QUESTION What type of securities order condition demonstrates the highest degree of faith in a broker’s capabilities? What will be an ideal response? ANSWER Answer: A discretionary order allows a broker to decide the best time and price for selling or buying a security. A client who places a discretionary order trusts the broker […]
QUESTION Which of the following, if true, most clearly weakens Karola’s point of view? A) People who use discount brokers often purchase stocks, which carry a greater risk than bonds or money market instruments. B) The department manager for whom the two work recently made several thousand dollars on an investment made through E-Trade. C) […]
QUESTION By what formula are the financial earnings of a mutual fund distributed to its investors? What will be an ideal response? ANSWER Answer: Investors in a mutual fund share in the returns according to the proportion of their contributions to the fund. Explanation: Investors share in the returns of a mutual fund in […]
QUESTION Which of the following, if true, most clearly strengthens Karola’s point of view? A) E-Trade is somewhat quicker than Merrill Lynch in putting in orders. B) Several other managers in the same firm use E-Trade and are satisfied with the quality of the investments they make. C) E-Trade offers online chats with an experienced […]
QUESTION Which portfolio mix is following the most aggressive investment strategy? A) 85% stocks, 15% bonds, 0% cash B) 50% stocks, 40% bonds, 10% cash C) 40% stocks, 35% bonds, 15% cash D) 0% stocks, 80% bonds, 20% cash E) 25% stocks, 65% bonds, 10% cash ANSWER Answer: A Explanation: A) Stocks present much […]
QUESTION Oliver is a day trader who tries to earn fast profits by making many trades in a short amount of time. What investment strategy does Oliver follow? A) value investing B) market timing C) investing for growth D) buying and holding E) investing for income ANSWER Answer: B Explanation: B) Market timing consists […]
QUESTION In the securities market, what is a capital gain? What will be an ideal response? ANSWER Answer: A capital gain occurs when an investor buys a security for a certain price and sells it at a higher price. The profit made from the sale is the capital gain. Explanation: Capital gain is the […]
QUESTION Explain the difference between a stock and a bond. What will be an ideal response? ANSWER Answer: A stock represents a share of ownership in a company. A bond is a certificate that shows the owner has lent money to a company or government agency. Explanation: Stocks represent shares of ownership in a […]
QUESTION Within the securities market, what is considered a “short-term IOU,” what is considered a “long-term IOU,” and which offers lower risk for investors? What will be an ideal response? ANSWER Answer: Short-term IOUs are money market instruments, such as U.S. treasury bills or bank CDs, that mature within one year. Long-term IOUs are […]
QUESTION Investment banks can take a financial loss when new issues of stocks they purchase are sold to investors at a lower price. How can they decrease their risk? What will be an ideal response? ANSWER Answer: Investment banks can form a syndicate to purchase and sell a particular stock issue. Rather than one […]
