Topics: Futures contract, Financial markets, Short Pages: 13 (4371 words) Published: March 13, 2013
1101/125.241 ALBANY Internal


EXAMINATION FOR 125.241 INTRODUCTION TO INVESTMENTS Semester One – 2011 Time allowed: THREE (3) hours

Answer ALL questions in Sections A and B

INSTRUCTIONS This is a closed book exam Section A: Answer on the Scantron Card Provided Section B: Answer in the Blue Answer Book provided. Sc: Ensure that your name and identification number are entered on your Scantron Card in the first eight spaces. Record your answer on your Scantron card by putting a solid horizontal pencil line through the character representing the ‘best’ answer to the question with a blunt 2B or 3B pencil, please. The Scantron Card will not read properly if you do not follow these instructions. At the conclusion of the examination hand in the Scantron Cards separately. CP – Calculators are permitted Section A: 75 questions worth 1 each. Section B: 5 questions worth 5 each. Total 75 marks Total 25 marks Total 100 marks

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1101/125.241 ALBANY Internal


Section A – Answer on the Scantron Card provided. 1. Setting the investment policy involves determining the investor’s objectives and a. risk tolerance b. investable wealth the ability to make “a lot of money” c. d. setting the risk of the potential reduction in household income e. market portfolio 2. The discount rate is most important to the analyst who conducts a. technical analysis b. fundamental analysis c. macroeconomic analysis d. microeconomic analysis e. top-down analysis 3. Although the secondary market does not generate funds for the original issuer of securities, the existence of the secondary market makes common stock overvalued a. b. common stock more attractive c. real investment more liquid d. tax liability for the issuer less burdensome listing requirements irrelevant e. 4. When an investor specifies a time limit on the order, it indicates the a. time that the exchange is open amount of price movement allowed by the investor b. c. length of time in which the order is valid d. commission based on the time it takes to fill the order e. time when the maintenance margin is lifted 5. A broker buys 500 shares of IBM stock at $80 a share on margin. The initial margin is 50% and the maintenance margin requirement is 30%. To what price may the IBM stock fall before the broker receives a margin call? $68.12 a. b. $56.08 c. $48.00 d. $52.85 e. $57.14 6. According to the actual margin equation, it can be seen that at the time of the margin purchase, the actual and the initial margin are the _____. a. same b. same as the maintenance margin c. loan value of the assets d. collateral on the margin account e. liabilities of the stock exchange

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7. Marked to market is a method used to a. destabilize a market and produce price volatility b. protect the exchange from investor fraud c. maximize a brokerage firm’s value d. reduce the frequency of investor defaults e. control brokerage firm’s revenue 8. Event studies following: a. b. c. d. e. to test for market efficiency would NOT be concerned with the stock splits and dividend announcements the January effect mergers and acquisitions dividend omissions earnings announcements

9. Traders being restricted from short selling a. results in securities being undervalued b. means the investor's pessimism will have less impact on the market. c. means investors are willing to sell short at lower prices. d. results in a smooth, downward sloping demand-to-hold curve. e. results in a flat demand-to-hold curve. 10. In a perfectly efficient market a. it is likely that investors will profit based on technical trading rules b. some people will continually earn high returns c. profit opportunities are eliminated before the entire market can react d. institutional investors will consistently outperform individual investors e. any gains based on patterns in past prices are merely due to luck 11. The theory that states...
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