Chapter 5 the Stock Market

Chapter 5 The Stock Market

1. High Color Detergent is issuing new shares of stock which will trade on NASDAQ. If Sue purchases 300 of these shares, the trade will occur in which one of the following markets? A. primary B. secondary C. third D. fourth E. over-the-counter See Section 5.1 Blooms: Knowledge Jordan - Chapter 05 #1 Learning Objective: 05-01 The differences between private and public equity and between imary and secondary stock markets. Level of Difficulty: Core Section: 5.1 Topic: Primary Market 2. Wilson just placed an order with his broker to purchase 500 of the outstanding shares of GE. This purchase will occur in which one of the following markets? A. primary B. secondary C. third D. fourth E. fifth See Section 5.1 Blooms: Knowledge Jordan - Chapter 05 #2 Learning Objective: 05-01 The differences between private and public equity and between imary and secondary stock markets. Level of Difficulty: Core Section: 5.1 Topic: Secondary Market 3. Hi-Tek Shoes is a private firm that has decided to issue shares of stock to the general public. This stock issue will be referred to as a(n): A. open-end sale B. break-out issue C. public service offering D. initial public offering E. initial trial issue See Section 5.1 Blooms: Knowledge Jordan - Chapter 05 #3 Learning Objective: 05-01 The differences between private and public equity and between imary and secondary stock markets. Level of Difficulty: Core Section: 5.1 Topic: Initial Public Offering 4. A firm that specializes in arranging financing for companies is called a(n): A. floor broker B. investment banking firm C. investment dealer D. private broker E. marketing firm See Section 5.1 Blooms: Knowledge Jordan - Chapter 05 #4 Learning Objective: 05-01 The differences between private and public equity and between imary and secondary stock markets. Level of Difficulty: Core Section: 5.1 Topic: Investment Banking Firm 5. The process of purchasing newly issued shares from the issuer and reselling those shares to the general public is called: A. underwriting B. capitalizing C. securing D. brokering E. deploying See Section 5.1 Blooms: Knowledge Jordan - Chapter 05 #5 Learning Objective: 05-01 The differences between private and public equity and between imary and secondary stock markets. Level of Difficulty: Core Section: 5.1 Topic: Underwriting 6. The financing provided for new ventures that are frequently high-risk investments is referred to as "venture ______". A. capital B. leverage C. risk funds D. funding E. investing See Section 5.1 Blooms: Knowledge Jordan - Chapter 05 #6 Learning Objective: 05-01 The differences between private and public equity and between imary and secondary stock markets. Level of Difficulty: Core Section: 5.1 Topic: Venture Capital 7. Marco Painting Supplies is a publicly-traded firm with 250,000 shares of stock outstanding. If the firm issues an additional 10,000 shares, those shares will be referred to as a(n): A. supplemental offering. B. seasoned equity offering. C. initial public offer. D. market expansion offer. E. after-market underwriting. See Section 5.1 Blooms: Knowledge Jordan - Chapter 05 #7 Learning Objective: 05-01 The differences between private and public equity and between imary and secondary stock markets. Level of Difficulty: Core Section: 5.1 Topic: Seasoned Equity Offering 8. Under the provisions of a general cash offer, shares of stock are offered to: A. underwriters on a guaranteed sale basis only. B. current shareholders prior to being offered to the general public. C. institutional investors only. D. the issuer's employees on a cash purchase basis only. E. the general public on a "first-come" basis. See Section 5.1 Blooms: Knowledge Jordan - Chapter 05 #8 Learning Objective: 05-01 The differences between private and public equity and between imary and secondary stock markets. Level of Difficulty: Core Section: 5.1 Topic: General Cash Offer 9. A public offering of securities which are offered first to current shareholders is called a(n): A. existing shareholder offer. B. limited offer. C. rights offer. D. venture offer. E. preference offer. See Section 5.1 Blooms: Knowledge Jordan - Chapter 05 #9 Learning Objective: 05-01 The differences between private and public equity and between imary and secondary stock markets. Level of Difficulty: Core Section: 5.1 Topic: Rights Offer 10. The difference between the price an underwriter pays an issuer and the underwriter's offering price is called the: A. spread. B. margin. C. offer differential. D. firm commitment. E. underwriting capital. See Section 5.1 Blooms: Knowledge Jordan - Chapter 05 #10 Learning Objective: 05-01 The differences between private and public equity and between imary and secondary stock markets. Level of Difficulty: Core Section: 5.1 Topic: Spread 11. When a group of underwriters jointly work together to sell a new issue of securities, the underwriters form a(n): A. underwriting cartel. B. market union. C. venture capital association. D. Dutch market. E. syndicate. See Section 5.1 Blooms: Knowledge Jordan - Chapter 05 #11 Learning Objective: 05-01 The differences between private and public equity and between imary and secondary stock markets. Level of Difficulty: Core Section: 5.1 Topic: Syndicate 12. When an underwriting syndicate purchases an entire issue of new securities and accepts the risk of unsold shares, the underwriting is known as a _____ underwriting. A. Dutch auction B. full-fledge C. firm commitment D. best efforts E. guaranteed sale See Section 5.1 Blooms: Knowledge Jordan - Chapter 05 #12 Learning Objective: 05-01 The differences