Question 1

At the market close on June 13, 2019 Apple Inc. (AAPL) common stock was trading at an ask price of $191.10 and a bid price of $190.35. Apple's previous closing price was $194.19. What is the bid/ask spread of Apple?

Accepted Answer

The bid/ask spread is calculated by subtracting the bid price from the ask price, which is $191.10 - $190.35 = $0.75.

Question 2

In recent years

Accepted Answer

There has been a major consolidation of trading venues, with mergers and acquisitions leading to fewer, larger exchanges and trading platforms.

Question 3

At the market close on June 13, 2019 Alphabet Inc. (GOOG) common stock was trading at an ask price of $1,099.99 and a bid price of $1,082.04. What is the bid/ask spread?

Accepted Answer

The bid/ask spread is calculated by subtracting the bid price from the ask price. Therefore, $1,099.99 (ask price) - $1,082.04 (bid price) = $17.95.

Question 4

Diversification is the inclusion of a number of different investments in a portfolio with the goal of reducing risk.

Accepted Answer

Diversification spreads investments across various financial instruments, industries, and other categories to reduce exposure to any single asset or risk, aiming to lower the overall risk of the portfolio.

Question 5

Which of the following are correct statements concerning the NYSE?
I. Each stock has a designated location, called a post, at which its shares are traded.
II. The NYSE is a dealer market.
III. Supply and demand determines the price of each security.
IV. A designated market maker buys and sells to maintain a market for a particular security.

Accepted Answer

I, III, and IV are correct. The NYSE operates with designated locations (posts) for trading specific stocks, prices are determined by supply and demand, and designated market makers help maintain liquidity. The NYSE is not a dealer market; it is an auction market.

Question 6

The dominant exchange for trading options contracts is the . The dominant player in the trading of futures contracts is .

Accepted Answer

The dominant exchange for trading options contracts is the Chicago Board Options Exchange (CBOE), and the dominant player in the trading of futures contracts is the Chicago Mercantile Exchange (CME) Group.

Question 7

Which of the following is currently a requirement for a stock to be listed on the NYSE?

Accepted Answer

The New York Stock Exchange (NYSE) has various requirements for a stock to be listed, including financial, liquidity, and corporate governance criteria. Among the options provided, having a global market capitalization of at least $200 million is a requirement for listing on the NYSE. This criterion helps ensure that only companies of a certain size and stability are listed, reflecting their ability to meet the exchange's standards for financial health and operational capacity.

Question 8

The ask price is always _______ the bid price.

Accepted Answer

The ask price is always higher than the bid price. This is because the ask price represents the minimum price a seller is willing to accept for an asset, while the bid price is the maximum price a buyer is willing to pay. The difference between these prices is known as the spread.

Question 9

Participation in foreign stock markets is complicated and expensive for American investors.

Accepted Answer

American investors can easily participate in foreign stock markets through various means such as American Depositary Receipts (ADRs), mutual funds, exchange-traded funds (ETFs), and direct investments on platforms that offer international trading, often without significant complications or expenses.

Question 10

Which of the following are associated with bull markets?
I. investor pessimism
II. government stimulus
III. economic recovery
IV. low inflation

Accepted Answer

Bull markets are characterized by rising stock prices and investor optimism. Government stimulus, economic recovery, and low inflation are all factors that can contribute to a bull market.

Question 11

The price an individual investor will pay to purchase a stock in the OTC market is the

Accepted Answer

The ask price is the price at which an individual investor can buy a stock in the OTC (Over-The-Counter) market. It is the lowest price a seller is willing to accept for their shares.

Question 12

The dominant options exchange is the

Accepted Answer

The Chicago Board Options Exchange (CBOE) is the largest options exchange in the world and is considered the dominant marketplace for trading options.

Question 13

Large technology companies such as IBM and Microsoft trade

Accepted Answer

Large technology companies like IBM and Microsoft have the flexibility to trade on either the NASDAQ or the NYSE, depending on various factors including their preferences, strategic considerations, and historical listings. These companies are not restricted to a single exchange.

Question 14

Which of the following are associated with bear markets?
I. investor pessimism
II. rising profits
III. economic slowdown
IV. rising security prices

Accepted Answer

Bear markets are typically characterized by investor pessimism and economic slowdowns, not rising profits or security prices.

Question 15

The NYSE Euronext includes exchanges in all of the following cities EXCEPT

Accepted Answer

The NYSE Euronext, before its acquisition by Intercontinental Exchange, included exchanges in several European cities such as Amsterdam, Brussels, and Paris, but it did not include an exchange in Tokyo. Tokyo has its own separate exchange, the Tokyo Stock Exchange (TSE).

Question 16

Options contracts on stocks may

Accepted Answer

Options contracts can be either call options, which give the right to buy, or put options, which give the right to sell, at a specified price within a specified time frame.

Question 17

ECNs are

Accepted Answer

ECNs, or Electronic Communication Networks, are networks that facilitate trading between institutional investors by directly matching buy and sell orders. They are used primarily for trading stocks and currencies outside of traditional stock exchanges.

Question 18

The automated system for trading highly active regulated OTC securities is the

Accepted Answer

The OTC Bulletin Board (OTCBB) is an electronic system for trading over-the-counter securities that are highly active and regulated, providing investors with current prices.

Question 19

The financial markets are becoming more globally integrated.

Accepted Answer

Advancements in technology, deregulation of financial markets, and increased trade have facilitated greater global integration of financial markets, allowing for more seamless cross-border transactions and investments.

Question 20

A market where securities are are bought from or sold to a market maker is known as a

Accepted Answer

In a dealer market, securities are bought and sold through dealers who buy and sell for their own accounts, unlike a broker market where transactions are made on behalf of clients.

Quiz 2: Securities Markets and Transactions