Deck 15: Investing in Stocks

Question 1

NASDAQ has less stringent trading requirements than the organized exchanges and tends to attract newer,high-tech companies.

Answer 1

True

Question 2

The stock exchange that is the largest in terms of dollar volume is the

A) NYSE.
B) NYSE MKT LLC.
C) NASDAQ.
D) Securities and Exchange Commission (SEC).

Answer 2

NYSE.

Question 3

Floor traders on the NYSE are willing to trade stocks for others and earn a commission for doing so.

Answer 3

True

Question 4

Most newly public companies list their IPO shares on the

A) NYSE MKT LLC.
B) NASDAQ.
C) NYSE.
D) Over the Counter market.

Question 5

NASDAQ is a key part of the ________ where dealers conduct stock trades over a computer network.

A) Intercontinental Exchange
B) over-the-counter (OTC) market
C) NYSE MKT LLC
D) mortgage market

Question 6

The stock exchange with the most stringent listing requirements is the

A) NASDAQ.
B) NYSE MKT LLC.
C) NYSE.
D) Securities and Exchange Commission (SEC).

Question 7

The ________ is/are not a physical location,but rather an electronic communications network to buy and sell stocks.

A) NYSE
B) NYSE MKT LLC
C) NASDAQ
D) Securities and Exchange Commission (SEC)

Question 8

The largest stock exchange in the United States is the ________.

Question 9

People who execute stock trades for others at the NYSE are called

A) day traders.
B) floor traders.
C) stock traders.
D) commission traders.

Question 10

The NYSE MKT LLC (formerly called the American Stock Exchange)is the largest of the physical stock exchanges.

Question 11

In the U.S.,IPO shares are generally listed on the ________ because the listing requirements are ________.

A) NASDAQ; less stringent
B) NYSE MKT LLC; less stringent
C) NYSE; more stringent
D) Amex; flexible

Question 12

Computer systems that match up purchases and sales of stocks even at night when the other exchanges are closed are

A) the NASDAQ.
B) the over-the-counter (OTC) markets.
C) electronic communication networks.
D) the regional stock exchanges.

Question 13

A ________ trader helps create a market in one or more stocks by taking an opposite position to the orders placed by clients.

A) day
B) stock
C) floor
D) specialist

Question 14

A stock dividend is distributed to the company's

A) individual creditors.
B) bank lenders.
C) suppliers.
D) stockholders.

Question 15

Use the following two columns of items to answer the matching questions below:
NYSE

A)a computerized network for buying and selling stocks
B)the oldest and most popular organized stock exchange

Question 16

Use the following two columns of items to answer the matching questions below:
NASDAQ

A)a computerized network for buying and selling stocks
B)the oldest and most popular organized stock exchange

Question 17

Some traders,called specialists,help to make a market in stocks by taking the same position as those who want to buy or sell the stock.

Question 18

Long established,"blue chip" companies list their shares on the

A) NYSE MKT LLC.
B) Over the Counter market.
C) NYSE.
D) NASDAQ.

Question 19

A ________ executes trades to fulfill orders placed by other investors.

A) day trader
B) stock trader
C) floor trader
D) specialist

Question 20

On the over-the-counter market trades are executed by

A) market makers.
B) day traders.
C) floor traders.
D) specialists.

Question 21

Stocks that are subject to more uncertainty tend to have a

A) wider range in prices over time.
B) narrower range in prices over time.
C) higher closing price.
D) higher annual dividend.

Question 22

Use the exhibit below to answer the following question(s):

How many shares of Drizel were traded the previous day?

A) 454,900
B) 487,800
C) 873,200
D) 8,732

Question 23

The daily stock quotations found in financial newspapers will tell you the closing price per share of stock for the previous day's trading,the range of prices the stock traded at the previous day,and a range of trading prices for the last year.

Question 24

Use the exhibit below to answer the following question(s):

What was the closing price per share for Drizel on the day before the trading shown on this listing?

A) $45.49
B) $45.69
C) $45.29
D) $48.78

Question 25

If you had 100 shares of Acarz,how much would you expect to receive in dividends annually?

A) $100
B) $10
C) $1,114
D) $1,000

Question 26

A discount brokerage firm executes transactions and provides investment advice at a price less than that of full-service brokers.

