金融市場與金融機(jī)構(gòu)基礎(chǔ)FabozziChapter17解析

1、Foundations of Financial Markets and Institutions, 4(eFabozzi/Modigliani/Jones)Chapter 17 Markets for Common Stock: The Basic CharacteristicsMultiple Choice Questions1 Common Stock Characteristics1) Equity securities represent interest in a corporation. Holders of equity securities areentitled to th

2、e earnings of the corporation when those earnings are distributed in the form of . The key distinction between common stock and preferred stock lies in the degree to which they may participate in any distribution of earnings and the priority given to each in theA) an ownership; dividends; retainment

3、 of earningsB) an ownership; interest; distribution of earningsC) an ownership; dividends; distribution of earningsD) a potential; interest; retainment of earningsAnswer: CComment: Equity securities represent an ownership interest in a corporation. Holders of equity securities are entitled to the ea

4、rnings of the corporation when those earnings are distributed in the form of dividends. They are also entitled to a pro rata share of the remaining equity in case of liquidation. The two types of equity securities are common stock and preferred stock. The key distinction between these two forms of e

5、quity securities lies in the degree to which they may participate in any distribution of earnings and the priority given to each in the distribution of earnings.Diff: 2Topic: 17.1 Common Stock CharacteristicsObjective: 17.9 the implications of pricing efficiency for a common stock strategy2) For com

6、mon stock investors, the return realized by holding this investment comes fromA) dividend paymentsB) decrease in the price of the common stockC) decrease in the price of the common stockD) All of theseAnswer: DComment: For common stock investors, the return realized by holding this investment comes

7、from two sources: dividend payments and the change in the price of the common stock. The changecan be either a decrease or increase.Diff: 2Topic: 17.1 Common Stock CharacteristicsObjective: 17.8 evidence on the pricing efficiency of the stock market13) Which of the below statements is TRUE?A) Divide

8、nds (which are typically in the form of stock) are are distributions made by a corporation to its owners that represent a return on their investment.B) Dividends paid to common stockholders are not legal obligations of a corporation and some corporations do not pay cash dividends.C) At one time, div

9、idend payments were taxed solely as ordinary income. Ordinary income means that the tax rate applicable is based on the investors average tax bracket.D) Depending on the individuals income tax rate, preferential dividends are taxed at either 5% or 15%.Answer: BComment: Dividends (which are typically

10、 in the form of cash) are are distributions made by a corporation to its owners that represent a return on their investment.At one time, dividend payments were taxed solely as ordinary income. Ordinary income means that the tax rate applicable is based on the investorregular marginal tsax bracket.De

11、pending on the individual s incomeqtauxalriafited, dividends are taxed at either 5% or15%.Diff: 2Topic: 17.1 Common Stock CharacteristicsObjective: 17.8 evidence on the pricing efficiency of the stock market4) If the price at a future date the purchase price, then there is a .A) less than; capital g

12、ainB) less than; a taxable gainC) exceeds; capital lossD) exceeds; capital gainAnswer: DComment: If the price at a future dateexceedsthe purchase price, then there is acapital gain; if the price at a future date isless thanthe purchase price, then there is acapital loss.Diff: 2Topic: 17.1 Common Sto

13、ck CharacteristicsObjective: 17.8 evidence on the pricing efficiency of the stock market22 Trading Mechanics1) In regards to types of order, which of the below statements is FALSE?A) The simplest type of order is the market order, an order to be executed at the best price available in the market.B)

14、The danger of a market order is that an adverse move may take place between the time the investor places the order and the time the order is executed.C) A buy limit order indicates that the stock may be purchased only at the designated price or lower, while a sell limit order indicates that the stoc

15、k may be sold at the designated price or higher.D) The key advantage of a limit order is that there is no guarantee that it will be executed at all; the designated price may simply not be obtainable.Answer: DComment: The key disadvantageof a limit order is that there is no guarantee that it will be

16、executed at all; the designated price may simply not be obtainable.Diff: 2Topic: 17.2 Trading MechanicsObjective: 17.1 trading mechanisms such as the types of orders, short selling, and margin transactions2) The is a conditional order and is executed only if the limit price or a better price canbe o

17、btained. Another type of conditional order is the , which specifies that the order isnot to be executed until the market moves to a designated price, at which time it becomes aA) limit order; stop order; market orderB) stop order; limit order; market orderC) limit order; market order; stop orderD) m

18、arket order; stop order; limit orderAnswer: AComment: The limit order is a conditional order and is executed only if the limit price or a better price can be obtained. Another type of conditional order is thestop order, which specifies that the order is not to be executed until the market moves to a

19、 designated price, at which time it becomes amarket order .Diff: 2Topic: 17.2 Trading MechanicsObjective: 17.1 trading mechanisms such as the types of orders, short selling, and margin transactions33) In a stop order, the designated price is than the current market price ofthe stock, while in a limi

20、t order, the designated price is than the currentmarket price of the stock.A) buy; lower; buy; higherB) sell; lower; buy; lowerC) sell; higher; buy; lowerD) sell; lower; sell; lower Answer: BComment: In a sell (buy) stoporder, the designated price islower (higher) than the current market price of th