between private and public equity and between imary and secondary stock markets. Level of Difficulty: Core Section: 5.1 Topic: Firm Commitment Underwriting 13. When the issuer assumes the risk for any shares the underwriters cannot sell, the underwriting is known as a _____ underwriting. A. Dutch auction B. partial C. firm commitment D. best efforts E. pro-rata See Section 5.1 Blooms: Knowledge Jordan - Chapter 05 #13 Learning Objective: 05-01 The differences between private and public equity and between imary and secondary stock markets. Level of Difficulty: Core Section: 5.1 Topic: Best Efforts Underwriting 14. When the price of newly issued shares is determined by competitive bidding the underwriting is known as a _____ underwriting. A. Dutch auction B. market-priced C. seasoned D. best efforts E. rights See Section 5.1 Blooms: Knowledge Jordan - Chapter 05 #14 Learning Objective: 05-01 The differences between private and public equity and between imary and secondary stock markets. Level of Difficulty: Core Section: 5.1 Topic: Dutch Auction Underwriting 15. Which one of the following is the federal agency which regulates the financial markets in the U.S.? A. Treasury Department B. National Association of Securities Dealers C. Over the Counter Commission D. Federal Reserve E. Securities and Exchange Commission See Section 5.1 Blooms: Knowledge Jordan - Chapter 05 #15 Learning Objective: 05-01 The differences between private and public equity and between imary and secondary stock markets. Level of Difficulty: Core Section: 5.1 Topic: Securities and Exchange Commission (Sec) 16. The document that must be prepared in order to receive approval for a stock offering is called a: A. tombstone. B. prospectus. C. offering agreement. D. regulatory report. E. offering paper. See Section 5.1 Blooms: Knowledge Jordan - Chapter 05 #16 Learning Objective: 05-01 The differences between private and public equity and between imary and secondary stock markets. Level of Difficulty: Core Section: 5.1 Topic: Prospectus 17. A preliminary document provided to investors who are interested in a stock offering is called a(n): A. prospectus. B. inquiry form. C. draft offer. D. green shoe. E. red herring. See Section 5.1 Blooms: Knowledge Jordan - Chapter 05 #17 Learning Objective: 05-01 The differences between private and public equity and between imary and secondary stock markets. Level of Difficulty: Core Section: 5.1 Topic: Red Herring 18. A securities dealer is a(n): A. intermediary who arranges trades between a buyer and a seller. B. trader who buys and sells from his or her inventory. C. firm which charges a commission for arranging a transaction. D. person who buys securities for his or her own account on an exchange floor. E. trader who transacts business on behalf of a securities issuer. See Section 5.1 Blooms: Knowledge Jordan - Chapter 05 #18 Learning Objective: 05-01 The differences between private and public equity and between imary and secondary stock markets. Level of Difficulty: Core Section: 5.1 Topic: Dealer 19. Which one of the following best describes a broker? A. intermediary who arranges trades between a buyer and a seller B. trader who buys and sells from his or her inventory C. firm which charges a commission for arranging a transaction D. person who buys securities for his or her own account on an exchange floor E. trader who transacts business on behalf of a securities issuer See Section 5.1 Blooms: Knowledge Jordan - Chapter 05 #19 Learning Objective: 05-01 The differences between private and public equity and between imary and secondary stock markets. Level of Difficulty: Core Section: 5.1 Topic: Broker 20. Which one of the following prices will an individual investor receive if he or she sells shares of Microsoft? A. bid B. ask C. issue D. offer E. Dutch See Section 5.1 Blooms: Knowledge Jordan - Chapter 05 #20 Learning Objective: 05-01 The differences between private and public equity and between imary and secondary stock markets. Level of Difficulty: Core Section: 5.1 Topic: Bid Price 21. Which one of the following prices will an investor pay to purchase shares of stock that are currently outstanding? A. issue B. option C. bid D. ask E. primary See Section 5.1 Blooms: Knowledge Jordan - Chapter 05 #21 Learning Objective: 05-01 The differences between private and public equity and between imary and secondary stock markets. Level of Difficulty: Core Section: 5.1 Topic: Ask Price 22. The profit a dealer makes on a purchase and resale of shares of stock is called the: A. margin. B. bid. C. float. D. offer. E. spread. See Section 5.1 Blooms: Knowledge Jordan - Chapter 05 #22 Learning Objective: 05-01 The differences between private and public equity and between imary and secondary stock markets. Level of Difficulty: Core Section: 5.1 Topic: Spread 23. A private equity fund: I. is set up as a limited partnership II. usually use a 2/20 fee structure III. place no constraints on manager compensation IV. typically have a stated life of 7 to 10 years A. I and II only B. I and III only C. I, II and III only D. I, II and IV only E. I, II, III, and IV See Section 5.1 Blooms: Knowledge Jordan - Chapter 05 #23 Learning Objective: 05-01 The differences between private and public equity and between imary and secondary stock markets. Level of Difficulty: Core Section: 5.1 Topic: Private Equity Fund 24. Which of the following is correct regarding the compensation paid to private equity fund managers? A. Managers typically receive 20% of fund profits but no separate management fee. B. Managers typically receive a high percentage management fee but no