The Investment Process

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Question 1

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Multiple Choice

Market timing is the:

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placing of an order within the last half-hour of trading for a day.

period of time between the placement of a short sale and the covering of that sale.

buying and selling of securities in anticipation of the overall direction of the market.

staggering of either buy or sell orders to mask the total size of a large transaction.

placing of trades within the last half-hour prior to the commencement of daily trading.

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Question 2

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Multiple Choice

Asset allocation is the:

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selection of specific securities within a particular class or industry.

division of a purchase price between a cash payment and a margin loan.

division of a portfolio into short and long positions.

distribution of investment funds among various broad asset classes.

dividing of assets into those that are hypothecated and those that are not.

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Question 3

Free

Multiple Choice

Jesse is researching chemical companies in an effort to determine which company's stock he should purchase.This process is known as:

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market timing.

purchase shorting.

marketing research.

asset allocation.

security selection.

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Question 4

Free

Multiple Choice

A Roth IRA:

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is a form of "tax-deferred" account

funds are taxed at the time you begin withdrawals

are well-suited to investors nearing retirement

invests after-tax dollars

is the type of account offered by most employers

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Question 5

Free

Multiple Choice

A brokerage account in which purchases can be made using credit is referred to as which type of account?

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clearing

funds available

cash

call

margin

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Question 6

Multiple Choice

Kate just purchased $7,000 worth of stock.She paid $5,000 in cash and borrowed $2,000.In this example,the term margin refers to:

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the total amount of the purchase.

the percentage of the purchase that was paid in cash.

the percentage of the purchase paid with borrowed funds.

any future increase in the value of the stock.

any future decrease in the value of the stock.

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Question 7

Multiple Choice

Which one of the following best describes the term "initial margin"?

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Amount of money that must be deposited to open a margin account with a broker

Amount of cash that must be paid to purchase a security on margin

Amount of cash that must be paid when a broker issues a margin call

Amount of money borrowed when a security is purchased

Total loan amount offered to a customer by a brokerage firm to cover future purchases

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Question 8

Multiple Choice

The minimum equity that must be maintained at all times in a margin account is called the:

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initial margin.

initial equity position.

maintenance margin.

call requirement.

margin call.

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Question 9

Multiple Choice

When your equity position in a security is less than the required amount,your brokerage firm will issue a:

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margin call.

margin certificate.

cash certificate.

limit order.

leverage call.

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Question 10

Multiple Choice

Stuart purchased 300 shares of Microsoft stock which he has pledged to his broker as collateral for the loan in his margin account.This process of pledging securities is called:

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margin calling.

hypothecation.

leveraging.

maintaining the margin.

street securitization.

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Question 11

Multiple Choice

Staci owns 1,000 shares of stock in a margin account.Those shares are most likely held in:

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transit.

her registered name.

street name.

a wrap account.

a discretionary account.

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Question 12

Multiple Choice

This morning,Josh sold 800 shares of stock that he did not own.This sale is referred to as a:

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margin sale.

long position.

wrap trade.

hypothecated sale.

short sale.

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Question 13

Multiple Choice

The amount of common stock held in short positions is referred to as the short:

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margin.

shares.

proceeds.

sale.

interest.

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Question 14

Multiple Choice

A company that owns income-producing real estate such as an apartment complex or a retail shopping center is called a(n):

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REIT.

SIPC.

REEF.

EAR.

SPIC.

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Question 15

Multiple Choice

An investor who has a resource constraint:

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pays no income taxes.

has insufficient funds to purchase a security.

has a relatively high marginal tax rate.

has only one source of income.

will only invest in socially acceptable securities.

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Question 16

Multiple Choice

To be considered liquid,a security must:

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be held in a cash account.

pay dividends.

be able to be sold on short notice.

be held for less than one year.

be able to be sold quickly with little, if any, price concession.

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Question 17

Multiple Choice

Wythe is trying to decide whether he wants to purchase shares in General Motors,Ford,or Honda,all of which are auto manufacturers.Wythe is making a(n) _____ decision.

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security selection

tax-advantaged

risk aversion

active strategy

asset allocation

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Question 18

Multiple Choice

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.This is a(n) _____ decision.

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market timing

security selection

tax-advantaged

active strategy

asset allocation

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Question 19

Multiple Choice

Kay plans to retire in two years and wishes to liquidate her account at that time.Kay has a _____ constraint.

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resource

horizon

liquidity

tax

special circumstances

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Question 20

Multiple Choice

The SIPC:

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guarantees investors against any loss related to an investment account held at a brokerage firm.

guarantees cash balances held in brokerage accounts up to $500,000.

is an agency of the federal government.

protects private brokerage firms from bankruptcy.

protects investors from missing assets when a brokerage firm closes.

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