E a discretionary account. This sale is referred to as a: A margin sale. B long position. C wrap trade. D hypothecated sale. E short sale. B shares.
C proceeds. D sale. E interest. B SIPC. C REEF. D EAR. E SPIC. B has insufficient funds to purchase a security. C has a relatively high marginal tax rate. D has only one source of income. E will only invest in socially acceptable securities. B pay dividends. C be able to be sold on short notice. D be held for less than one year. E be able to be sold quickly with little, if any, price concession.
A security selection B tax-advantaged C risk aversion D active strategy E asset allocation 18 Brooke has decided to invest 55 percent of her money in large company stocks, 40 percent in small company stocks, and 5 percent in cash. A market timing B security selection C tax-advantaged D active strategy E asset allocation. C is an agency of the federal government. D protects private brokerage firms from bankruptcy. E protects investors from missing assets when a brokerage firm closes.
B asset allocation. C security analysis. D market timing. E market selection. B move money between asset classes but will not be concerned about which individual securities are owned. C focus on picking individual stocks only. D maintain a relatively constant mix of asset classes while continually buying and selling individual securities.
E concentrate solely on asset allocation to maximize potential returns. A Purchasing Ford stock rather than General Motors stock B Determining that thirty percent of a portfolio should be invested in bonds C Adopting a passive investment strategy D Deciding to actively analyse individual securities E Deciding to use an online broker.
Since he has no investment experience, he has decided that he would like to work with a professional who can explain the market to him and also manage his funds for him. Ted most likely needs the services offered by a n : A deep-discount broker. B discount broker. C full-service broker. D online broker. E cyber broker. A Most brokerage agreements require disputes be settled in a court of law. B Arbitration is a formal legal process for settling disputes related to brokerage accounts.
C Churning is the preferred method of providing deep-discount brokerage services. D Discount brokers only provide order execution services.
E Full service brokers frequently provide financial planning services to clients. Martin believes that William has mishandled his account by churning it. If he files a complaint against William seeking compensation, the case will most likely be decided by: A the office manager of City Brokerage.
B a civil suit judge. C a jury. D an arbitration panel. Which type of brokerage account do you have? A The call money rate is the rate of interest brokerage firms charge on margin loans. B The spread is the fee a deep-discount broker charges to execute a trade. C The percentage of a purchase paid for with borrowed funds is referred to as the margin.
D A margin loan is treated as an asset on an account balance sheet. E Margin is equal to account equity divided by the value of the securities owned. This is the only transaction in her brokerage account. A 30; 30 B 30; 70 C 70; 30 D 70; 50 E 70; 70 32 The absolute minimum initial margin requirement is set by the: A individual investor. B brokerage firm. C Federal Reserve. D Security Investors Protection Corporation.
E Securities and Exchange Commission. The house maintenance margin requirement for your account is set by: A your broker. B the stock exchange. C the SEC. D the SIPC. E the Federal Reserve. B increase your maximum potential rate of return. C guarantee yourself a profit. D eliminate any potential profit.
E have equal rates of return regardless of how the purchase is made. A to inform you that your margin loan is due and payable B to demand funds to increase your margin position C to let you know the amount of funds that are now available for you to borrow D to advise you that the interest rate on your loan has changed E to remind you of the upcoming monthly payment due on your margin loan 36 If you ignore a margin call, your broker: A will seize all the assets in your account.
B will close your account. C may place a short sale on your behalf to cover the amount of the call. D may sell some of your securities to repay the margin loan. E will increase both your margin loan and the rate of interest on that loan. These shares are held in street name and are registered under the name of: A Lauren Mitchell. B RL Brokers. C Abbot Industries. D the New York Stock Exchange. E the Securities and Exchange Commission.
A The securities are registered under your mailing address rather than your name. B There is a greater likelihood the security may be stolen. C All dividend checks are mailed to your street address. D The annual stock report is mailed directly to your street address. E The brokerage firm is the owner of record. Sarah pays an all-inclusive annual fee to the firm and Jeff manages her funds.
She pays no trading costs or commissions. Which one of the following best describes this type of account? A wrap B cash C margin D mutual E advisory. B charges an annual fee to cover all trading and management services.
C is the term applied to brokerage accounts with check-writing and credit card services. D is the same as a wrap account. E is the account used to pledge securities as collateral for a margin loan. B if the price of the security declines.
C if the price of the security remains stable. D only if the security has been purchased on margin. E only by shorting the security. On September 6 of this year, he purchased shares of ADO stock to cover his position. The transaction on August 8: A was a short sale.
B was a margin trade. C was a wrap transaction. D created a long transaction. E was a pooling transaction. B involves the borrowing of securities. C is the purchase of less than shares of a stock. D is a bullish outlook towards a security. E is the resale of a security within four hours of purchase. A long B margined C short D covered E wrapped. B limited to your initial margin.
C limited to the margin loan plus interest. D zero. E unlimited. You would like to purchase as many shares of this stock as you can. What is the maximum number of shares you can buy? The initial margin is 70 percent and the maintenance margin is 30 percent.
A shares B shares C shares D shares E shares 50 Theresa has a margin account with a 60 percent initial margin requirement and a 35 percent maintenance margin. What was the initial margin requirement? What is the initial margin requirement on this particular stock? What is the initial margin requirement on this stock? What is the minimum amount the Federal Reserve will require Stephen to pay in cash for this purchase?
What is his current equity position? The initial margin was 70 percent and the maintenance margin is 30 percent. Learn more about our Textbook Rental program. By prompting students to engage with key concepts, while continually adapting to their individual needs, Connect activates learning and empowers students to take control resulting in better grades and increased retention rates. Proven online content integrates seamlessly with our adaptive technology, and helps build student confidence outside of the classroom.
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Fundamentals appeals to intuition and basic principles whenever possible because the authors found that this approach effectively promotes understanding. The text also makes extensive use of examples, drawing on material from the world around us and using familiar companies wherever appropriate.
Throughout, the text strikes a balance by introducing and covering the essentials while leaving some of the details to follow-up courses. Topics are organized in a way that would make them easy to apply—whether to a portfolio simulation or to real life—and support these topics with hands-on activities. This ninth edition provides a terrific framework and introduction for students looking to pursue a career in investments—particularly for those interested in eventually holding the CFA charter.
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