Question 27

The most up-to-date quotes of stock prices may be found in The Wall Street Journal.

Question 28

The daily stock quotations found in financial newspapers will not tell you the annual dividends paid per share of stock.

Question 29

Companies A and B are both in the same industry and generally compete against each other in the marketplace.Stock A has a P/E ratio of 15 while Stock B's P/E is 21.Which of the following is not true about the relative positioning of Stock A and Stock B?

A) Stock B has lower perceived risk.
B) Investor's are willing to pay a higher price for shares in Company B.
C) Company A business performance is probably not as strong as Company B performance.
D) All of the statements are correct.

Question 30

Use the exhibit below to answer the following question(s):

Approximately how much did Bixto Company earn per share of common stock during the last year?

A) $1.00
B) $15.00
C) $.44
D) $7.22

Question 31

Which of the following stocks performed the best today relative to its closing price on the previous day?

A) Acarz
B) Bixto
C) Drizel
D) Mavit

Question 32

Some investors use ________ as a simple measure of the firm's risk.

A) a stock's dividend yield
B) a stock's trading volume
C) a stock's price range
D) a stock's closing price

Question 33

Company X pays out 100% of its earnings in the form of annual dividends.Last year,the company paid $5.25 in dividends for the year.If the stock price is $105 per share,what is the "trailing" P/E?

A) 15
B) 10
C) 17.5
D) 20

Question 34

If you don't need advice or other services offered,you are better off using a discount broker or Internet broker rather than a full-service broker.

Question 35

What is the highest price paid for a share of Acarz stock in the last 52 weeks?

A) $8.22
B) $11.14
C) $12.00
D) $10.00

Question 36

The yield represents which of the following?

A) Earnings per share
B) Dividend payment
C) Annual return from dividends
D) Market price

Question 37

If a stock is near it's 52 week low,that means the stock

A) is trading at its lowest volume for past year.
B) has a stock price that is near the lowest for the past year.
C) is reflecting very low sales for the company that issued the stock.
D) is a high risk investment.

Question 38

Which of the following is not a good source of current stock quotations?

A) Newspapers, such as The Wall Street Journal
B) Magazines that focus on success stories of new businesses
C) Financial news television networks, such as CNBC
D) Web sites such as Yahoo Finance or Bloomberg

Question 39

A PE of 10 means that the firm's stock price is ten times the firm's

A) earnings per share.
B) book value.
C) net income.
D) dividends.

Question 40

A company's earnings are $3 per share,its dividend is $2 per share,and its stock price is $30 per share.Its PE ratio is

A) 15.
B) 10.
C) 1.5.
D) 33.

Question 41

When you buy a stock on margin,your gain is magnified if the stock goes up in value.

Question 42

You can currently borrow up to 75% of stock transactions under today's margin rules.

Question 43

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

A) follow instructions to set up an account.
B) mail or deposit cash in an account.
C) go to the Web site.
D) deposit a minimum number of shares already owned.

Question 44

A round lot of stock is ________ shares.

A) 10
B) 100
C) $100 worth of
D) $1,000 worth of

Question 45

A market order is normally executed much more quickly than a limit order.

Question 46

A stop order is a special form of limit order; it is an order to execute a transaction when the stock price reaches a specified level.

Question 47

A margin call is a request from a brokerage firm for the investor to increase the cash in the account in order to bring the margin back up to the minimum level.

Question 48

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

A) money market fund for uninvested cash.
B) a personal sales representative to answer your questions.
C) quick and convenient trades.
D) very low cost trades.

Question 49

Online trading of stocks is not only less expensive than using traditional brokers,but is usually more convenient too.

Question 50

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

A) discount brokerage firm.
B) full-service brokerage firm.
C) online brokerage service.
D) commercial bank trust department.

Question 51

Limit orders can only be placed for a short period of time,usually a week or less.

Question 52

Some stockbrokers or analysts encourage frequent buying and selling of your securities which may cause you to

A) increase your profit margin.
B) pay less commissions.
C) incur additional tax liabilities.
D) reduce your risk of loss.

Question 53

When you place an order to buy or sell stock,you must specify all of the following except

A) the commission you are willing to pay.
B) whether the order is a market order or a limit order.
C) the ticker symbol.
D) whether you are buying or selling.

