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Exam 3: Securities Markets

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Question 31

Multiple Choice

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The bulk of most initial public offerings (IPOs) of equity securities go to ___________.

A) institutional investors
B) individual investors
C) the firm's current shareholders
D) day traders

E) None of the above
F) B) and C)

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Question 32

Multiple Choice

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Which one of the following is a false statement regarding NYSE specialists?

A) On a stock exchange all buy or sell orders are executed at a specialist's post on the exchange
B) Specialists can not trade for their own accounts
C) Specialists earn income from commissions and spreads in stock prices
D) Specialists stand ready to trade at quoted bid and ask prices

E) None of the above
F) All of the above

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Question 33

Multiple Choice

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IBM is listed on the NYSE.If a share of IBM is sold via the NASDAQ exchange in which market is it thought to have traded?

Advantages of ECNs over traditional markets include all but which one of the following?

The inside quotes on a limit order book would be comprised of the ______.

An order to buy or sell a security at the current price is a ______________.

According to Loughran and Ritter,initial public offerings tend to exhibit __________ performance initially,and __________ performance over the long term.

Underwriting is one of the services provided by _____.

__________ often accompany short sales,and are used to limit potential losses from the short position.

Specialists try to maintain a narrow bid-ask spread because _______. I.If the spread is too large they will not participate in as many trades,losing commission income II.The exchange requires specialists to maintain price continuity III.Specialists are non-profit entities designed to facilitate market transactions rather than make a profit

The market collapse of 1987 prompted ________________________.

In a __________ underwriting arrangement,the underwriter assumes the full risk that shares may not be sold to the public at the stipulated offering price.

Transactions that do not involve the original issue of securities take place in _________.

An investor buys $8,000 worth of a stock priced at $40 per share using 50% initial margin.The broker charges 6% on the margin loan and requires a 30% maintenance margin.In one year the investor gets a margin call.At the time of the margin call the stock's price must have been ____.

The over-the-counter securities market is a good example of _________.

You find that the bid and ask prices for a stock are $10.25 and $10.30 respectively.If you purchase or sell the stock you must pay a flat commission of $25.If you buy 100 shares of the stock and immediately sell them,what is your total implied and actual transaction cost in dollars?

Which one of the following types of markets requires the greatest level of trading activity to be cost effective?

Specialists on the stock exchanges may do all of the following except _________.

The term "paying for order flow" refers to the practice of ________________.

Which one of the following is not an example of a brokered market?