portion of fund profits. C. Management compensation is usually subject to a "clawback" provision to limit the performance fees. D. "Carried interest" refers to the interest fund managers earn on performance fees. E. Fees paid to fund managers do not reduce the net return of the fund. See Section 5.1 Blooms: Knowledge Jordan - Chapter 05 #24 Learning Objective: 05-01 The differences between private and public equity and between imary and secondary stock markets. Level of Difficulty: Core Section: 5.1 Topic: Private Equity Fund 25. An owner of a trading license on the NYSE is called a: A. broker. B. shareholder. C. member. D. trader. E. dealer. See Section 5.2 Blooms: Knowledge Jordan - Chapter 05 #25 Learning Objective: 05-02 The workings of the New York Stock Exchange. Level of Difficulty: Core Section: 5.2 Topic: Nyse Member 26. An NYSE Supplemental Liquidity Provider: I. can trade the same stocks as designated market makers II. can trade only from offices outside the exchange III. must quote bid or ask quotes a certain % of the day IV. are paid 30 cents per 100 shares traded A. I and II only B. I, II and III only C. I and III only D. I, II, and IV only E. I, II, III and IV See Section 5.2 Blooms: Knowledge Jordan - Chapter 05 #26 Learning Objective: 05-02 The workings of the New York Stock Exchange. Level of Difficulty: Core Section: 5.2 Topic: Supplemental Liquidity Provider 27. The party who serves as a dealer for a few securities on an exchange floor and is obligated to maintain an orderly market for those securities is called a: A. floor trader. B. designated market maker. C. floor broker. D. member. E. house broker. See Section 5.2 Blooms: Knowledge Jordan - Chapter 05 #27 Learning Objective: 05-02 The workings of the New York Stock Exchange. Level of Difficulty: Core Section: 5.2 Topic: Specialist 28. A trading floor broker: A. is a NYSE member who trades on the floor for his or her personal account. B. executes orders on behalf of commission brokers in exchange for a fee. C. executes customers' orders in exchange for a commission. D. trades a limited number of securities and is obligated to maintain an orderly market for those securities. E. is any party who owns a NYSE trading license. See Section 5.2 Blooms: Knowledge Jordan - Chapter 05 #28 Learning Objective: 05-02 The workings of the New York Stock Exchange. Level of Difficulty: Core Section: 5.2 Topic: Floor Broker 29. The NYSE's Super Display Book is an electronic system which: A. maintains the historical records of each customer's trading activity. B. transmits the latest market information to the news media. C. allows floor traders to execute trades via cell phones. D. tracks the activity on an exchange floor to ensure regulatory compliance. E. is based on NYSE's ARCA electronic trading engine. See Section 5.2 Blooms: Knowledge Jordan - Chapter 05 #29 Learning Objective: 05-02 The workings of the New York Stock Exchange. Level of Difficulty: Core Section: 5.2 Topic: Sdbk 30. A NYSE member who trades only for his or her own account is called a(n): A. floor trader. B. specialist. C. individual broker. D. floor broker. E. house broker. See Section 5.2 Blooms: Knowledge Jordan - Chapter 05 #30 Learning Objective: 05-02 The workings of the New York Stock Exchange. Level of Difficulty: Core Section: 5.2 Topic: Floor Trader 31. The location on an exchange floor where a particular security trades is called a(n): A. specialist's post. B. broker's terminal. C. floor spot. D. exchange spot. E. market pit. See Section 5.3 Blooms: Knowledge Jordan - Chapter 05 #31 Learning Objective: 05-02 The workings of the New York Stock Exchange. Level of Difficulty: Core Section: 5.3 Topic: Specialists Post 32. You want to sell shares of stock at the current price. Which type of order should you place? A. limit B. post C. market D. short E. stop See Section 5.3 Blooms: Knowledge Jordan - Chapter 05 #32 Learning Objective: 05-02 The workings of the New York Stock Exchange. Level of Difficulty: Core Section: 5.3 Topic: Market Order 33. An order to buy shares of stock at a stated price or less is called a _____ order. A. limit B. stop C. market D. short E. bid See Section 5.3 Blooms: Knowledge Jordan - Chapter 05 #33 Learning Objective: 05-02 The workings of the New York Stock Exchange. Level of Difficulty: Core Section: 5.3 Topic: Limit Order 34. An order to sell that involves a preset trigger point is called a _____ order. A. limit B. day C. stop D. short E. market See Section 5.3 Blooms: Knowledge Jordan - Chapter 05 #34 Learning Objective: 05-02 The workings of the New York Stock Exchange. Level of Difficulty: Core Section: 5.3 Topic: Stop Order 35. A market centered on dealers buying and selling for their own inventories is called a(n): A. exchange floor. B. SuperDot. C. OTC market. D. subscriber market. E. Big Board. See Section 5.4 Blooms: Knowledge Jordan - Chapter 05 #35 Learning Objective: 05-03 How NASDAQ operates. Level of Difficulty: Core Section: 5.4 Topic: Otc Market 36. Which one of the following describes an ECN? A. Web site used by investors to trade directly with other investors B. Web site limited to use by professional brokers and dealers C. computerized trading floor D. communications network used by specialists E. cellular trading network See Section 5.4 Blooms: Knowledge Jordan - Chapter 05 #36 Learning Objective: 05-03 How NASDAQ operates. Level of Difficulty: Core Section: 5.4 Topic: Ecn 37. Inside quotes are the: A. highest asked and lowest bid quotes offered by securities dealers. B. highest bid and lowest asked quotes offered by securities dealers. C. latest prices at