Question 54

Fees charged by brokerage firms

A) are set by the NYSE.
B) are set by the Federal Reserve.
C) are set by the National Association of Securities Dealers.
D) vary according to the services offered.

Question 55

In getting recommendations from brokers and analysts,you need to be careful that frequent suggestions to buy or sell are not being made in order to generate revenues for these traders.

Question 56

An odd lot is the purchase of less than 100 shares of stock.

Question 57

Stocks are usually bought or sold in round lots,which are multiples of $100.

Question 58

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

A) company
B) ticker
C) graphic
D) numeric

Question 59

Unlike discount brokers,full-service brokers

A) give stock advice to their clients.
B) execute stock trades quickly.
C) charge competitive rates.
D) seldom meet with clients.

Question 60

If you want recommendations you can

A) trade with an online broker.
B) open an account at a full-service brokerage firm.
C) visit the SEC Web site.
D) contact a discount broker.

Question 61

Use the following two columns of items to answer the matching questions below:
market order

A)a brokerage firm that provides advice plus transaction services
B)a brokerage firm that executes transactions without giving advice
C)purchasing stock with funds borrowed from a brokerage firm
D)an order to buy or sell at the prevailing market price
E)an order to sell stock when the price falls to a specified level

Question 62

All of the following are odd lots except

A) 99 shares.
B) 189 shares.
C) 200 shares.
D) 970 shares.

Question 63

Use the following two columns of items to answer the matching questions below:
discount brokerage firm

A)a brokerage firm that provides advice plus transaction services
B)a brokerage firm that executes transactions without giving advice
C)purchasing stock with funds borrowed from a brokerage firm
D)an order to buy or sell at the prevailing market price
E)an order to sell stock when the price falls to a specified level

Question 64

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

Question 65

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

A) stop order
B) buy stop order
C) sell stop order
D) go order

Question 66

Use the following two columns of items to answer the matching questions below:
full-service broker

A)a brokerage firm that provides advice plus transaction services
B)a brokerage firm that executes transactions without giving advice
C)purchasing stock with funds borrowed from a brokerage firm
D)an order to buy or sell at the prevailing market price
E)an order to sell stock when the price falls to a specified level

Question 67

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

A) stop order
B) buy stop order
C) sell stop order
D) go order

Question 68

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

A) market order.
B) sell stop order at $100 a share.
C) buy stop order at $100 a share.
D) sell stop order at $150 a share.

Question 69

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

Question 70

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?

A) $1,500
B) $3,000
C) $5,000
D) None-you already have $5,000 in your account.

Question 71

A stock that you purchased at a price of $22 per share has risen to $46 per share.You wish to avoid losing all of your your profit while still allowing an opportunity for additional gains; therefore,you should put in a sell stop order at a price of

A) $22 per share.
B) $40 per share.
C) $47 per share.
D) $53 per share.

Question 72

How much cash would you need to purchase 500 shares of stock at $21 per share plus brokerage commissions of $125,if you purchase on margin and the margin requirement is 50%?

A) $10,625
B) $5,312.50
C) $10,500
D) $5,250

Question 73

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

A) limit
B) stock
C) market
D) written

Question 74

Use the following two columns of items to answer the matching questions below:
sell stop order

A)a brokerage firm that provides advice plus transaction services
B)a brokerage firm that executes transactions without giving advice
C)purchasing stock with funds borrowed from a brokerage firm
D)an order to buy or sell at the prevailing market price
E)an order to sell stock when the price falls to a specified level

Question 75

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

Question 76

You purchase 300 shares of stock on margin at a price of $42 per share plus $150 in brokerage commissions at a time when the margin requirement is 50%.How much additional cash would you need to deposit with your broker if the price of the stock dropped to $37 per share?

A) $825
B) $1,500
C) $1,650
D) $5,550

Question 77

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

A) limit
B) stock
C) market
D) written

Question 78

Which of the following is the most risky?

A) Buying stocks online
B) Buying on margin
C) Buying from a broker
D) Buying a bond

Question 79

T is the ________ for American Telephone and Telegraph Company.

Question 80

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

A) 40%.
B) 50%.
C) 60%.
D) 75%.