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What does a stop order to buy Facebook at $50 mean (3 points)? Can you place this order if the current stock price of Facebook is $55 (2 points)? Why may an investor who is not short a stock place a buy stop order (5 points)?

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Beverley Smith
Beverley SmithLv2
28 Sep 2019

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According to our “Fundamental Principle #1”, what is the key relationship characteristic between risk and return?

Select one:

a. Investing in corporate bonds is the least risky strategy for portfolio investment.

b. Risk levels and potential returns have an inverse relationship.

c. Increases in unsystematic risk yield greater returns.

d. In order to receive a greater potential return, you must be willing to accept more risk.

e. Both b. and d. above

Diversification will

Select one:

a. not reduce a portfolio’s total risk

b. reduce a portfolio’s firm-specific risk

c. increase a portfolio’s total risk

d. not reduce a portfolio’s unsystematic risk

e. eliminate a portfolio's risk

An investor believes a stock currently selling at $20 per share will be a good investment if its share price drops $5. In such a situation, the investor may decide to place a ________ at $15.

Select one:

a. limit order to buy

b. market order

c. stop order to buy

d. stop order to sell

You buy 500 shares of BHC stock at $80 a share on margin. The initial margin is 50% and the maintenance margin requirement is 30%. If the stock price drops to $60, what will be the actual margin in your account?

Select one:

a. 67%

b. 50%

c. 33%

d. 25%

You just sold short 1,000 shares of a stock at $70 per share (your broker has a 60% initial margin requirement). You cover your short position when the price hits $50 per share one year later. If the company paid $1 per share in dividends during this period, what is your rate of return on the investment?

Select one:

a. 47.62%

b. 27.14%

c. 45.24%

d. -50.00%

1. What is the difference between each pair of items? a) listed and unlisted securities b) brokers and market makers c) full- service and discount brokerage firms d) primary and secondary markets e) market order and good- till- canceled order f) cash account and margin account

2. When would you use a stop- loss order?

3. Why is it riskier to buy stock on margin?

4. The following questions concern short selling: a) When should an investor sell short? b) How can investors sell stock they do not own? c) How is a short position closed? d) How does the investor profit from a short sale? e) What is the risk associated with a short position?

5. How are the SIPC and FDIC similar? Why are securities laws frequently referred to as

Suppose you short-sell 100 shares of IBM, now selling at $178 per share. a. What is your maximum possible loss?. What happens to the maximum loss if you simultaneously place a stop-buy order at $192.50? (Do not round intermediate calculations. Input the amount as a positive value.) Maximum loss $

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