which corporate insiders have purchased or sold securities. D. bid and asked prices which are offered only to institutional traders or large private investors. E. latest price at which a security traded. See Section 5.4 Blooms: Knowledge Jordan - Chapter 05 #37 Learning Objective: 05-03 How NASDAQ operates. Level of Difficulty: Core Section: 5.4 Topic: Inside Quotes 38. The off-exchange market in which exchange-listed securities trade is referred to as the _____ market. A. independent B. secondary C. fourth D. third E. primary See Section 5.5 Blooms: Knowledge Jordan - Chapter 05 #38 Learning Objective: 05-03 How NASDAQ operates. Level of Difficulty: Core Section: 5.5 Topic: Third Market 39. The market where individual investors directly trade exchange-listed securities with other individual investors is referred to as the _____ market. A. home B. independent C. third D. fourth E. SuperDot See Section 5.5 Blooms: Knowledge Jordan - Chapter 05 #39 Learning Objective: 05-03 How NASDAQ operates. Level of Difficulty: Core Section: 5.5 Topic: Fourth Market 40. Which of the following types of indexes is a stock market index in which stocks are held in proportion to their share price? A. balanced B. market-weighted C. dollar-weighted D. price-weighted E. value-weighted See Section 5.6 Blooms: Knowledge Jordan - Chapter 05 #40 Learning Objective: 05-04 How to calculate index returns. Level of Difficulty: Core Section: 5.6 Topic: Price-Weighted Index 41. When stocks are held in an index in proportion to their total company market value, the index is: A. dollar-weighted. B. front-weighted. C. back-weighted. D. price-weighted. E. value-weighted. See Section 5.6 Blooms: Knowledge Jordan - Chapter 05 #41 Learning Objective: 05-04 How to calculate index returns. Level of Difficulty: Core Section: 5.6 Topic: Value-Weighted Index 42. An index is valued on a daily basis. However, some stocks in this particular index have not traded recently. As a result, this index suffers from index: A. fatigue. B. devaluation. C. flatness. D. staleness. E. weighting. See Section 5.6 Blooms: Knowledge Jordan - Chapter 05 #42 Learning Objective: 05-04 How to calculate index returns. Level of Difficulty: Core Section: 5.6 Topic: Index Staleness 43. Which one of the following statements concerning the NYSE is correct? A. The NYSE was created based on the Walnut Tree Agreement. B. The average daily trading volume on the NYSE in 2007 was approximately one billion shares. C. The NYSE and NASDAQ merged in 2007. D. The NYSE is part of a firm that also operates a stock exchange in Amsterdam. E. The NYSE merged with NASDAQ in 2007. See Section Introduction Blooms: Knowledge Jordan - Chapter 05 #43 Learning Objective: 05-02 The workings of the New York Stock Exchange. Level of Difficulty: Core Section: introduction Topic: Nyse Euronext 44. Which of the following are common sources of venture capital? I. private individuals II. NASDAQ III. university endowment funds IV. insurance companies A. I and II only B. III and IV only C. I, III, and IV only D. I, II, and IV only E. I, II, III, and IV See Section 5.1 Blooms: Knowledge Jordan - Chapter 05 #44 Learning Objective: 05-01 The differences between private and public equity and between imary and secondary stock markets. Level of Difficulty: Core Section: 5.1 Topic: Venture Capital 45. Which one of the following statements concerning venture capital is correct? A. Venture capital is frequently provided in stages with each stage financed by a different venture capitalist. B. Most venture capitalists are passive investors. C. The founders of a firm generally realize substantial payoffs as soon as the firm receives venture financing. D. Venture capitalists generally compete with banks to find projects to finance. E. Well established firms tend to absorb most of the available venture capital. See Section 5.1 Blooms: Knowledge Jordan - Chapter 05 #45 Learning Objective: 05-01 The differences between private and public equity and between imary and secondary stock markets. Level of Difficulty: Intermediate Section: 5.1 Topic: Venture Capital 46. How long is the "lock-up" period that is commonly found in an IPO underwriting contract? A. one month B. three months C. six months D. one year E. eighteen months See Section 5.1 Blooms: Knowledge Jordan - Chapter 05 #46 Learning Objective: 05-01 The differences between private and public equity and between imary and secondary stock markets. Level of Difficulty: Core Section: 5.1 Topic: Lock-Up Period 47. Which one of the following can be assumed when the SEC approves an IPO registration? A. The securities offering will provide value to the shareholders. B. The issuer is financially sound. C. The issuer will remain solvent. D. All rules have been followed to allow for full disclosure of information. E. The stock price is set at a level which will allow shareholders to earn a positive rate of return. See Section 5.1 Blooms: Knowledge Jordan - Chapter 05 #47 Learning Objective: 05-01 The differences between private and public equity and between imary and secondary stock markets. Level of Difficulty: Core Section: 5.1 Topic: Sec Registration 48. Which one of the following transactions occurs in the primary market? A. sale of stock by Shareholder A to Shareholder B B. gift of shares from a grandmother to her granddaughter C. sale of newly issued shares by the issuer to a shareholder D. sale of shares in the third market E. purchase of shares by a dealer from a shareholder See Section 5.1 Blooms: Knowledge Jordan - Chapter 05 #48 Learning Objective: 05-01 The differences between private and public equity and