Fundamentals .of .Investments, .8e
.(Jordan) .Chapter .2 The .Investment
.Process
1) Market .timing .is .the:
A) placing .of .an .order .within .the .last .half-hour .of .trading .for .a .day.
B) period .of .time .between .the .placement .of .a .short .sale .and .the .covering .of .that .sale.
C) buying .and .selling .of .securities .in .anticipation .of .the .overall .direction .of .the .market.
D) staggering .of .either .buy .or .sell .orders .to .mask .the .total .size .of .a .large .transaction.
E) placing .of .trades .within .the .last .half-hour .prior .to .the .commencement .of .daily .trading.
2) Asset .allocation .is .the:
A) selection .of .specific .securities .within .a .particular .class .or .industry.
B) division .of .a .purchase .price .between .a .cash .payment .and .a .margin .loan.
C) division .of .a .portfolio .into .short .and .long .positions.
D) distribution .of .investment .funds .among .various .broad .asset .classes.
E) dividing .of .assets .into .those .that .are .hypothecated .and .those .that .are .not.
3) Jack .is .researching .chemical .companies .in .an .effort .to .determine .which .company's .stock
.he .should .purchase. .This .process .is .known .as:
A) market .timing.
B) purchase .shorting.
C) marketing .research.
D) asset .allocation.
E) security .selection.
,4) A .Roth .IRA:
A) is .a .form .of ."tax-deferred" .account.
B) funds .are .taxed .at .the .time .you .begin .withdrawals.
C) are .well-suited .to .investors .nearing .retirement.
D) invests .after-tax .dollars.
E) is .the .type .of .account .offered .by .most .employers.
5) A .brokerage .account .in .which .purchases .can .be .made .using .credit .is .referred .to .as .which
.type .of .account?
A) clearing
B) funds .available
C) cash
D) call
E) margin
6) Kay .just .purchased .$5,000 .worth .of .stock. .She .paid .$3,000 .in .cash .and .borrowed .$2,000.
.In .this .example, .the .term .margin .refers .to:
A) the .total .amount .of .the .purchase.
B) the .percentage .of .the .purchase .that .was .paid .in .cash.
C) the .percentage .of .the .purchase .paid .with .borrowed .funds.
D) any .future .increase .in .the .value .of .the .stock.
E) any .future .decrease .in .the .value .of .the .stock.
1
,7) Which .one .of .the .following .best .describes .the .term ."initial .margin"?
A) Amount .of .money .that .must .be .deposited .to .open .a .margin .account .with .a .broker
B) Amount .of .cash .that .must .be .paid .to .purchase .a .security .on .margin
C) Amount .of .cash .that .must .be .paid .when .a .broker .issues .a .margin .call
D) Amount .of .money .borrowed .when .a .security .is .purchased
E) Total .loan .amount .offered .to .a .customer .by .a .brokerage .firm .to .cover .future .purchases
8) The .minimum .equity .that .must .be .maintained .at .all .times .in .a .margin .account .is .called .the:
A) initial .margin.
B) initial .equity .position.
C) maintenance .margin.
D) call .requirement.
E) margin .call.
9) When .your .equity .position .in .a .security .is .less .than .the .required .amount, .your .brokerage
.firm .will .issue .a:
A) margin .call.
B) margin .certificate.
C) cash .certificate.
D) limit .order.
E) leverage .call.
10) Sam .purchased .500 .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:
A) margin .calling.
B) hypothecation.
C) leveraging.
D) maintaining .the .margin.
E) street .securitization.
11) Staci .owns .1,000 .shares .of .stock .in .a .margin .account. .Those .shares .are .most .likely .held .in:
A) transit.
B) her .registered .name.
C) street .name.
D) a .wrap .account.
E) a .discretionary .account.
12) This .morning, .Josh .sold .800 .shares .of .stock .that .he .did .not .own. .This .sale .is .referred .to .as
.a:
A) margin .sale.
B) long .position.
C) wrap .trade.
D) hypothecated .sale.
E) short .sale.
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Copyright ©2018 McGraw-Hill
, 13) The .amount .of .common .stock .held .in .short .positions .is .referred .to .as .the .short:
A) margin.
B) shares.
C) proceeds.
D) sale.
E) interest.
14) A .company .that .owns .income-producing .real .estate .such .as .an .apartment .complex .or .a
.retail .shopping .center .is .called .a(n):
A) REIT.
B) SIPC.
C) REEF.
D) EAR.
E) SPIC.
15) An .investor .who .has .a .resource .constraint:
A) pays .no .income .taxes.
B) has .insufficient .funds .to .purchase .a .security.
C) has .a .relatively .high .marginal .tax .rate.
D) has .only .one .source .of .income.
E) will .only .invest .in .socially .acceptable .securities.
16) To .be .considered .liquid, .a .security .must:
A) be .held .in .a .cash .account.
B) pay .dividends.
C) be .able .to .be .sold .on .short .notice.
D) be .held .for .less .than .one .year.
E) be .able .to .be .sold .quickly .with .little, .if .any, .price .concession.
17) Walter .is .trying .to .decide .whether .he .wants .to .purchase .shares .in .General .Motors, .Ford,
.or .Honda, .all .of .which .are .auto .manufacturers. .Walter .is .making .a(n) . decision.
A) security .selection
B) tax-advantaged
C) risk .aversion
D) active .strategy
E) asset .allocation
18) 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.
