Question 1

An order to buy or sell a security that lets the broker decide when to execute the transaction and at what price is called a ____________ order.

Accepted Answer

A discretionary order is also known as a "not held" order because it gives the broker the discretion to determine the timing and price of the execution. The broker will take into account market conditions and make the trade when they believe it is most advantageous for the client's interests. This kind of order is suitable for investors who trust their brokers to make informed decisions on their behalf.

Question 2

Colin owns 100 shares of RIM stock.He purchased the stock for $100 a share.He sold the stock for $75 a share.The commissions required to buy and sell the stock totaled $60.Assuming that he received no dividends during the time he owned the stock, what is his total profit or loss from this transaction?

Accepted Answer

The total amount Colin paid for the 100 shares was:

100 shares x $100 per share = $10,000

The total amount he received from selling the 100 shares was:

100 shares x $75 per share = $7,500

Colin's total cost for commissions was $60.

His total profit or loss can be calculated as:

Profit/Loss = Sale Price - Purchase Price - Commissions

Profit/Loss = $7,500 - $10,000 - $60

Profit/Loss = -$2,560

Therefore, the correct answer is D, Loss $2,560.

Question 3

To safeguard investments, stock owners who believe that the price of their stock will go down during an option period will purchase a

Accepted Answer

A put option gives the owner the right to sell their shares at a fixed price for a certain period of time. If the stock price decreases during the option period, the owner can exercise the option and sell their shares at the higher fixed price, protecting their investment. Therefore, purchasing a put option is the best choice to safeguard investments if the stock owner believes the price will go down.

Question 4

One hundred shares or a multiple of 100 shares is called a(n) ____________ lot.

Accepted Answer

A round lot is a standard trading unit defined as 100 shares of stock. When an investor wants to buy or sell stock, they do so in multiples of 100, known as a round lot. For example, if an investor wants to buy 500 shares of a stock, they would buy five round lots.

Question 5

A request that a stock be bought or sold at a specified price is called a ____________ order.

Accepted Answer

A limit order specifies the maximum (for a sell order) or minimum (for a buy order) price at which the trade can be executed. If the stock reaches the limit price, the trade will be executed at that price or better.

Question 6

Ammar purchased 100 shares of Northern Bank at $55 dollars a share in January of 2004.The shares subsequently split two-for-one on December 31, 2004 after paying an annual dividend of $1.00 per share.If Ammar sells all of his shares on the first trading day in January 2005 for $30 each, what has been his return on investment?

Accepted Answer

The answer of Ammar purchased 100 shares of Northern Bank...

Question 7

Which of the following is a long-term stock investment technique?

Accepted Answer

Dollar cost averaging involves investing a fixed amount of money at regular intervals over a long period of time, regardless of the market's ups and downs. This strategy allows investors to take advantage of long-term growth opportunities while minimizing the impact of short-term fluctuations in the market. The other options are more short-term focused or involve higher risk.

Question 8

The investment bank's commission or spread:

Accepted Answer

The investment bank's commission or spread depends on the quality and financial health of the issuing corporation, as well as reflects the transfer of risk of raising funds to the investment bank. Therefore, options A, B, and C are all correct.

Question 9

Which of the following statements is not true?

Accepted Answer

C) is incorrect because in a short sale, the investor sells borrowed stock with the intention to buy it back later at a lower price, not the other way around.

Question 10

A long-term investment technique used by investors to purchase stock without paying a commission to a broker is called

Accepted Answer

A direct investment plan (also known as a dividend reinvestment plan or DRIP) allows investors to purchase stock directly from a company, often without having to pay a commission to a broker. Instead of receiving cash dividends, the investor can choose to have the dividends automatically reinvested in more shares of the company's stock. This can be a useful long-term investment strategy as it allows for compound growth over time.

Question 11

Which of the following statements is not true?

Accepted Answer

The statement that the current margin requirement is identical for all exchanges is not true. Each exchange sets its own margin requirements, which may vary depending on the type of security being traded and market conditions.