between imary and secondary stock markets. Level of Difficulty: Core Section: 5.1 Topic: Primary Market 49. Trevor currently owns 545,000 shares of ABC stock. He will sell those shares for $17.10 a share. He is also willing to purchase additional shares for $17.07 a share. Trevor is a securities: A. broker. B. representative. C. underwriter. D. floor broker. E. dealer. See Section 5.1 Blooms: Knowledge Jordan - Chapter 05 #49 Learning Objective: 05-01 The differences between private and public equity and between imary and secondary stock markets. Level of Difficulty: Core Section: 5.1 Topic: Dealer 50. Anna is an individual investor. She purchases shares at the _____ price and sells at the _____ price. A. asked; bid B. average; asked C. bid; asked D. bid; average E. asked; average See Section 5.1 Blooms: Knowledge Jordan - Chapter 05 #50 Learning Objective: 05-01 The differences between private and public equity and between imary and secondary stock markets. Level of Difficulty: Core Section: 5.1 Topic: Ask Price 51. What is the current structure of the NYSE? A. general partnership B. limited partnership C. non-profit organization D. publicly traded corporation E. government agency See Section 5.2 Blooms: Knowledge Jordan - Chapter 05 #51 Learning Objective: 05-02 The workings of the New York Stock Exchange. Level of Difficulty: Core Section: 5.2 Topic: Nyse 52. In 2007, NYSE Holdings merged with which one of the following? A. NASDAQ B. AMEX C. Chicago Stock Exchange D. London Stock Exchange E. Euronext, N.V. See Section 5.2 Blooms: Knowledge Jordan - Chapter 05 #52 Learning Objective: 05-02 The workings of the New York Stock Exchange. Level of Difficulty: Core Section: 5.2 Topic: Nyse 53. In order to currently trade on the floor of the NYSE, members must: A. be registered as a floor trader B. own a seat C. purchase a trading license D. be a specialist E. be designated as a floor broker See Section 5.2 Blooms: Knowledge Jordan - Chapter 05 #53 Learning Objective: 05-02 The workings of the New York Stock Exchange. Level of Difficulty: Core Section: 5.2 Topic: Nyse 54. Which one of the following has the greatest duty to provide liquidity to the financial market? A. floor broker B. independent broker C. dealer D. designated market maker E. floor trader See Section 5.2 Blooms: Knowledge Jordan - Chapter 05 #54 Learning Objective: 05-02 The workings of the New York Stock Exchange. Level of Difficulty: Core Section: 5.2 Topic: Specialist 55. The SuperDOT system has lessened the role of which one of the following? A. personal financial advisers B. floor traders C. specialists D. floor brokers E. underwriters See Section 5.2 Blooms: Knowledge Jordan - Chapter 05 #55 Learning Objective: 05-02 The workings of the New York Stock Exchange. Level of Difficulty: Core Section: 5.2 Topic: Superdot 56. Which one of the following statements related to the NYSE Hybrid market is correct? A. Floor brokers operate both electronically and in person. B. The Hybrid system replaces the market specialists. C. The automated system works better than the specialist for stocks with minimal liquidity. D. The automated system will only replace the specialist in times of market duress. E. Investors can automatically trade an unlimited number of shares. See Section 5.2 Blooms: Knowledge Jordan - Chapter 05 #56 Learning Objective: 05-02 The workings of the New York Stock Exchange. Level of Difficulty: Core Section: 5.2 Topic: Nyse Hybrid 57. To be listed on the NYSE, a firm must have at least: A. 2,500 shareholders B. 100,000 shares traded on an average day C. 1.5 million shares held by the public D. $75 million in market value for an IPO E. pre-tax aggregate earnings of $10 million in the previous 3 years See Section 5.2 Blooms: Knowledge Jordan - Chapter 05 #57 Learning Objective: 05-02 The workings of the New York Stock Exchange. Level of Difficulty: Intermediate Section: 5.2 Topic: Nyse Listing 58. Lucas wants to sell 9,000 shares of stock and places a market order. The floor broker is unable to arrange the sale with another floor broker so the specialist agrees to "stop" the stock. What has the specialist agreed to do? A. cancel the order B. place the order into the order book to hold until an order to buy 9,000 shares is received C. purchase the shares if no other buyer is readily available D. sell the shares to the next available buyer regardless of the price received E. sell the shares at the end of the trading day at the best price available at that time See Section 5.3 Blooms: Knowledge Jordan - Chapter 05 #58 Learning Objective: 05-02 The workings of the New York Stock Exchange. Level of Difficulty: Core Section: 5.3 Topic: Specialist "Stop" 59. The duties of a specialist include which of the following? I. maintain an orderly market II. offer a higher bid price than the floor brokers III. provide liquidity to the market IV. purchase all shares offered as limit sells A. I and III only B. II and III only C. I, II, and III only D. I, III, and IV only E. I, II, III, and IV See Section 5.3 Blooms: Knowledge Jordan - Chapter 05 #59 Learning Objective: 05-02 The workings of the New York Stock Exchange. Level of Difficulty: Core Section: 5.3 Topic: Specialist 60. Faith placed an order to sell 7,500 shares of stock she currently owned. As soon as the order reached the trading floor, the shares were immediately sold. Which type of order did Faith place? A. limit B. day C. market D. short E. stop See Section 5.3 Blooms: Knowledge Jordan - Chapter 05 #60 Learning Objective: 05-02 The workings of the New York Stock Exchange. Level of Difficulty: Core Section: 5.3 Topic: Market