10,000 stock purchase on margin (50%).You put $5,000 into your account initially to cover the purchase.Your stock has declined in value to $7,000 and you receive a margin call.How much cash must you put into your account as a result of the margin call?

Accepted Answer

The maintenance margin requirement is typically 25%. After the stock declines to $7,000, the equity in the account is $2,000 ($7,000 - $5,000 borrowed). To meet the maintenance margin, you need 25% of $7,000, which is $1,750. You already have $2,000 in equity, so you don't need to add more to meet the maintenance margin. However, the question asks how much you must add as a result of the margin call, which seems to imply a different margin requirement or misunderstanding. Given the standard options, none directly apply to the typical maintenance margin scenario. Assuming a different margin requirement or a specific requirement from the broker that necessitates adding funds to avoid liquidation, without explicit details, the closest standard answer reflecting a need to add funds based on the given options and a potential misunderstanding of the margin call process would be $1,500, as it's the only option that suggests adding funds. However, this does not align with standard margin call calculations and should be clarified with the correct margin requirements.

Question 8

If you are a day trader you would probably utilize a(n)

Accepted Answer

Day traders usually require fast and efficient trading platforms, which are readily available through online brokerage services. Discount brokerage firms may also be a good option for day traders as they offer lower fees and commissions. Full-service brokerage firms and commercial bank trust departments may not provide the necessary technology or flexibility needed for day traders.

Question 9

A ________ is an order for a brokerage firm to buy a stock when the price rises to a specified level.

Accepted Answer

A buy stop order is an order for a brokerage firm to buy a stock when the price rises to a specified level. A stop order is a type of order used to limit potential losses on a stock position, while a buy stop order is used to initiate a new position or to add to an existing position when the price goes up. A sell stop order is used to limit potential losses on a long position when the price falls below a certain level. A go order is not a known type of order in the context of stock trading.

Question 10

You bought IBM stock at $70 per share.It is now $120 a share.You think it could go higher but you are nervous that it could go down and you would lose your gains.To protect your gains but still give yourself the chance to make future profits you could place a

Accepted Answer

A sell stop order at $100 a share would allow you to protect your gains by selling the stock if it drops to $100 a share. This guarantees that you will lock in some profit and not lose all of your gains. Additionally, it still gives you the chance to make future profits if the stock continues to rise. A buy stop order or market order would not protect your gains if the stock drops, and a sell stop order at $150 a share may be too high and could cause you to lose some or all of your gains.

Question 11

The purchase of 48 shares of stock is considered a(n)________ transaction.

Accepted Answer

The answer of The purchase of 48 shares of stock...

Question 12

A stock purchased at a price of $22 per share,has risen to $46 per share.You wish to avoid losing your profit; therefore,you should put in a sell stop order at a price of
(a)$22 per share
(b)$40 per share
(c)$43 per share
(d)$46 per share

Accepted Answer

The answer of A stock purchased at a price of...

Question 13

A brokerage firm that executes your transactions without offering investment advice is a(n)________.

Accepted Answer

The answer of A brokerage firm that executes your transactions...

Question 14

All of the following are odd lots except

Accepted Answer

An odd lot is a number of shares that is not a multiple of 100. 
99 shares and 189 shares are both odd lots because they are not divisible by 100. 
970 shares is not an odd lot because it is divisible by 100 (9.7 lots of 100 shares). 
Therefore, the best choice is C, 200 shares, because it is a multiple of 100 and therefore not an odd lot.

Question 15

With an online brokerage firm,you have all of the following except

Accepted Answer

Online brokerage firms typically do not provide a personal sales representative as they are designed for self-directed investing. The other options are commonly offered by online brokerage firms.

Question 16

T is the ________ for American Telephone and Telegraph Company.

Accepted Answer

The answer of T is the ________ for American Telephone...

Question 17

Which of the following is the most risky?

Accepted Answer

Buying on margin involves borrowing money to buy stocks, which increases the risk of losses. The other options (buying stocks online, buying from a broker, and buying a bond) may still carry some level of risk, but not as much as buying on margin.

Question 18

A ________ symbol is used to identify a stock for trading purposes.

Accepted Answer

A ticker symbol is a unique series of letters assigned to a security for trading purposes. It helps investors and traders to quickly identify and track the performance of a particular stock.

Question 19

Compare and contrast a full-service brokerage firm to a discount brokerage firm.

Accepted Answer

The answer of Compare and contrast a full-service brokerage firm...

Question 20

If you purchase stock ________ you are doing so with a portion of the funds borrowed from your broker.

Accepted Answer

The answer of If you purchase stock ________ you are...

Quiz 15: Investing in Stocks