Question 12

Anne owns 300 shares of Lily Industries.Suppose that for the last calendar quarter, Lily Industries paid $.30 a share.What is the total amount she received in her dividend cheque for this quarter?

Accepted Answer

Anne owns 300 shares and each share paid $.30, so the total amount she received is 300 * $.30 = $90.00.

Question 13

A request that an order be executed at the next available opportunity after the market price of the stock reaches a specified price is called a ____________ order.

Accepted Answer

A stop order is an order to execute a trade at the market price once the stock reaches a specified price, also known as the stop price. This type of order is commonly used to limit potential losses or to capture gains.

Question 14

A corporation whose stock is owned by relatively few people and is not traded openly in stock markets is called a(n) ____________ corporation.

Accepted Answer

A private corporation is owned by a small number of people and the stocks are not traded publicly. This type of corporation is also not required to provide disclosure and financial statements to the general public. Therefore, answer B is the correct choice.

Question 15

A long-term technique used by investors who purchase an equal dollar amount of the same stock at equal intervals in time is called a

Accepted Answer

The given technique in which an equal dollar amount of the same stock is purchased at equal intervals in time is called dollar cost averaging. This helps investors to mitigate the impact of market volatility and get an average cost of the investment over time.

Question 16

Which one of the following is not a true statement?

Accepted Answer

Most OTC trading in modern times is conducted electronically, not in person in the account executive's office.

Question 17

Daisy Diaz purchased 100 shares of Cameco Inc.at $40 dollars a share.The shares subsequently split three for one on December 31, 2004 and currently trade at $50 a share.If Daisy sells all of her shares, what will be his capital gain?

Accepted Answer

After the 3-for-1 split, Daisy has 300 shares (100 original shares * 3). Selling at $50 each, she gets $15,000 (300 shares * $50/share). Her original investment was $4,000 (100 shares * $40/share). The capital gain is $15,000 - $4,000 = $11,000.

Question 18

A request that a stock be bought or sold at the current market price is called a ____________ order.

Accepted Answer

A market order is executed immediately at the best available current price, regardless of the price level. It is the simplest and most common type of order used by traders to enter or exit a position quickly.

Question 19

Which of the following is not a true statement?

Accepted Answer

Investment banks do not typically buy and hold new stock issues for at least one year. Instead, they resell the stock issue to their customers.

Question 20

Why would an investor favor a common share over a preferred share?

Accepted Answer

An investor would favor a common share over a preferred share to obtain a bigger potential capital gain. Common shares have the potential for higher gains as they are more volatile and their value is dependent on the performance of the company. Preferred shares, on the other hand, offer a fixed dividend but have limited potential for capital appreciation.

Quiz 11: Investing in Stocks

An order to buy or sell a security that lets the broker decide when to execute the transaction and at what price is called a ____________ order.

To safeguard investments, stock owners who believe that the price of their stock will go down during an option period will purchase a

One hundred shares or a multiple of 100 shares is called a(n) ____________ lot.

A request that a stock be bought or sold at a specified price is called a ____________ order.

Which of the following is a long-term stock investment technique?

The investment bank's commission or spread:

Which of the following statements is not true?

A long-term investment technique used by investors to purchase stock without paying a commission to a broker is called

Which of the following statements is not true?

Anne owns 300 shares of Lily Industries.Suppose that for the last calendar quarter, Lily Industries paid $.30 a share.What is the total amount she received in her dividend cheque for this quarter?

A request that an order be executed at the next available opportunity after the market price of the stock reaches a specified price is called a ____________ order.

A corporation whose stock is owned by relatively few people and is not traded openly in stock markets is called a(n) ____________ corporation.

A long-term technique used by investors who purchase an equal dollar amount of the same stock at equal intervals in time is called a

Which one of the following is not a true statement?

Daisy Diaz purchased 100 shares of Cameco Inc.at $40 dollars a share.The shares subsequently split three for one on December 31, 2004 and currently trade at $50 a share.If Daisy sells all of her shares, what will be his capital gain?

A request that a stock be bought or sold at the current market price is called a ____________ order.

Which of the following is not a true statement?

Why would an investor favor a common share over a preferred share?