Order 61. Steve placed a limit order to sell 500 shares of stock at $14 a share. Which of the following does Steve know for sure? I. His order will execute but the time of execution is unknown. II. His order may never execute. III. He will receive exactly $7,000 if his order executes. IV. He could receive more, but not less, than $14 a share. A. I and III only B. I and IV only C. II and III only D. II and IV only E. I only See Section 5.3 Blooms: Comprehension Jordan - Chapter 05 #61 Learning Objective: 05-02 The workings of the New York Stock Exchange. Level of Difficulty: Core Section: 5.3 Topic: Limit Order 62. Kelly wants to sell 600 shares of DeLux stock at the going market price after the stock reaches $42 a share. Which type of order should she place? A. stop B. limit C. market D. fixed E. loss See Section 5.3 Blooms: Knowledge Jordan - Chapter 05 #62 Learning Objective: 05-02 The workings of the New York Stock Exchange. Level of Difficulty: Core Section: 5.3 Topic: Stop Order 63. After the trigger point is reached, a stop-loss order will be executed at the: A. trigger price. B. stop price. C. trigger price or better. D. stop price or better. E. market price. See Section 5.3 Blooms: Knowledge Jordan - Chapter 05 #63 Learning Objective: 05-02 The workings of the New York Stock Exchange. Level of Difficulty: Core Section: 5.3 Topic: Stop Order 64. Which one of the following orders is frequently used as a means to limit losses resulting from a short sale? A. limit B. market C. day D. stop-sell E. stop-buy See Section 5.3 Blooms: Knowledge Jordan - Chapter 05 #64 Learning Objective: 05-02 The workings of the New York Stock Exchange. Level of Difficulty: Core Section: 5.3 Topic: Stop-Buy Order 65. Marcus just placed a stop limit order to sell 100 shares at $21 stop, $18 limit. Which one of the following statements is correct concerning this order if the current market price is $16? A. As soon as the price rises to $18, the stock will be sold. B. The stock will sell for at least $18 but less than $21. C. The stock will sell for $18 a share as soon as the price hits $21. D. The order will become a limit order to sell at $21 once the market price reaches $18. E. The order will become a limit order to sell at $18 once the market price reaches $21. See Section 5.3 Blooms: Knowledge Jordan - Chapter 05 #65 Learning Objective: 05-02 The workings of the New York Stock Exchange. Level of Difficulty: Core Section: 5.3 Topic: Stop-Limit Order 66. Which one of the following statements is correct regarding the NYSE uptick rule? A. The rule prevents any further selling of shares when the last sale was an uptick. B. The rule prevents any further selling of shares when the last sale was a downtick. C. The rule prevents short-selling except following an uptick. D. The rule prevents short-selling except following a downtick. E. The rule was recently adopted to limit market volatility. See Section 5.3 Blooms: Knowledge Jordan - Chapter 05 #66 Learning Objective: 05-02 The workings of the New York Stock Exchange. Level of Difficulty: Core Section: 5.3 Topic: Uptick Rule 67. NASDAQ dealers post which one of the following in addition to their bid and ask prices? A. commission rates B. front-end load charges C. number of shares they will commit to buy or sell D. total trades for the day E. trading fees See Section 5.4 Blooms: Knowledge Jordan - Chapter 05 #67 Learning Objective: 05-03 How NASDAQ operates. Level of Difficulty: Core Section: 5.4 Topic: Nasdaq 68. NASDAQ has which of the following characteristics? I. trading floor II. computer network III. specialist system IV. multiple market makers A. I and IV only B. II and IV only C. I, III, and IV only D. II, III, and IV only E. I, II, III, and IV See Section 5.4 Blooms: Knowledge Jordan - Chapter 05 #68 Learning Objective: 05-03 How NASDAQ operates. Level of Difficulty: Core Section: 5.4 Topic: Nasdaq 69. Which one of the following statements concerning NASDAQ is correct? A. The NASDAQ Capital Market has the most stringent listing requirements of any of the NASDAQ companies. B. NASDAQ is actually comprised of four separate markets. C. Microsoft shares are listed on the NASDAQ Global Market. D. NASDAQ has more total dollar volume of trading than does the NYSE. E. There are more companies listed on NASDAQ than on NYSE. See Section 5.4 Blooms: Knowledge Jordan - Chapter 05 #69 Learning Objective: 05-03 How NASDAQ operates. Level of Difficulty: Core Section: 5.4 Topic: Nasdaq 70. The orders displayed on NASDAQ are placed by: A. individuals on ECNs only. B. market makers only. C. both market makers and individuals on ECNs. D. brokerage firms. E. floor brokers. See Section 5.4 Blooms: Knowledge Jordan - Chapter 05 #70 Learning Objective: 05-03 How NASDAQ operates. Level of Difficulty: Core Section: 5.4 Topic: Nasdaq 71. Stocks which are listed on the NYSE can: A. not be listed on any other exchange. B. only be dual listed on a regional exchange. C. only be dual listed on Instinet. D. only be dual listed on the Archipelago Exchange. E. also be listed on NASDAQ. See Section 5.5 Blooms: Knowledge Jordan - Chapter 05 #71 Learning Objective: 05-03 How NASDAQ operates. Level of Difficulty: Core Section: 5.5 Topic: Dual Listings 72. The stocks listed on the Pink Sheets: A. are those stocks trading on the NASDAQ CAPITAL MARKET. B. do not have to file financial statements with the SEC. C. have all been delisted by the NYSE. D. are the highest priced stocks listed on NASDAQ. E. must file financial statements with the SEC but do not have to meet any listing requirements. See Section 5.4 Blooms: Knowledge Jordan - Chapter 