Question 7

1. Secondary equity markets are important because

   		It has an impact on price stability
   		The prevailing market price of securities is determined in the secondary market
   		It has an impact on price continuity
   		The proceeds of the transaction goes to the firm
   		All of the above

Question 8

1. Exchange traded funds

   		are exactly the same as index mutual funds
   		can be bought and sold like common stocks.
   		cannot be sold short.
   		have a high management fee.
   		cannot be timed for capital gain tax realizations.

Question 9

1. Investors can leverage their stock transactions with the use of

   		Stop loss orders
   		Limit orders
   		Market orders
   		Specialists
   		Margin orders

Question 10

1. Which of the following is not a use of security market indicator series?

   		To use in the measurement of systematic risk
   		To determine factors influencing aggregate security price movements
   		To use in the measurement of diversifiable risk
   		To develop an index portfolio
   		To use as a benchmark of individual portfolio performance

Question 11

1. Under the following conditions, what is the required rate of return for stocks A?

   0 = 0.07	ba,1 = 0.95
   1 = 0.04	ba,2 = 1.10
   2 = 0.03

   		17.65%
   		16.5%
   		14.1%
   		18.45%
   		None of the above

Question 12

1. Use the information below for the following problem:

   	Number of shares	Closing Prices	(per share)
   Companies	outstanding	Day T	Day T + 1
   1	2,000	$30.00	$25.00
   2	7,000	55.00	60.00
   3	5,000	20.00	25.00

   Assume that a stock price-weighted index consisted of the three issues with their prices. What is the percentage change in the index from Day T to T + 1?

   		4.76%
   		5.85%
   		3.25%
   		4.15%

Question 13

1. Heidi Talbott has a margin account and deposits $60,000 (cash amount). If the initial margin deposit is 50 percent, and RC Industries is currently selling at $45 per share. If the maintenance margin is 25 percent, to what price can RC Industries stock price fall before Heidi receives a margin call?

   		$21.75
   		$30.00
   		$32.00
   		$33.33
   		None of the above

Question 14

1. Your broker has advised you that he believes that the stock of Brat Inc. is going to rise from $20 to $22.15 per share over the next year. You know that the annual return on the S&P 500 has been 11.25 percent and the 90-day T-bill rate has been yielding 4.75 percent per year over the past 10 years. If beta for Brat is 1.25, will you purchase the stock?

   		Yes, because it is overvalued.
   		No, because it is overvalued.
   		No, because it is undervalued.
   		Yes, because it is undervalued.
   		Yes, because the expected return equals the estimated return.