Trading Settlement, And Corporate Actions Quiz

Question 1

Internal procedures which limit and control the passing of sensitive potentially non public information between the departments of a corporation or firm to aid in protecting investors against violations of insider trading laws are known as

Answer 1

Chinese walls

Question 2

The liquidity of an investment is best described as

Answer 2

Whether the investment can be sold as quickly and profitably as expected should the investor wish to sell

Question 3

Which of the following statements is correct in regard to broker/dealer?

Answer 3

A principal is a dealer and sells securities from its own inventory
An agent is broker and trades securities for a customer. As an agent a firm does not own the security
Securities firms may act in the capacity of both a principal and an agent and are referred to as broker/dealers

Question 4

When a market maker does not honor a published quote that could be considered a market manipulation practice of

Answer 4

Backing away

Question 5

ABC Corporation shares are currently trading at $50 per share. ABC is about to perform a two for one stock split. After the split an investor who currently owns 100 shares of ABC stock would own

Answer 5

200 shares at $25

Question 6

Which of the following statements regarding limit orders is true?

Answer 6

A limit may never be executed

Question 7

Sell ABC short 20 stop 20.50. The ticker tape shows: 19, 20, 21, 20.50, 20.25. At what price was the trade executed?

Answer 7

21

Question 8

When a customer sells a security in the secondary market he or she will receive the

Answer 8

Bid price

Question 9

James owns 300 shares of LYPA stock which is currently trading at $60 per share. The company announces a 1:3 reverse split. What will James own after the split?

Answer 9

100 shares at $180 per share

Question 10

Which of the following is the risk that an issuer may not be able to meet interest or principal payments on fixed income securities?

Answer 10

Business/ credit risk

Question 11

Liability to contemporaneous traders for inside trading means

Answer 11

Insider traders may be liable to traders with no insider information who traded at the same time and lost money.

Question 12

An investor owned stock in the corporation where he was an officer. Two day md before it was made public that the company would file or for a financial restructure he hold his truck $50000. After the news became public the stock would have been worth $10,000. What is the maximum civil penalty that can be imposed on this investor to the insider Traded act of 1988 AcT

Answer 12

$120,000

Question 13

A customer instructs his broker /dealer to purchase 200 shares of Dunham Corporation m. Two days after date the customer decided that he no longer wants the shares. Which statement is correct

Answer 13

The customer has entered into a legally binding contract

Question 14

All of the following investments are subject to currency exchange risk

Answer 14

US treasury Bonds

Question 15

What is the lowest price at which the dealer will sell a stock to the investor?

Answer 15

Ask

Question 16

Which of the following products might be offered by a cyclical company?

Answer 16

Bulldozers

Question 17

Which of the following represents the order in which market orders are filed?

Answer 17

Priority precedence and parity

Question 18

Companies are required to notify FINRA of corporate actions such as dividends stock soloist or rights offering and rights offerings within what time period?

Answer 18

10 days prior to the record date

Question 19

What type of risk is involved where an investor may sustain a loss of a security must be sold quickly?

Answer 19

Liquidity risk

Question 20

The Act that requires financial institutions to develop implement and monitor procedures that prevent its agents and associates from misusing non public information is the

Answer 20

Securities and Exchange Act of 1934

Question 21

One of your clients bought 100 shares of TBS at 20. The stock has now risen to 55, and the client would like to protect her profit. Which of the following orders should be entered?

Answer 21

Sell stop at 54.88

Question 22

An investor could achieve diversification in his portfolio by holding

Answer 22

Stocks and or bonds of companies in different industries
Stocks and or bonds of companies in different geographic regions
A variety of investment instruments

Question 23

Sustained inflation over time will erode the value of a dollar. This is known as

Answer 23

Purchasing power risk

Question 24

The options position limit on XYZ stock is 200,000 contracts. Bob (a high roller) is short 150,000 XYZ Dec 50 puts. Which of the following trades would put Bob in a violation of position limits?

Answer 24

Buy 60,000 XYZ Mar 60 calls

Question 25

James owns 300 shares of LYPA stock which is currently trading at $60 per share. The company announces a 1:3 reverse split. What will James own after the split?

