Question 1

Which one of the following statements concerning venture capital is correct?
A)Venture capital is frequently provided in stages with each stage financed by a different venture capitalist.
B)Most venture capitalists are passive investors.
C)The founders of a firm generally realize substantial payoffs as soon as the firm receives venture financing.
D)Venture capitalists generally compete with banks to find projects to finance.
E)Well established firms tend to absorb most of the available venture capital.

Accepted Answer

Venture capital is frequently provided in stages, where each stage is financed by a different venture capitalist. This is known as venture capital financing rounds, where startups receive funding from different investors in sequential rounds as they achieve specific milestones or goals. This allows the investors to mitigate their risks and ensures that the startup is making progress before receiving additional funding.

Question 2

Which of the following are common sources of venture capital?
I. private individuals
II. NASDAQ
III. university endowment funds
IV. insurance companies
A)I and II only
B)III and IV only
C)I, III, and IV only
D)I, II, and IV only
E)I, II, III, and IV

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 3

Which one of the following transactions occurs in the primary market?
A)sale of stock by Shareholder A to Shareholder B
B)gift of shares from a grandmother to her granddaughter
C)sale of newly issued shares by the issuer to a shareholder
D)sale of shares in the third market
E)purchase of shares by a dealer from a shareholder

Accepted Answer

The primary market is where newly issued securities are sold by the issuer to investors. Therefore, the sale of newly issued shares by the issuer to a shareholder is the only transaction that occurs in the primary market.

Question 4

In 2007, NYSE Holdings merged with which one of the following?
A)NASDAQ
B)AMEX
C)Chicago Stock Exchange
D)London Stock Exchange
E)Euronext, N.V.

Accepted Answer

In 2007, NYSE Holdings merged with Euronext, N.V. to create NYSE Euronext, a transatlantic stock exchange group.

Question 5

Kelly wants to sell 600 shares of DeLuxe stock at the going market price if the stock price falls to $42 a share. Which type of order should she place?
A)stop
B)limit
C)market
D)fixed
E)loss

Accepted Answer

A stop order will trigger a sale of the shares if the stock price falls to a certain level, in this case $42 a share. This ensures that Kelly can sell her shares at the desired price if the stock falls to that level, but if the stock does not fall to that level, the order will not be executed. A limit order would only sell the shares at a specific price or higher, which may not happen if the market price falls below that level. A market order would sell the shares immediately at the current market price, which may not be the desired price of $42 a share. Fixed and loss orders are not relevant in this context.

Question 6

Sam placed a limit order to sell 500 shares of stock at $14 a share. Which of the following does Sam know for sure?
I. His order will execute but the time of execution is unknown.
II. His order may never execute.
III. He will receive exactly $7,000 if his order executes.
IV. He could receive more, but not less, than $14 a share.
A)I and III only
B)I and IV only
C)II and III only
D)II and IV only
E)I only

Accepted Answer

The answer of Sam placed a limit order to sell...

Question 7

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 offer
III. provide liquidity to the market
IV. purchase all shares offered as a limit sale
A)I and III only
B)II and III only
C)I, II, and III only
D)I, III, and IV only
E)I, II, III, and IV

Accepted Answer

Specialists are responsible for maintaining an orderly market by managing the flow of buy and sell orders, and providing liquidity to the market by buying and selling shares as needed. They do not offer a higher bid price than floor brokers, and they are not required to purchase all shares offered as a limit sale.

Question 8

After the trigger point is reached, a stop-loss order will be executed at the:
A)trigger price.
B)stop price.
C)trigger price or better.
D)stop price or better.
E)market price.

Accepted Answer

A stop-loss order is executed at the market price once the trigger point is reached, meaning it will be filled at the best available price in the market at that time.

Question 9

To be listed on the NYSE, a firm must have at least:
A)2,500 shareholders.
B)100,000 shares traded on an average day.
C)1.5 million shares held by the public.
D)$75 million in market value for an IPO.
E)pre-tax aggregate earnings of $10 million in the previous 3 years.

Accepted Answer

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

Question 10

Trey 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. Trey is a securities:
A)broker.
B)representative.
C)underwriter.
D)floor broker.
E)dealer.

Accepted Answer

Trey is willing to both sell and purchase shares, indicating that he is acting as a dealer. Dealers buy and sell securities for their own account and profit from the difference between the purchasing and selling price.

Question 11

What is the current structure of the NYSE?
A)general partnership
B)limited partnership
C)non-profit organization
D)publicly traded corporation
E)government agency

Accepted Answer

The NYSE is a publicly traded corporation since it is owned by its shareholders and operates as a for-profit entity.