21、e stock, while in a sell (buy)limit order, the designated price ishigher (lower) than the current market price of the stock.Diff: 2Topic: 17.2 Trading MechanicsObjective: 17.1 trading mechanisms such as the types of orders, short selling, and margin transactions4) Which of the below statements is TR

22、UE?A) Stock prices often exhibit abrupt price changes, so the direction of a change in a stock price may be quite permanent, resulting in the premature trading of a stock.B) A stop-limit order, a hybrid of a stop order and a limit order, is a stop order that designates a price limit.C) The stop-limi

23、t order cannot be used to cushion the market impact of a stop order.D) We can think of the stop order as an order designed to get out of an existing position at an acceptable price (by specifying the exact price), and the market if touched order as an order designed to get into a position at an acce

24、ptable price (also by specifying the exact price). Answer: BComment: Stock prices sometimesexhibit abrupt price changes, so the direction of a change in a stock price may be quitetemporary, resulting in the premature trading of a stock.The stop-limit order can be used to cushion the market impact of

25、 a stop order.We can think of the stop order as an order designed to get out of an existing position at an acceptable price (without specifyingthe exact price), and the market if touched order as an order designed to get into a position at an acceptable price (alswoithout specifyingthe exact price).

26、 Diff: 2Topic: 17.2 Trading MechanicsObjective: 17.1 trading mechanisms such as the types of orders, short selling, and margin transactions45) involves the sale of a security not owned by the investor at the time of sale.A) Short buyingB) Long sellingC) Short sellingD) Long buyingAnswer: CDiff: 1Top

27、ic: 17.2 Trading MechanicsObjective: 17.1 trading mechanisms such as the types of orders, short selling, and margin transactions6) A transaction in which an investor borrows to buy shares using the shares themselves as collateral is called .A) buying on margin.B) selling on margin.C) buying on loan.

28、D) selling on loan. Answer: ADiff: 1Topic: 17.2 Trading MechanicsObjective: 17.1 trading mechanisms such as the types of orders, short selling, and margin transactions7) is the minimum proportion of (1) the equity in the investors margin account to (2)the total market value.A) preservation margin re

29、quirementB) maintenance boundary requirementC) maintenance margin conditionD) maintenance margin requirementAnswer: DDiff: 1Topic: 17.2 Trading MechanicsObjective: 17.1 trading mechanisms such as the types of orders, short selling, and margin transactions53 Transaction Costs1) are the direct costs o

30、f trading, such as broker commissions, fees, and taxes.A) Embedded costsB) Operation costsC) Implicit costsD) Explicit costsAnswer: DComment: Transaction costs, also referred to as trading costs, can be decomposed into two major components: explicit costs and implicit costs.Explicit costsare the dir

31、ect costs of trading, such as broker commissions, fees, and taxes. Implicit costs represent such indirect costs as the price impact of the trade and the opportunity costs of failing to execute in a timely manner or at all. Whereas explicit costs are associated with identifiable accounting charges, n

32、o such reporting of implicit costs occurs.Diff: 2Topic: 17.3 Transaction CostsObjective: 17.2 the types of transaction costs encountered when trading stocks2) Investors often choose their based on who will give them the best execution at the on a specific transaction, and also based on who will prov

33、ide over a period of time.A) customers; highest transaction cost; required servicesB) broker/dealer; highest transaction cost; required servicesC) broker/dealer; lowest transaction cost; complementary servicesD) customers; lowest transaction cost; complementary servicesAnswer: CComment: Investors of

34、ten choose theirbroker/dealer based on who will give them the best execution at thelowest transaction cosot n a specific transaction, and also based on who will provide complementary services(such as research) over a period of time.Diff: 2Topic: 17.3 Transaction CostsObjective: 17.2 the types of tra

35、nsaction costs encountered when trading stocks3) An investor preferentially routes their order to the broker/dealer specified in the soft dollar relationship and does not have to pay real money, for the research or other services. This practice is called paying (i.e., directing their order flow) for

36、 the ancillary research.A) hard dollarsB) soft dollarsC) ancillary dollarsD) real money dollarsAnswer: BDiff: 2Topic: 17.3 Transaction CostsObjective: 17.2 the types of transaction costs encountered when trading stocks64) Implicit trading costs include .A) influence costs, timing costs, and sunk cos

37、ts.B) impact costs, time period costs, and sunk costs.C) influence costs, time period costs, and opportunity costs.D) impact costs, timing costs, and opportunity costs.Answer: DDiff: 2Topic: 17.3 Transaction CostsObjective: 17.2 the types of transaction costs encountered when trading stocks5) is the

38、 cost of securities not traded.A) The sunk costB) The impact costC) The timing costD) The opportunity costAnswer: DDiff: 2Topic: 17.3 Transaction CostsObjective: 17.2 the types of transaction costs encountered when trading stocks4 Trading Arrangements for Retail and Institutional Investors1) Which o

39、f the below statements is FALSE?A) Trades are executed by individuals (wholesale investors) and institutions.B) Institutions typically transact much larger orders than individuals.C) Consistent with their larger size, institutions typically pay lower commissions than individuals.D) Although both an

