A+ Answers

1. In an efficient market, security prices A. adjust rapidly to new information. B. adjust slowly to new information. C. indicate that the firm is overvalued. D. poorly value a firm’s future prospects 3. Which of the following assets is the most liquid? A. Savings accounts and checking accounts B. Stocks and bonds C. Money and antiques D. Bonds and real estate 4. If an individual buys stock on margin and its price rises, the investor A. may take delivery of the stock. B. must pay interest on the borrowed funds. C. must put up additional collateral. D. must pay tax on the unrealized gain. 6. Entering an order to sell stock at $17 when the bid is $18 to $19 is an example of a A. short sale. B. market order. C. limit order. D. margin payment. 7. What is a nation’s cash inflow or outflow on its current account given the following information? Imports $145 Direct investments abroad $72 Foreign purchase of domestic securities $86 Net income from foreign investments $37 Exports $211 Foreign investments in country $143 Purchase of foreign securities $29 Government spending abroad $22 A. Inflow of $81 B. Outflow of $81 C. Inflow of $128 D. Outflow of $128 8. The Securities and Exchange Commission regulates A. trading in publicly held securities. B. the amount a stock’s price may change. C. trading in privately held securities. D. the margin requirement. 9. Foreign investments may be financed by issuing A. London Interbank Bonds. B. Euro dollars. C. Eurobonds. D. IMF reserve securities. 10. Which of the following best explains a potential disadvantage of leaving securities in street name? A. Securities held in street name become the property of the custodian and the customer is only beneficiary of the securities. B. Correspondence sent by securities issuers may not be forwarded to brokerage clients who own securities held in street name. C. In the event of class action suits against securities issuers, the custodian, not the beneficial owner (customer), is the only party that may benefit from court orders. D. Securities held in street name can’t be quickly purchased or sold. 11. When investing in securities, an investor may place a limit order that A. specifies when the stock will be purchased. B. establishes the exchange on which the security is to be bought or sold. C. limits the amount of commissions. D. states a price at which the investor seeks to buy or sell the stock. 12. A financial intermediary transfers A. stocks to brokers. B. savings to borrowers. C. savings to households. D. new stock issues to buyers. 13. Which of the following is a federally insured investment? A. A certificate of deposit in excess of $100,000 B. Commercial bank assets C. A savings account in a national commercial bank D. A life insurance policy 15. Teresa buys 100 shares of XYZ stock on margin at $20 per share. If the margin requirement is 45 percent, the interest rate is 10 percent, and she holds the security for 1 year, how much interest must she pay? A. $90 B. $200 C. $110 D. $2,000 16. Which of the following is indicated by an upward-sloping yield curve? A. Higher prices for long-term maturity B. Lower prices for short-term maturity C. Lower interest rates for long-term maturity D. Higher interest rates for long-term maturity 17. The reserves of commercial banks must be held against A. savings deposits. B. commercial loans. C. losses. D. the bank as equity.