Answer 25

100 shares at $180 per share

Question 26

When a customer buys a security in the secondary market he or she will pay the

Answer 26

Ask price

Question 27

The type of risk that includes influences such as competing pressures market share and competence of management and is usually managed with a long term focus is called

Answer 27

Business risk

Question 28

Government securities regular settlement is

Answer 28

Next day

Question 29

Which of the following describes a tender offer?

Answer 29

Shareholders selling into the tender must deceived the shares not long

Question 30

Maximum civil and criminal penalties for an individual for insider trading violations are

Answer 30

$5,000,000 and or 20 Years imprisonment

Question 31

A corporation pays a stock dividend to

Answer 31

Conserve cash

Question 32

The ABC European Bond Fund invests in the debt of European corporations and other companies doing business in Europe. Investors in this fund are subject to all of the following risks

Answer 32

Currency exchange risk Interest rate risk Inflation risk

Question 33

A specialist receives an order to buy XYZ 200 shares 20 stop 19. This means that

Answer 33

The order is triggered at or above 20 and filled at 19 or lower

Question 34

If an investor cannot specifically identify redeemed shares IRS assumes that reporting will be in the basis of

Answer 34

First in first out

Question 35

Which of the following best describes cash settlement?

Answer 35

The customer pays for the securities on trade date

Question 36

The options limit on ABC stock is 75,000 contracts in the same side of the market. Which of the following positions would violate the position limit?

Answer 36

Long 50,000 ABC June 60 calls Long 25,000 ABC Sept 55 calls and Short 10,000 ABC June 50 puts

Question 37

ABC corporation announces that it will be acquiring XYZ corporation XYZ shareholders will receive one share of ABC stock for every two shares of XYZ they own. This corporate action is an

Answer 37

Acquisition

Question 38

A customer placed a market order. This means

Answer 38

No price is set and the order is to be filled at the best available market price

Question 39

Of the following examples which would be exempt from liability under insider trading laws?

Answer 39

There are no exceptions from liability under inside trading laws

Question 40

Which of the following is true concerning physical safety of mutual fund holdings?

Answer 40

Physical safety of funds assets is the responsibility of the custodian The shareholder needs to maintain share certificates since funds use book entry accounting If certificates are held they must be surrendered in good order before shares can be redeemed

Question 41

Which of the following factors will most likely create reinvestment risk?

Answer 41

Falling interest rates

Question 42

The insider trading act of 1988 has set guidelines for imposing penalties including civil actions in a federal court. The maximum penalty a court can impose for insider trading violation is

Answer 42

An amount up to 3 times the profit gained of loss avoided

Question 43

Sam was having difficulty selling his investments due to a lack of demand in the secondary market. What does that say about his investments?

Answer 43

The have a high liquidity risk

Question 44

The cyclical and constantly fluctuating nature of interest rates has the most direct impact on

Answer 44

Market values of fixed income securities

Question 45

If the prime interest rate increases bond prices will generally

Answer 45

Decrease

Question 46

Why does a diversified portfolio tend to carry a lower degree of investor risk?

Answer 46

Not all market segments or investment types in a diversified portfolio will move in tandem with one another.

Question 47

ABC Corp a newly formed corporation is developing a machine to harness wind power to create energy. Because ABC currently has no earnings and is still in the growth phase, it is unable to pay cash dividends to its investors. However ABC is very optimistic about its new product and wants to provide some sort of dividend to its current shareholders. ABC board of directors declares a 20% stock dividend to its current shareholders. An investor who currently owns 1,000 shares valued at $50 per share would own what after the stock dividend?

Answer 47

1,200 shares at $41.67

Question 48

The type of investment risk that impacts buying power and results in a devaluation of assets is called

Answer 48

Inflation risk

Question 49

Which of the following statements describe a market manipulation practice of painting the tape?

Answer 49

Buying and selling a Security among traders to create a high level of activity to influence the price of a stock

Question 50

The highest price a dealer is willing to pay for a security is known as the

Answer 50

Bid price

Question 51

Which TWO of the following positions are bullish?

Answer 51

Long Calls | Short Puts

Question 52

Government securities regular settlement is

Answer 52

Next day

Question 53

A technician or chartist would most likely enter a sell stop order

Answer 53

At or below the support level for the stock

Question 54

Which of the following is synonymous with market risk?

Answer 54

Systematic risk