Exam Prep Finance

Topic 1: Introduction & Securities Markets

* Securities traded in equity markets, money markets, and bond markets:

* Sarbanes-Oxley Act (SOX)

Question 1

A) How to the previous days closing price?

b) How many shares could you buy for $5000 if closing price was 10.19?

c) What would be the annual dividend income from those shares?

Question 3

Explain the difference between a put option and a short position in a futures contract?

Question 4

Explain the difference between a call option and a long position in a futures contract?

Topic 2: Securities Trading & Return and Risk

* Types of orders

* Margin trading

* HPR

* Expected return

* Risks measures (standard deviation vs. variance)

Question 3

What is the difference between a stop loss order and a market order?

Question 4

a) Order to broker to buy at market. At what price will your trade be executed?

b) Order to sell market at what price will your trade be executed?

c) limit order to sell at $55.62. What will happen?

d) limit order to buy at $55.37. What will happen?

Question 5

Trader opens a brokerage account and purchases 300 shares of Internet dreams at $40 per share. She borrows $4000 from her broker to help pay for the purchase.

a) What is the margin in brokers account when she first purchases stock?

b) If the share price falls to $30 per share by the end of the year, what is the remaining margin in her account? If the maintenance margin requirement is 30%, will she receive a margin call?

Question 6

Old economy traders opened an account to short sell 1000 shares of Internet dreams from question 8. The initial margin requirement was 50%. A year later, the price of Internet dreams has risen from $40 to $50.

a) What is the remaining margin in the account?

b) if the maintenance margin requirement is 30%, will old economy receive a margin call?

Question 8

Old economy traders opened an...