1. Which of the underlisted reasons account for unethical investor behaviour?

1. Initial success may encourage more unethical behaviour.
2. The stakes are too high.
3. The love for their clients.
4. Companies may expect that their interests have high priority.

1. (i) and (iii) only
2. (i), (ii), (iii) and (iv).
3. (iii) and (iv) only
4. (i), (ii) and (iv) only.

2) Christopher invests $400 today at a 4% rate of return which is compounded annually. What is the future value of this investment after four years?

A) $342

B) $416

C) $464

D) $468

3) Investors seeking to increase their wealth as quickly as possible would invest in

A) corporate bonds and preferred stock.

B) large company stocks with high dividends.

C) smaller companies pursuing rapid growth.

D) government bonds and low-risk income stocks.

4) The document that describes the issuer of a security's management and financial position is known as a

A) statement of financial position.

B) income statement.

C) prospectus.

D) red herring.

5) Which one of the following statements is correct concerning the time value of money?

A) The future value of $1 at the end of two years is equal to $1 plus the first year's interest times 1 plus the annual interest rate.

B) As the interest rate increases for any given year, the future value interest factor will decrease.

C) The future value of $1 decreases with the passage of time.

D) The future value interest factor is equal to zero if the interest rate is zero.

6) Speculative and growth-oriented investments are least appropriate for

A) young investors.

B) middle-aged investors.

C) retired investors.

D) high income investors.

7)Systematic risk is the risk that the unscrupulous actions of a few market participants could undermine public confidence in the financial system. Is this statement

1. True
2. False

8) Churning is the unethical practice of a broker trading an equity based on information from the analyst department before his or her clients have been given the information. Is this statement .

1. True
2. False

9) Which one of the following statements concerning the primary market is correct?

A) A transaction in the primary market is between two private stockholders.

B) The first public sale of a company's stock in the primary market is called a seasoned new issue.

C) The first public sale of a company's stock is called an Initial Public Offer.

D) A rights offering is a direct sale of stock to an institution that participates in the primary market.

10) Kofi is going to receive a payment of $5,000 one year from today. He earns an average of 6% on his investments. What is the present value of this payment?

A) $4,717

B) $4,821

C) $5,000

D) $5,300

11) A rights offering is the

A) initial offering of securities to the public.

B) offering of new securities to current shareholders on a pro-rata basis.

C) sale of newly issued shares of stock to the public.

D) sale of securities directly to a select group of investors.

12. Which one of the following statements is wrong concerning investment in mutual funds?

1. A way to accumulate wealth.
2. A storehouse of value
3. A speculative vehicle for achieving high rates of return.
4. A risk-free type of investment

13) When the rate of return is equal to the discount rate

A) the present value of an investment's benefits must be greater than its cost.

B) the cost of an investment equals the sum of its benefits.

C) the cost of an investment equals the future value of its benefits.

D) the cost of an investment equals the present value of its benefits.

14) Which of the following statements are correct concerning present value?

I. The present value interest factor for a single sum is always equal to or less than 1.

II.The lower the discount rate for a given year, the smaller the present value interest factor.

III.The further in time, the smaller the present value interest factor.

IV. The present value is equal to the future value only when the stated interest rate is 1%.

A) I and II only

B) I and III only

C) II and III only

D) I, III and IV only

15) Emily bought 200 shares of ABC Co. stock for $29.00 per share on 60% margin. Assume she holds the stock for one year and that her interest costs will be $80 over the holding period. Ignoring commissions, what is her percentage return (loss) on invested capital if the stock price went down 10%?

A) -32%

B) -21%

C) -16%

D) -10%

16) Jerry bought 100 shares of stock for $30.00 per share on 70% margin. Assume Jerry holds the stock for one year and that his interest costs will be $45 over the holding period. Jerry also received dividends amounting to $0.30 per share. Ignoring commissions, what is his percentage return on invested capital if he sells the stock for $34 a share?

A) 106.17%

B) 20.48%

C) 18.33

D) 9.16%

17) AmBen wants to buy 200 shares of stock at $50 per share because he feels it will rise to $75 within one year. The stock pays $2 per share in annual dividends. He is going to buy the stock with 50% margin and will pay 10% interest on the margin loan.

Required: Find the expected return

1. 99%
2. 98%
3. 94%
4. 90%

18) A restricted account is defined as a margin account wherein the equity is

A) less than the initial margin amount.

B) greater than the initial margin amount.

C) less than the maintenance margin amount.

D) greater than the maintenance margin amount.

19) Which of the following are functions of the secondary market?

I. Provide liquidity for current stockholders.

II.Equate the demand and supply of securities.

III. Provide a market for the dale of new stock by companies that are already public.

IV. Provide continuous pricing of securities.

A) I and II only

B) II and IV only

C) I and III only

D) I, II and IV only

20) Wendy purchased 200 shares of stock at $38 using her 70% margin account. Her maintenance margin is 40%. Wendy has no other securities in her account. At what price will she receive a margin call?

A) $26.60

B) $19.00

C) $11.40

D) $7.60

21) Which of the following are associated with bear markets?

I. investor pessimism

II.rising profits

III.economic slowdown

IV.rising security prices

A) I and III only

B) II and III only

C) I, II and III only

D) II, III and IV only

22) Which one of the following statements about margin trading is correct?

A) The Federal Reserve sets the minimum margin requirement for margin trading.

B) If Fred buys $1,000 worth of stock using 60% margin, he will need to pay $400 in cash to make the purchase.

C) Purchasing stocks on margin is less risky than purchasing stocks by paying cash for the entire purchase.

D) Margin trading increases the potential profits while lowering the potential losses on a percentage basis.

23) Megan bought 200 shares of stock at a price of $10 a share. She used her 70% margin account to make the purchase. Megan sold her stock after a year for $12 a share. Ignoring margin interest and trading costs, what is Megan's return on investor's equity for this investment?

A) 67%

B) 29%

C) 14%

D) 10%

24) Joseph bought 100 shares of stock at a price of $24 a share. He used his 70% margin account to make the purchase. Joseph sold his stock after a year for $20 a share. Ignoring margin interest and trading costs, what is Joseph's return on investor's equity for this investment?

A) -17%

B) -24%

C) 24%

D) -56%

25) Roy is going to receive a payment of $5,000 one year from today. He earns an average of 6% on his investments. What is the present value of this payment?

A) $4,717

B) $4,821

C) $5,000

D) $5,300

26) The primary risk associated with a short-term investment is

A) purchasing power risk.

B) default risk.

C) interest rate risk.

D) economic risk.

27) Michael purchased 1000 shares of stock at a price of $16 a share. He utilized his 50% margin account to make the purchase. What is Michael's initial equity in this investment?

A) -$16,000

B) $16,000

C) $8,000

D) -$8,000

28) A market where securities are bought from or sold to a market maker is known as a

A) broker market.

B) dealer market.

C) exchange floor.

D) board of exchange.

29) Kim believes the client is right and so decides to sell her own personal shares in that stock as well. She places the order to sell her shares first, so that if the price drops as she sells, her shares will be sold at a higher price. This is an example of .

1. Due diligence
2. Late trading
3. Front-running.
4. Churning

30) Which of the following are characteristics of short selling?

I. borrowing shares of stock from a brokerage firm or other investors

II.selling shares or stocks you do not own

III. betting the stock price will increase.

IV. limiting losses per share to the price at which the stock was sold.

A) I and II only

B) III and IV only

C) I, II and IV only

D) I, II, III only