40、individual and an institution can trade through a broker-dealer, the ways in which their orders are entered and executed may be considerably different, even if the trades are through the same broker-dealer.Answer: AComment: Trades are executed by individuals r(etail investors) and institutions.Diff:

41、 2Topic: 17.4 Trading Arrangements for Retail and Institutional InvestorsObjective: 17.3 trading arrangements to accommodate institutional traders such as block trades and program trades72) may be sent to the broker-dealers floor broker, and orders may betransacted with another broker-dealer or inte

42、rnalized at a competitive bid or offer.A) Exchange orders; OTCB) Exchange orders; NYSEC) Floor orders; AMEXD) Floor orders; OTCAnswer: ADiff: 2Topic: 17.4 Trading Arrangements for Retail and Institutional InvestorsObjective: 17.3 trading arrangements to accommodate institutional traders such as bloc

43、k trades and program trades3) During the past 50 years, common stock holdings in the United States have become increasingly institutionalized. The major institutional holders include .A) pension funds and asset management companies.B) life insurance companies and bank trusts.C) endowments and founda

44、tions.D) All of theseAnswer: DDiff: 2Topic: 17.4 Trading Arrangements for Retail and Institutional InvestorsObjective: 17.3 trading arrangements to accommodate institutional traders such as block trades and program trades4) are orders requiring the execution of trades in a large number of different

45、stocks atas near the same time as possible.A) Retail tradesB) Program tradesC) Mutual fund tradesD) Block tradesAnswer: BDiff: 2Topic: 17.4 Trading Arrangements for Retail and Institutional InvestorsObjective: 17.3 trading arrangements to accommodate institutional traders such as block trades and pr

46、ogram trades8Copyright ? 2010 Pearson Education Inc. Publishing as Prentice Hall5) What type of trades requires require the execution of a trade of a large number of shares of a given stock?A) Program tradesB) Pension fund tradesC) Block tradesD) Execution tradesAnswer: CDiff: 1Topic: 17.4 Trading A

47、rrangements for Retail and Institutional InvestorsObjective: 17.3 trading arrangements to accommodate institutional traders such as block trades and program trades6) Participants in the upstairs market play a key role .A) by providing liquidity to the market so that institutional trades can be execu

48、ted.B) through arbitrage activities that help to integrate the mended institutional market.C) by providing liquidity to the market so as to integrate the fragmented stock market.D) by providing arbitrage opportunities to the market so that institutional trades can be executed. Answer: AComment: Part

49、icipants in the upstairs market play a key role (1) by providing liquidity to the market so that institutional trades can be executed, and (2) by arbitrage activities that help to integrate the fragmented stock market.Diff: 2Topic: 17.4 Trading Arrangements for Retail and Institutional InvestorsObje

50、ctive: 17.3 trading arrangements to accommodate institutional traders such as block trades and program trades7) Which of the below statements is FALSE?A) The NYSE defines block as trades of either at least 10,000 shares of a given stock or trades of shares with a market value of at least $200,000.B)

51、 When sales traders find enough institutions to take an entire block, then the balance of the block trade order is given to the brokerage firms market maker.C) Program trades involve the buying and/or selling of a large number of names simultaneously.D) The two major applications of program trades a

52、re asset allocation and index arbitrage. Answer: BComment: If sales traders cannot findenough institutions to take an entire block, then the balance of the block trade order is given to the brokerage firm s market maker.Diff: 2Topic: 17.4 Trading Arrangements for Retail and Institutional InvestorsOb

53、jective: 17.3 trading arrangements to accommodate institutional traders such as block trades and program trades8) Which of the below statements is FALSE?A) The growth of mutual fund sales and massive equity investments by pension funds and insurance companies during the 1990s have all given an impet

54、us to such methods to trade baskets or bundles of stocks efficiently.B) Program trading is used for a strategy called index arbitrage.C) Several commission arrangements are available to an institution for a program trade, and each arrangement has numerous variants.D) From a dealers perspective, prog

55、ram trades can be conducted in only one way and this on a principal basis.Answer: DComment: From a dealers perspective, program trades can be conducted itnwo ways,namely, on an agency basis and on a principal basis.Diff: 2Topic: 17.4 Trading Arrangements for Retail and Institutional InvestorsObjecti

56、ve: 17.3 trading arrangements to accommodate institutional traders such as block trades and program trades5 Basic Functioning of Stock Markets1) The Consolidated Tape Association (CTA) .A) oversees the dissemination of real-time trade and quote information (market data) from the NYSE and Amex listed

57、 securities (stocks and bonds).B) manages two systems to govern the collection, processing and dissemination of trade and quote data: the Consolidated Tape System (CTS) and the Consolidate Quotation System (CQS).C) conducts price reporting in the U.S. stock markets.D) All of these Answer: DComment:

58、Price reporting in the U.S. stock markets is conducted by the Consolidated Tape Association (CTA). The CTA oversees the dissemination of real-time trade and quote information (market data) from the NYSE and Amex listed securities (stocks and bonds). The CTA is an independent, industry-wide organization. CTA manages two systems to