FIN 335 MAIN PAPER ANSWERS AND QUESTIONS
SET A+
✔✔36. If you ignore a margin call, your broker:
A. will seize all the assets in your account.
B. will close your account.
C. may place a short sale on your behalf to cover the amount of the call.
D. may sell some of your securities to repay the margin loan.
E. will increase both your margin loan and the rate of interest on that loan. - ✔✔D. may
sell some of your securities to repay the margin loan.
✔✔37. Lauren Mitchell has a margin account with a local brokerage firm, RL Brokers.
She recently purchased 200 shares of Abbot Industries common stock that trades on
the New York Stock Exchange (NYSE). These shares are held in street name and are
registered under the name of:
A. Lauren Mitchell.
B. RL Brokers.
C. Abbot Industries.
D. the New York Stock Exchange.
E. the Securities and Exchange Commission. - ✔✔B. RL Brokers.
✔✔38. Which one of the following is generally true concerning securities held in street
name?
,A. The securities are registered under your mailing address rather than your name.
B. There is a greater likelihood the security may be stolen.
C. All dividend checks are mailed to your street address.
D. The annual stock report is mailed directly to your street address.
E. The brokerage firm is the owner of record. - ✔✔E. The brokerage firm is the owner of
record.
✔✔39. Sarah has a brokerage account with Jeff, who is a money manager with
Downtown Brokers. Sarah pays an all-inclusive annual fee to the firm and Jeff manages
her funds. She pays no trading costs or commissions. Which one of the following best
describes this type of account?
A. wrap
B. cash
C. margin
D. mutual
E. advisory - ✔✔A. wrap
✔✔40. A discretionary account:
A. authorizes a broker to trade securities on your behalf.
B. charges an annual fee to cover all trading and management services.
C. is the term applied to brokerage accounts with check-writing and credit card services.
D. is the same as a wrap account.
E. is the account used to pledge securities as collateral for a margin loan. - ✔✔A.
authorizes a broker to trade securities on your behalf.
✔✔41. An investor with a long position in a security will make money:
A. if the price of the security increases.
B. if the price of the security declines.
C. if the price of the security remains stable.
, D. only if the security has been purchased on margin.
E. only by shorting the security. - ✔✔A. if the price of the security increases.
✔✔42. Which one of the following describes a short position?
A. Purchasing a security on margin
B. Selling a security that you originally purchased on margin
C. Loaning a security to your broker to cover a margin call
D. Having less equity than required in your margin account
E. Selling a security that you do not own - ✔✔E. Selling a security that you do not own
✔✔43. On August 8 of this year, Brent sold 500 shares of ADO stock for $24 a share.
On September 6 of this year, he purchased 500 shares of ADO stock to cover his
position. The transaction on August 8:
A. was a short sale.
B. was a margin trade.
C. was a wrap transaction.
D. created a long transaction.
E. was a pooling transaction. - ✔✔was a short sale.
✔✔44. A short sale:
A. creates a long position in a stock.
B. involves the borrowing of securities.
C. is the purchase of less than 100 shares of a stock.
D. is a bullish outlook towards a security.
E. is the resale of a security within four hours of purchase. - ✔✔B. involves the
borrowing of securities.
SET A+
✔✔36. If you ignore a margin call, your broker:
A. will seize all the assets in your account.
B. will close your account.
C. may place a short sale on your behalf to cover the amount of the call.
D. may sell some of your securities to repay the margin loan.
E. will increase both your margin loan and the rate of interest on that loan. - ✔✔D. may
sell some of your securities to repay the margin loan.
✔✔37. Lauren Mitchell has a margin account with a local brokerage firm, RL Brokers.
She recently purchased 200 shares of Abbot Industries common stock that trades on
the New York Stock Exchange (NYSE). These shares are held in street name and are
registered under the name of:
A. Lauren Mitchell.
B. RL Brokers.
C. Abbot Industries.
D. the New York Stock Exchange.
E. the Securities and Exchange Commission. - ✔✔B. RL Brokers.
✔✔38. Which one of the following is generally true concerning securities held in street
name?
,A. The securities are registered under your mailing address rather than your name.
B. There is a greater likelihood the security may be stolen.
C. All dividend checks are mailed to your street address.
D. The annual stock report is mailed directly to your street address.
E. The brokerage firm is the owner of record. - ✔✔E. The brokerage firm is the owner of
record.
✔✔39. Sarah has a brokerage account with Jeff, who is a money manager with
Downtown Brokers. Sarah pays an all-inclusive annual fee to the firm and Jeff manages
her funds. She pays no trading costs or commissions. Which one of the following best
describes this type of account?
A. wrap
B. cash
C. margin
D. mutual
E. advisory - ✔✔A. wrap
✔✔40. A discretionary account:
A. authorizes a broker to trade securities on your behalf.
B. charges an annual fee to cover all trading and management services.
C. is the term applied to brokerage accounts with check-writing and credit card services.
D. is the same as a wrap account.
E. is the account used to pledge securities as collateral for a margin loan. - ✔✔A.
authorizes a broker to trade securities on your behalf.
✔✔41. An investor with a long position in a security will make money:
A. if the price of the security increases.
B. if the price of the security declines.
C. if the price of the security remains stable.
, D. only if the security has been purchased on margin.
E. only by shorting the security. - ✔✔A. if the price of the security increases.
✔✔42. Which one of the following describes a short position?
A. Purchasing a security on margin
B. Selling a security that you originally purchased on margin
C. Loaning a security to your broker to cover a margin call
D. Having less equity than required in your margin account
E. Selling a security that you do not own - ✔✔E. Selling a security that you do not own
✔✔43. On August 8 of this year, Brent sold 500 shares of ADO stock for $24 a share.
On September 6 of this year, he purchased 500 shares of ADO stock to cover his
position. The transaction on August 8:
A. was a short sale.
B. was a margin trade.
C. was a wrap transaction.
D. created a long transaction.
E. was a pooling transaction. - ✔✔was a short sale.
✔✔44. A short sale:
A. creates a long position in a stock.
B. involves the borrowing of securities.
C. is the purchase of less than 100 shares of a stock.
D. is a bullish outlook towards a security.
E. is the resale of a security within four hours of purchase. - ✔✔B. involves the
borrowing of securities.
