All government bonds and the majority of corporate bonds are traded:
D
Explanation:
All government bonds and the majority of corporate bonds are traded in the over-the-counter
market.
Which of the following types of securities would not be traded in the over-the-counter market?
I. stock options
II. government bonds
III. corporate bonds
IV. corporate stocks
D
Explanation:
All of the choices listed-and more-are traded in the over-the-counter market: stock options,
government bonds, corporate bonds, and corporate stocks. Additionally, securities such as warrants,
rights, forward contracts, and foreign currencies also trade in the over-the-counter market.
Which of the following are duties of the specialist on an exchange floor?
I. executing limit orders if/when the limit price specified is reached
II. minimizing any imbalance in supply and demand for the stock(s) that the specialist is assigned
III. determining an opening price for each assigned stock every day
IV. serving as an auctioneer for the shares of the assigned stocks
D
Explanation:
All of the choices listed are duties of the specialist on an exchange floor. The specialist maintains a
limit order “book” and executes those orders if/when the limit price is reached. The specialist is also
charged with maintaining a fair and orderly market in the assigned securities, which means trading
on his own account to ensure that the supply and demand of the stock’s shares match. Additionally,
the specialist is responsible for setting the opening price for the assigned stock each day and for
serving as the auctioneer for the shares of the stock.
The price at which an investor can sell a security to a market maker in the over-the-counter market is
called the:
C
Explanation:
An investor can sell a security to a market maker in the over -the-counter market at the bid price,
which is the price at which the market maker is willing to buy the security.
Mary is interested in buying shares of the Lambchops Corporation, which sells over-the-counter. The
market maker with the best bid price--$3.15--is Veggie Investments. The market maker with the best
ask price--$3.27-is Carnivor Investments. Mary conducts trades in NYSE-listed stocks through her
broker, Omnivor and Associates.
Given this scenario, which of the following statements is true?
D
Explanation:
Mary can buy shares of Lambchops Corporation for $3.27 from the market maker with the best ask
price, Carnivor, by contacting her broker, Omnivor and Associates, which will execute the transaction.
The ask price is the price at which market makers in the over-the-counter market are willing to sell
the stock, and over-the-counter transactions, like NYSE transactions, are executed by brokers.
Noah Mete is interested in selling his shares of the Lambchops Corporation, which trades over-the-
counter. The market maker with the best bid price--$3.15--is Veggie Investments. The market maker
with the best ask price--$3.27-is Carnivor Investments. Noah conducts trades in NYSE-listed stocks
through his broker, Omnivor and Associates.
Given this scenario, which of the following statements is true?
C
Explanation:
Noah can sell his shares of Lambchops Corporation for $3.15 from the market maker with the best
bid price, Veggie, by contacting his broker, Omnivor and Associates, which will execute the
transaction. The bid price is the price at which market makers in the over-the-counter market are
willing to buy the stock, and over-the-counter transactions, like NYSE transactions, are executed by
brokers.
Which of the following represents a secondary market transaction?
C
Explanation:
Explanation: When an investor sells her shares of Sunvalley Solar that is listed on the OTC Bulletin
Board, it is a secondary market transaction since shares are being bought and sold between
investors. All the other selections involve a new issue of securities, which makes them primary
market transactions.
Which of the following statements about primary market transactions is true?
B
Explanation:
In a primary market transaction, the issuer of the security receives the proceeds from the sale of the
security. A secondary market transaction involves the purchase and sale of a security between
investors, and the seller of the security receives the proceeds from the sale. Both stocks and bonds
are initially introduced to the market as primary market securities and are then traded in the
secondary market.
A new issue of common stock can be classified in which of the following categories?
I. primary market
II. money market
III. secondary market
IV. capital market
C
Explanation:
Only Selections I and IV are correct. A new issue of common stock will be sold in the primary market.
It is also a capital market security since it has no maturity, and capital market securities are securities
with greater than one year to maturity.
Which of the following securities would be exempt from SEC registration requirements?
I. a 15-year bond issued by the state of Colorado
II. an issue of preferred stock that has an aggregate par value of $5 million
III. an issue of commercial paper that has a 5-month maturity
C
Explanation:
Only Selections I and III are exempt from SEC registration requirements. The bond issued by Colorado
is exempt because bonds issued by a government body are exempt from registration. The issue of
commercial paper is exempt because securities with less than 270 days to maturity are exempt from
registration.