Question 12

Which one of the following has the greatest duty to provide liquidity to the financial market?
A)floor broker
B)independent broker
C)dealer
D)designated market maker
E)floor trader

Accepted Answer

A designated market maker (DMM) has the primary responsibility to ensure liquidity in the financial market by buying and selling securities to keep the market running smoothly. They are responsible for maintaining an orderly market and preventing excessive price volatility. Floor brokers, floor traders, and independent brokers are all involved in the buying and selling of securities but do not have the same level of responsibility as DMMs in providing liquidity. Dealers are also involved in the buying and selling of securities but they typically focus on a specific market or product and may not have the same overall responsibility for providing liquidity as DMMs.

Question 13

How long is the "lock-up" period that is commonly found in an IPO underwriting contract?
A)one month
B)three months
C)six months
D)one year
E)eighteen months

Accepted Answer

The lock-up period typically lasts for six months after the IPO, during which time insiders such as company executives and early investors are prohibited from selling their shares. This helps to prevent a flood of sell orders in the market immediately after the IPO, which could cause the stock price to plummet.

Question 14

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?
A)cancel the order
B)place the order into the order book to hold until an order to buy 9,000 shares is received
C)purchase the shares if no other buyer is readily available
D)sell the shares to the next available buyer regardless of the price received
E)sell the shares at the end of the trading day at the best price available at that time

Accepted Answer

When a specialist "stops" a stock, they agree to purchase the shares if there are no other buyers readily available. This allows the seller to have their order filled even if there is not an immediate buyer, and also helps the market maintain some stability by preventing a sudden drop in the price due to a flood of sell orders.

Question 15

Fay placed an order to sell 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?
A)limit
B)day
C)market
D)short
E)stop

Accepted Answer

Fay placed a market order, which involves selling the shares at the current market price as soon as the order reaches the trading floor. This is different from a limit order, where the seller sets a specific price at which they are willing to sell the shares, or a stop order, which is triggered when the stock hits a certain price point. A day order simply means that the order is only valid for the current trading day, while a short order involves selling shares the seller does not yet own, in the hopes of buying them back later at a lower price to make a profit.

Question 16

In order to be entitled to trade on the floor of the NYSE, members must:
A)be registered as a floor trader.
B)own a seat.
C)purchase a trading license.
D)be a specialist.
E)be designated as a floor broker.

Accepted Answer

Members must purchase a trading license to trade on the floor of the NYSE. Owning a seat is an outdated requirement.

Question 17

Alexis is an individual investor. She purchases shares at the ________ price and sells at the ________ price.
A)ask; bid
B)average; ask
C)bid; ask
D)bid; average
E)ask; average

Accepted Answer

In the stock market, the "ask" price is the lowest price a seller is willing to accept for a security, while the "bid" price is the highest price a buyer is willing to pay. Therefore, when Alexis purchases shares, she does so at the "ask" price, and when she sells, it is at the "bid" price.

Question 18

Which one of the following can be assumed when the SEC approves an IPO registration?
A)The securities offering will provide value to the shareholders.
B)The issuer is financially sound.
C)The issuer will remain solvent.
D)All rules have been followed to allow for full disclosure of information.
E)The stock price is set at a level which will allow shareholders to earn a positive rate of return.

Accepted Answer

When the SEC approves an IPO registration, it means that the issuer has followed all rules and guidelines for full disclosure of information related to the offering. This assures investors that they have access to all the relevant information needed to make an informed investment decision. However, approval of an IPO registration does not necessarily imply anything about the financial soundness of the issuer, whether the offering will provide value to shareholders, or whether the issuer will remain solvent. It also does not imply anything about the stock price being set at a level that will allow shareholders to earn a positive rate of return.

Question 19

Which one of the following statements concerning the NYSE is correct?
A)The NYSE was created based on the Walnut Tree Agreement.
B)The average daily trading volume on the NYSE in 2007 was approximately one billion shares.
C)The NYSE and NASDAQ merged in 2007.
D)The NYSE is part of a firm that also operates a stock exchange in Amsterdam.
E)The NYSE merged with NASDAQ in 2007.

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 20

Which one of the following statements related to the NYSE Hybrid market is correct?
A)Floor brokers operate both electronically and in person.
B)The Hybrid system replaces the market specialists.
C)The automated system works better than the specialist for stocks with minimal liquidity.
D)The automated system will only replace the specialist in times of market duress.
E)Investors can automatically trade an unlimited number of shares.

Accepted Answer

Floor brokers in the NYSE Hybrid market operate both electronically and in person. The system combines both electronic and human elements, allowing for greater flexibility in trading. The market specialists still play an important role in the market, but they work alongside the electronic trading platform.

Quiz 5: The Stock Market

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

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

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

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

Kelly wants to sell 600 shares of DeLuxe stock at the going market price if the stock price falls to $42 a share. Which type of order should she place?

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 offer III. provide liquidity to the market IV. purchase all shares offered as a limit sale

After the trigger point is reached, a stop-loss order will be executed at the:

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

Trey 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. Trey is a securities:

What is the current structure of the NYSE?

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

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

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?

Fay placed an order to sell 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?

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

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

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

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

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