Problem 1: Assume that the S&P 500 composite stock index is 995.50. This means that
a.) the average stock in the index is selling for $99.55.
b.) an investor would have to pay $995.50 to purchase one share of each of the stocks represented in the index.
c.) the market values of the stocks in the index increased by a factor of 99.55 since the 1941-1943 base period.
d.) the share prices of the stocks in the index have risen 995.50 times since 1941.
Problem 2: Mike bought 200 shares of EG stock two years ago at $16 per share. The stock has traded in a range of $21 to $44 a share over the past year. EG is now selling for $43.60 a share. EG announces its earnings today and Mike feels the stock could go to $60 on good news or fall to $30 on bad. To protect his profits, the most appropriate order for him to place is
a.) market order to sell immediately.
b.) a limit sell order at $60.00.
c.) a stop loss order at $42.
d.) a stop-limit order to sell at $45.
Problem 3: An individual can sort stocks by dividend rates, growth rates, and price/earnings ratios using screening tools on the Internet.
Problem 4: Which one of the following statements about limit orders is correct?
a.) The execution of the trade will occur prior to the close of trading on the day the trade is placed.
b.) The execution will occur at the regular open on the day following the day the trade is placed.
c.) The trade may be executed only at the limit price or better at any time prior to expiration or cancellation of the order.
d.)The trade will be executed at the market price at the end of the third business day, if not executed previously at the limit price.
Problem 5: Trading stocks is much faster and less complicated if an individual investor has possession of the actual stock certificates.
Problem 6: Over-the-counter market activity is reflected in the
a.) Standard & Poor's composite index.
b.) Nasdaq index.
c.) AMEX composite index.
d.) financials index.
Problem 7: Traders who hold stocks for less than a full day can reduce the tax burden on their profits. (Points : 1)
Problem 8: Which of the following designations does not have formal education and testing requirements.
a.) Chartered Financial Analyst
b.) Certified Financial Planner
c.) Registered Investment Adviser
d.) Certified Public Accountant
Problem 9: The Dow Jones Industrial Average (DJIA) consists of 30 stocks whose price behavior
a.) typically has little correlation with the rest of the stock market.
b.) broadly reflects the overall price behavior of the stock market.
c.) reflects the changes in value of manufacturing stocks only.
d.) leads the movements in the general economy by one to two weeks.
Problem 10: Investment advisors are legally responsible for losses incurred by their clients.
Problem 11: McDonald's stock is now selling for $57 per share. Kim wants to buy 100 shares but only if she can do so at $55 or less. She should place a(n)
a.) stop order.
b.) market order.
c.) limit order.
d.) odd-lot order.
Problem 12: A stop-loss order is activated once the stock reaches the specified price.