FINC 334 exam 1 review || with Complete Solutions.
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Course
FINC 334
Institution
FINC 334
Averages and indexes differ from one another in that an index
A) is the arithmetic average price behavior of a group of stocks at a given point in time.
B) measures the current price behavior of a group of stocks in relation to a base value set at an earlier point in time.
C) is of value in-an...
averages and indexes differ from one another in th
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FINC 334 exam 1 review || with Complete Solutions.
Averages and indexes differ from one another in that an index
A) is the arithmetic average price behavior of a group of stocks at a given point in time.
B) measures the current price behavior of a group of stocks in relation to a base value set at an
earlier point in time.
C) is of value in-and-of itself, whereas an average must be compared to a historical figure to
have any meaning.
D) always moves up before a corresponding average moves up, and always moves down before a
corresponding average moves down. correct answers B) measures the current price behavior of a
group of stocks in relation to a base value set at an earlier point in time
Suppose that Pfizer and Boeing are part of the Dow-Jones Industrial Average. If on a given day
Boeing closes at $320 and Pfizer at $40
A) the difference in price will not affect the Average.
B) the Average will include 8 shares of Pfizer for each share of Boeing.
C) the effect of each stock on the Average cannot be determined without knowing the number of
shares outstanding for each company.
D) changes in the price of Boeing shares will have 8 times the effect on the Average as changes
in the price of Pfizer correct answers D) changes in the price of Boeing shares will have 8 times
the effect on the Average as changes in the price of Pfizer
Assume that the S&P 500 composite stock index closes at 2,500. This means that
A) the average stock in the index is selling for $25.00.
B) an investor would have to pay $2,500 to purchase one share of each of the stocks represented
in the index.
C) The average value of a company reflected in the Index has doubled from when the Index was
at 1,250.
D) the share prices of the stocks in the index have risen 25 times since the 1941-1943 base
period. correct answers C) The average value of a company reflected in the Index has doubled
from when the Index was at 1,250.
Which one of the following statements concerning stock trades is correct?
A) Brokerage firms send customer orders to a market maker on the floor of the NYSE.
B) Confirmation of a trade is transmitted directly from the NYSE to the customer who placed the
order.
C) A broker transmits OTC orders from a customer directly to a floor broker in the OTC market.
D) Brokerage firms generally hold securities in street name so they can be transferred without
the customer's signature. correct answers D) Brokerage firms generally hold securities in street
name so they can be transferred without the customer's signature.
The current price of HAR stock is $75. Jason places a limit order for 100 shares at $65, GTC.
The price falls to $65.10 and then rises over the course of a month to $84.
A) Jason has a gain of $1,900.
B) Jason has a gain of $1,890.
, C) Jason does not own the stock, but will if his trade can ever be executed at $65.00 or less.
D) Jason has a loss of $900. correct answers C) Jason does not own the stock, but will if his trade
can ever be executed at $65.00 or less
McDonald's stock is now selling for $190 per share. Kim wants to buy 100 shares but only if she
can do so at $180 or less. She should place a(n)
A) stop order.
B) market order.
C) limit order.
D) odd-lot order. correct answers C) limit order
Stefan places a good-'til-canceled limit order to sell 200 shares of MRK at $76 a share. When his
order reaches the trading floor, MRK is trading at $76.48. Which of the following statements is
true concerning Roy's order?
A) The trade will not be executed and will be immediately cancelled.
B) The order will only be executed if it can be matched with an order to buy at $76.
C) The broker will sell the 200 shares at $76.48 and keep the additional $0.48 as a commission.
D) The order will be executed at $76.48 with the proceeds credited to Stefan's account. correct
answers D) The order will be executed at $76.48 with the proceeds credited to Stefan's account.
Which of the following statements concerning market, stop loss and limit orders are correct?
I. Market orders guarantee both a price and an execution.
II. Market orders guarantee an execution but not a price.
III. Limit orders guarantee a price but not an execution.
IV. Stop-loss orders may never be executed.
A) I and III only
B) II, III and IV only
C) I and IV only
D) II and IV only correct answers B) II, III and IV only
Dr. Balcom is a busy opthamologist who has no time to trade during market hours. She likes
Allergan products and thinks the stock is attractively priced at the day's close of $148.20. Over
the past week, Allergan has traded between $145 and $160, fluctuating widely within each day.
It is now 8:00 P.M. on a Wednesday evening. If Dr. Balcom wants to buy 200 shares of
Allergan, she should
A) place a limit order to buy 200 shares at $148.20.
B) place a market order to buy 200 shares.
C) place a limit order to buy 200 shares at $145.
D) wait to see what happens the next day. correct answers A) place a limit order to buy 200
shares at $148.20.
Ashley purchased a stock at $54 per share. She received quarterly dividends of $0.80 per share.
After one year, Ashley sold the stock at a price of $53.25 a share. What is her percentage holding
period return on this investment?
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