1.A stop order is similar to a limit order, except that once the set price is reached the the stop order is executed after all limit orders at the same price b. the stop order immediately becomes a market order c. the stop order becomes a limit order d. the stop order goes to the end of the execution cue 2. What factors must be considered in choosing between investment alternatives? a. Risk and liquidity b. Interest or dividends versus capital gains c. Safety of principal d. All of the above 3. The following are all value-weighted indexes, except: a the S&P 500 b. The S&P Industrials c. Midcap 400 d. Value Line Index 4. Economic analysis is important for investors, because they need to anticipate a changes in corporate profits due to business cycle impacts. b. growth in various industry segments based on changing economic trends. c. how foreign trade might affect U.S. companies. d. All of the above 5. Which of the following is (are) feature(s) of margin accounts? a. they do not leverage returns, i.e. magnify the size of a gain or loss b. they are controlled by the Federal Reserve Board and the Securities and Exchange Commission c. purchased securities are delivered to the investor d all of the above are features 6. When ranking the riskiness of securities using the standard deviation, the highest risk security to the lowest risk security is as follows: long-term government bonds, small stocks, large stocks, U.S. treasury bills. 5. Which of the following is (are) feature(s) of margin accounts? a. they do not leverage returns, i.e. magnify the size of a gain or loss b. they are controlled by the Federal Reserve Board and the Securities and Exchange Commission c. purchased securities are delivered to the investor d. all of the above are features When ranking the riskiness of securities using the standard deviation, the highest risk security to the lowest risk security is as follows: a. long-term government bonds, small stocks, large stocks, U.S. treasury bills. b. large stocks, small stocks, long-term government bonds, U.S. treasury bills small stocks, long-term government bonds, large stocks, U.S. treasury bills d. small stocks, large stocks, long-term government bonds, U.S. treasury bills c. 7. Wealthy investors may prefer the favorable tax treatment of investments such as: a. corporate bonds b. municipal bonds c. common stock d. preferred stock 8. An employee of an investment house who executes orders on the floor of the exchange for customers of the firm is called a: a. house broker b. registered trader. c. commission broker d. specialist 9. In the market, existing assets are exchanged between investors, while in the participants buy their assets directly from the source of the asset 2-primary, secondary b. secondary: primary c. tertiary; primary d. primary; tertiary on: 10. The success of a short investment position depends a. a level stock price b. a declining stock market. c. declining interest rates. d. none of the above 11. The holding period to qualify for long-term capital gains is: a. at least 6 months. b. at least 9 months. c. at least 18 months. d. more than one year. 12. The Securities Investor Protection Corporation (SIPC) was established to: a. oversee the liquidation of brokerage firms, and insure an investor's accounts to a maximum value of $500,000 in case of bankruptcy by the broker. b. protect investors from corporate insider trading, and insure their accounts for $500,000 in case corporate fraud caused a company to go bankrupt. c. cover the total market loss on an investor's brokerage account in case of the bankruptcy of the broker d. create an insurance pool for brokerage firms, so that if one firm went bankrupt, all investor losses would be covered out of the insurance pool. 13. The most widely used tool of the Federal Reserve is: A. buying and selling securities for its own portfolio. B. changing the interest rate charged to commercial banks on very short-term loans. C. changing reserve requirements on commercial bank time or demand deposits. D. fiscal policy. 14.. In order to be listed on an exchange, a firm must meet minimum standards pertaining to the following criteria: a. the number of common shares publicly held. b. the net income of the firm. c. the number of stockholders owning a minimum of 100 shares. d. All of the above are requirements 15. ECNs provide several advantages to investors. Which of the following is not an advantage? a. They lower the cost of trading compared to organized exchanges with floor trading b. They let everyone know who is making the trade and at what price c. They provide the ability to trade after hours when the exchanges are closed d. They provide more price transparency than organized exchanges PART II Solve problems for a total of 70 points only. Please show all your work. 1. You purchase 100 shares of a stock at $150 per share on margin of 55 percent. The stock declines to $95. . What is your initial margin position (equity and loan)? b. When the price declines to $95 per share will you be called upon to put up more margin to meet the 35 percent minimum maintenance margin requirement? If yes, how much equity would you need to add to your account? If no, how much equity do you have over the minimum required? c. What is your rate of return (loss)? d. Determine the price that will trigger a margin call. (30 Points) 2. Owen prepared his tax return and estimated that his taxable income was $130,000. What was his tax liability? (use the table below) b. What were his marginal and average tax rates? (20 Points) Tax Rate Taxable income 10% Up to 89,700 12% 59,701 to $39,475 229 539,476 to 584,200 $84.201 to $160,725 S160,726 to 5204,100 35% S204,101 to 5510,300 379 Over S510,300