A) market .timing
B) security .selection
C) tax-advantaged
D) active .strategy
E) asset .allocation
3
Copyright ©2018 McGraw-Hill
.(Jordan) .Chapter .2 The .Investment
.Process
1) Market .timing .is .the:
A) placing .of .an .order .within .the .last .half-hour .of .trading .for .a .day.
B) period .of .time .between .the .placement .of .a .short .sale .and .the .covering .of .that .sale.
C) buying .and .selling .of .securities .in .anticipation .of .the .overall .direction .of .the .market.
D) staggering .of .either .buy .or .sell .orders .to .mask .the .total .size .of .a .large .transaction.
E) placing .of .trades .within .the .last .half-hour .prior .to .the .commencement .of .daily .trading.
2) Asset .allocation .is .the:
A) selection .of .specific .securities .within .a .particular .class .or .industry.
B) division .of .a .purchase .price .between .a .cash .payment .and .a .margin .loan.
C) division .of .a .portfolio .into .short .and .long .positions.
D) distribution .of .investment .funds .among .various .broad .asset .classes.
E) dividing .of .assets .into .those .that .are .hypothecated .and .those .that .are .not.
3) Jack .is .researching .chemical .companies .in .an .effort .to .determine .which .company's .stock
.he .should .purchase. .This .process .is .known .as:
A) market .timing.
B) purchase .shorting.
C) marketing .research.
D) asset .allocation.
E) security .selection.
,4) A .Roth .IRA:
A) is .a .form .of ."tax-deferred" .account.
B) funds .are .taxed .at .the .time .you .begin .withdrawals.
C) are .well-suited .to .investors .nearing .retirement.
D) invests .after-tax .dollars.
E) is .the .type .of .account .offered .by .most .employers.
5) A .brokerage .account .in .which .purchases .can .be .made .using .credit .is .referred .to .as .which
.type .of .account?
A) clearing
B) funds .available
C) cash
D) call
E) margin
6) Kay .just .purchased .$5,000 .worth .of .stock. .She .paid .$3,000 .in .cash .and .borrowed .$2,000.
.In .this .example, .the .term .margin .refers .to:
A) the .total .amount .of .the .purchase.
B) the .percentage .of .the .purchase .that .was .paid .in .cash.
C) the .percentage .of .the .purchase .paid .with .borrowed .funds.
D) any .future .increase .in .the .value .of .the .stock.
E) any .future .decrease .in .the .value .of .the .stock.
1
,7) Which .one .of .the .following .best .describes .the .term ."initial .margin"?
A) Amount .of .money .that .must .be .deposited .to .open .a .margin .account .with .a .broker
B) Amount .of .cash .that .must .be .paid .to .purchase .a .security .on .margin
C) Amount .of .cash .that .must .be .paid .when .a .broker .issues .a .margin .call
D) Amount .of .money .borrowed .when .a .security .is .purchased
E) Total .loan .amount .offered .to .a .customer .by .a .brokerage .firm .to .cover .future .purchases
8) The .minimum .equity .that .must .be .maintained .at .all .times .in .a .margin .account .is .called .the:
A) initial .margin.
B) initial .equity .position.
C) maintenance .margin.
D) call .requirement.
E) margin .call.
9) When .your .equity .position .in .a .security .is .less .than .the .required .amount, .your .brokerage
.firm .will .issue .a:
A) margin .call.
B) margin .certificate.
C) cash .certificate.
D) limit .order.
E) leverage .call.
10) Sam .purchased .500 .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:
A) margin .calling.
B) hypothecation.
C) leveraging.
D) maintaining .the .margin.
E) street .securitization.
11) Staci .owns .1,000 .shares .of .stock .in .a .margin .account. .Those .shares .are .most .likely .held .in:
A) transit.
B) her .registered .name.
C) street .name.
D) a .wrap .account.
E) a .discretionary .account.
12) This .morning, .Josh .sold .800 .shares .of .stock .that .he .did .not .own. .This .sale .is .referred .to .as
.a:
A) margin .sale.
B) long .position.
C) wrap .trade.
D) hypothecated .sale.
E) short .sale.
2
Copyright ©2018 McGraw-Hill
, 13) The .amount .of .common .stock .held .in .short .positions .is .referred .to .as .the .short:
A) margin.
B) shares.
C) proceeds.
D) sale.
E) interest.
14) A .company .that .owns .income-producing .real .estate .such .as .an .apartment .complex .or .a
.retail .shopping .center .is .called .a(n):
A) REIT.
B) SIPC.
C) REEF.
D) EAR.
E) SPIC.
15) An .investor .who .has .a .resource .constraint:
A) pays .no .income .taxes.
B) has .insufficient .funds .to .purchase .a .security.
C) has .a .relatively .high .marginal .tax .rate.
D) has .only .one .source .of .income.
E) will .only .invest .in .socially .acceptable .securities.
16) To .be .considered .liquid, .a .security .must:
A) be .held .in .a .cash .account.
B) pay .dividends.
C) be .able .to .be .sold .on .short .notice.
D) be .held .for .less .than .one .year.
E) be .able .to .be .sold .quickly .with .little, .if .any, .price .concession.
17) Walter .is .trying .to .decide .whether .he .wants .to .purchase .shares .in .General .Motors, .Ford,
.or .Honda, .all .of .which .are .auto .manufacturers. .Walter .is .making .a(n) . decision.
A) security .selection
B) tax-advantaged
C) risk .aversion
D) active .strategy
E) asset .allocation
18) 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.
A) market .timing
B) security .selection
C) tax-advantaged
D) active .strategy
E) asset .allocation
3
Copyright ©2018 McGraw-Hill
