3. Active trading in markets and competition among securities analysts helps ensure that __________.I. security prices approach informational efficiencyII. riskier securities are priced to offer higher potential returnsIII. investors are unlikely to be able to consistently find under- or overvalued securities A. I onlyB. I and II onlyC. II and III onlyD. I, II and III12. A stock quote indicates a stock price of $60 and a dividend yield of 3%. The latest quarterly dividend received by stock investors must have been ______ per share. A. $0.55B. $1.80C. $0.45D. $1.2513. Three stocks have share prices of $12, $75, and $30 with total market values of $400 million, $350 million and $150 million respectively. If you were to construct a price-weighted index of the three stocks what would be the index value? A. 300B. 39C. 43D. 3014. You decide to purchase an equal number of shares of stocks of firms to create a portfolio. If you wished to construct an index to track your portfolio performance your best match for your portfolio would be to construct a/an ______. A. value weighted indexB. equal weighted indexC. price weighted indexD. bond price index15. Consider the following three stocks:Assume at these prices the value-weighted index constructed with the three stocks is 490. What would the index be if stock B is split 2 for 1 and stock C 4 for 1? A. 265B. 430C. 355D. 490E. 100016. __________ often accompany short sales, and are used to limit potential losses from the short position. A. Limit ordersB. Restricted ordersC. Limit-loss ordersD. Stop-buy orders17. Specialists on the stock exchanges may do all of the following except _________. A. They make a market in shares of the firms for which they specializeB. They keep the limit order bookC. Use their privileged information to make speculative investments on their own accountD. Use their privileged information to make investments on behalf of clients of brokerage firms with which they do business 18. You purchased XYZ stock at $50 per share. The stock is currently selling at $65. Your gains could be protected by placing a _________. A. limit-buy orderB. limit-sell orderC. market orderD. stop-loss order19. Rank the following types of markets from least integrated and organized to most integrated and organized.I. Brokered marketsII. Continuous auction marketsIII. Dealer marketsIV. Direct search markets A. IV, II, I, IIIB. I, III, IV, IIC. II, III, IV, ID. IV, I, III, II20. The process of polling potential investors regarding their interest in a forthcoming initial public offering (IPO) is called ________. A. interest buildingB. book buildingC. market analysisD. customer identification21. Under firm commitment underwriting the ______ assumes the full risk that the shares cannot be sold to the public at the stipulated offering price. A. red herringB. issuing companyC. initial stockholderD. underwriter22. __________ are an indirect way U.S. investors can invest in foreign companies. A. ADRsB. IRAsC. SDRsD. CPCsQuestion 2 (25 points)Briefly explain the following (maximum 3 lines each)a)Convertible bond:b)MBS:c)Private placement::d)DAX:e)Bank Discount Yield:Question 3 (9 points)Based on the information given for the three stocks, calculate the first-period rates of return (from t = 0 to t = 1) ona. a market-value-weighted index.b. an equally-weighted index. Note: The subscripts 0, 1, and 2 indicate time t = 0, t = 1 and t = 2 respectively.
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