05 #72 Learning Objective: 05-02 The workings of the New York Stock Exchange. Level of Difficulty: Core Section: 5.4 Topic: Pink Sheets 73. Which of the following are common characteristic of the OTCBB market? I. low stock prices II. dual listings with NASDAQ III. high percentage price changes IV. thinly traded securities A. I and III only B. I, II, and III only C. I, III, and IV only D. II, II, and IV only E. I, II, III, and IV See Section 5.4 Blooms: Knowledge Jordan - Chapter 05 #73 Learning Objective: 05-02 The workings of the New York Stock Exchange. Level of Difficulty: Core Section: 5.4 Topic: OTCBB 74. The DJIA is an index of the stock prices of _____ firms. A. 25 B. 30 C. 50 D. 100 E. 500 See Section 5.6 Blooms: Knowledge Jordan - Chapter 05 #74 Learning Objective: 05-04 How to calculate index returns. Level of Difficulty: Core Section: 5.6 Topic: Djia 75. Stock market indexes: A. are all computed using the same methodology. B. all react the same to a change in the price of a particular stock. C. all cover the same market sectors. D. are all price-weighted. E. vary in the type of stocks included. See Section 5.6 Blooms: Knowledge Jordan - Chapter 05 #75 Learning Objective: 05-04 How to calculate index returns. Level of Difficulty: Core Section: 5.6 Topic: Market Indexes 76. Which one of the following is the primary flaw of a price-weighted index? A. Price-weighted indexes ignore stock splits which affect stock prices. B. The effect a company has on the index is dependent solely on the price per share. C. Only a small number of stocks can be included in a price-weighted index. D. If the number of shares outstanding of an index stock changes, the index divisor must be recomputed. E. The index can only be computed once the trading day is over. See Section 5.6 Blooms: Knowledge Jordan - Chapter 05 #76 Learning Objective: 05-04 How to calculate index returns. Level of Difficulty: Core Section: 5.6 Topic: Price-Weighted Index 77. Which one of the following statements related to stock indexes is correct? A. The index divisor increases in value whenever a stock in the index undergoes a stock split. B. A value-weighted index includes both dividends and capital gains. C. The S&P 500 index is value-weighted. D. The DJIA is value-weighted. E. Index staleness is more apt to be a problem for the DJIA than for the Wilshire 5000. See Section 5.6 Blooms: Knowledge Jordan - Chapter 05 #77 Learning Objective: 05-04 How to calculate index returns. Level of Difficulty: Core Section: 5.6 Topic: Stock Indexes 78. Alco Metals just sold 2.7 million shares through an IPO offering. The shares were offered at $21 a share and all shares were sold. The firm received a total of $60,385,500 for this issue. What was the spread? A. 5.50 percent B. 6.25 percent C. 6.50 percent D. 7.00 percent E. 7.25 percent Spread = [$60,385,500/($21 × 2,700,000)] - 1 = 6.5 percent Blooms: Application Jordan - Chapter 05 #78 Learning Objective: 05-01 The differences between private and public equity and between imary and secondary stock markets. Level of Difficulty: Core Section: 5.1 Topic: Spread 79. Reliant Underwriters has agreed to a firm commitment underwriting in which they will pay $36.75 million in exchange for 3 million shares of stock for an IPO offering. The offering price is expected to be $13.50 a share. How much will the underwriters earn if all of the shares can be sold? A. $1.25 million B. $2.75 million C. $3.75 million D. $4.25 million E. $4.50 million Underwriting fees = ($13.50 × 3,000,000) - $36,750,000 = $3.75 million Blooms: Application Jordan - Chapter 05 #79 Learning Objective: 05-01 The differences between private and public equity and between imary and secondary stock markets. Level of Difficulty: Core Section: 5.1 Topic: Spread 80. In a recent IPO, the Sausage Co. offered 1.6 million shares of stock at an offer price of $18 a share. The underwriting was conducted on a best efforts basis with a spread of 7.0 percent. The Sausage Co. received a total of $25,079,868.00 in sale proceeds. How many shares were sold? A. 1,378,700 shares B. 1,486,500 shares C. 1,498,200 shares D. 1,505,700 shares E. 1,508,400 shares Number of shares = [$25,079,868/(1 - .07)]/$18 = 1,498,200 shares Blooms: Application Jordan - Chapter 05 #80 Learning Objective: 05-01 The differences between private and public equity and between imary and secondary stock markets. Level of Difficulty: Core Section: 5.1 Topic: Best Efforts 81. A best efforts IPO underwriting consisted of 2.2 million shares at an offer price of $17 a share. The underwriter's fee was set at 6.65 percent. How many shares were sold if the issuer received $31,926,260.10? A. 2,011,800 shares B. 1,878,015 shares C. 1,760,915 shares D. 2,346,300 shares E. 2,053,700 shares Number of shares = [$31,926,260.10/(1 - .0665)]/$17 = 2,011,800 shares Blooms: Application Jordan - Chapter 05 #81 Learning Objective: 05-01 The differences between private and public equity and between imary and secondary stock markets. Level of Difficulty: Core Section: 5.1 Topic: Best Efforts 82. ML Underwriters paid an issuer $37,748,700 as IPO proceeds. The IPO offered 1.86 million shares of which 1.835 million were sold at an offer price of $22 a share. The underwriting spread was 7.75 percent. What type of underwriting was this? A. best efforts B. variable C. firm commitment D. plain vanilla E. stand-by Number of shares = [$37,748,700/(1 - .0775)]/$22 = 1,860,000 shares. This was a firm commitment underwriting since the issuer was paid for all of the shares, even though the underwriter did not sell the entire issue. Blooms: Application Jordan - Chapter 05 #82 Learning Objective: 05-01 The differences between private and public equity and between imary and secondary stock markets. Level of Difficulty: Core Section: 5.1 Topic: Firm Commitment 83. DT Metals is offering 700 shares in a Dutch auction IPO. The following bids have been received: What will the gross proceeds be for this offering? A. $12,000 B. $12,600 C. $13,200 D. $13,300 E. $14,700 Proceeds = 700 × $21 = $14,700 Blooms: Application Jordan - Chapter 05 #83 Learning Objective: 05-01 The differences between private and public equity and between imary and secondary stock markets. Level of Difficulty: Core Section: 5.1 Topic: Dutch auction 84. Cee The Moon is offering 700 shares in a Dutch auction IPO. The following bids have been received: How much will Cee The Moon receive from this offering if the underwriter's fee is 7 percent? A. $9,905 B. $9,440 C. $10,184 D. $11,067 E. $12,095 (700 × $17) × (1 - .07) = $11,067 Blooms: Application Jordan - Chapter 05 #84 Learning Objective: 05-01 The differences between private and public equity and between imary and secondary stock markets. Level of Difficulty: Core Section: 5.1 Topic: Dutch auction 85. Mason Materials is offering 800 shares in a Dutch auction IPO. The following bids have been received: How many shares will be allocated to Bidder A? A. 0 B. 80 C. 125 D. 145 E. 200 Allocation = 200 × [800/(200 + 300 + 100 + 500)] = 145 shares Blooms: Application Jordan - Chapter 05 #85 Learning Objective: 05-01 The differences between private and public equity and between imary and secondary stock markets. Level of Difficulty: Core Section: 5.1 Topic: Dutch auction 86. Juno Markets is offering 900 shares in a Dutch auction IPO. The following bids have been received: How much will Bidder B have to spend to purchase all of the shares that have been allocated to him? A. $4,320.00 B. $4,812.50 C. $5,100.00 D. $5,400.00 E. $5,700.00 Cost = 300 × [900/(100 + 300 + 400+200)] × $16 = $4,320.00 Blooms: Application Jordan - Chapter 05 #86 Learning Objective: 05-01 The differences between private and public equity and between imary and secondary stock markets. Level of Difficulty: Core Section: 5.1 Topic: Dutch auction 87. An index consists of the following securities and has an index divisor of 3.0. What is the priceweighted index return? A. 9.43 percent B. 9.67 percent C. 10.53 percent D. 10.91 percent E. 11.03 percent Price-weighted index = {[($19 + $11 + $33)/3] - [($17 + $14 + $26)/3]}/[($17+ $14 + $26)/3] = 10.53 percent Blooms: Application Jordan - Chapter 05 #87 Learning Objective: 05-04 How to calculate index returns. Level of Difficulty: Intermediate Section: 5.6 Topic: Price-Weighted Index 88. An index consists of the following securities and has an index divisor of 3.0. What is the priceweighted index return? A. 9.87 percent B. 10.35 percent C. 11.54 percent D. 12.33 percent E. 13.00 percent Price-weighted index = {[($34 + $31 + $22)/3] - [($27 + $32 + $19)/3]}/[($27+ $32 + $19)/3] = 11.54 percent Blooms: Application Jordan - Chapter 05 #88 Learning Objective: 05-04 How to calculate index returns. Level of Difficulty: Intermediate Section: 5.6 Topic: Price-Weighted Index 89. An index consists of the following securities and has an index divisor of 3.0. What is the priceweighted index return? A. -4.76 percent B. -2.05 percent C. 3.09 percent D. 5.17 percent E. 7.48 percent Price-weighted index = {[($16 + $61 + $38)/3] - [($21 + $49 + $37)/3]}/[($21+ $49 + $37)/3] = 7.48 percent Blooms: Application Jordan - Chapter 05 #89 Learning Objective: 05-04 How to calculate index returns. Level of Difficulty: Intermediate Section: 5.6 Topic: Price-Weighted Index 90. An index consists of the following securities and has an index divisor of 2.0. What is the priceweighted index return? A. -0.69 percent B. -0.18 percent C. 0.00 percent D. 0.22 percent E. 0.31 percent Price-weighted index = {[($51 + $36)/2] - [($54 + $33)/2]}/[($54 + $33)/2] = 0 percent Blooms: Application Jordan - Chapter 05 #90 Learning Objective: 05-04 How to calculate index returns. Level of Difficulty: Intermediate Section: 5.6 Topic: Price-Weighted Index 91. A price-weighted index consists of stocks A, B, and C which are priced at $38, $21, and $26 a share, respectively. The current index divisor is 2.7. What will the new index divisor be if stock B undergoes a 3-for-1 stock split? A. 2.1684 B. 2.2553 C. 2.5890 D. 2.7000 E. 3.1447 [38 + (21/3) + 26]/x = (38 + 21 + 26)/2.7; x = 2.2553 Blooms: Application Jordan - Chapter 05 #91 Learning Objective: 05-04 How to calculate index returns. Level of Difficulty: Intermediate Section: 5.6 Topic: Price-Weighted Divisor 92. A price-weighted index consists of stocks A, B, and C which are priced at $55, $38, and $17 a share, respectively. The current index divisor is 2.75. What will the new index advisor be if stock A undergoes a 5-for-1 stock split? A. 0.40 B. 0.65 C. 1.00 D. 1.65 E. 1.85 [(55/5) + 38 + 17]/x = (55 + 38 + 17)/2.75; x = 1.65 Blooms: Application Jordan - Chapter 05 #92 Learning Objective: 05-04 How to calculate index returns. Level of Difficulty: Intermediate Section: 5.6 Topic: Price-Weighted Divisor 93. A price-weighted index consists of stocks A, B, and C which are priced at $27, $11, and $18 a share, respectively. The current index divisor is 2.24. If stock B undergoes a 1-for-3 reverse stock split, the new index divisor will be: A. 1.9467. B. 2.1806. C. 2.2000. D. 3.0842. E. 3.1200. [27 + (11 × 3) + 18]/x = [(27 + 11 + 18)/2.24]; x = 3.12 Blooms: Application Jordan - Chapter 05 #93 Learning Objective: 05-04 How to calculate index returns. Level of Difficulty: Intermediate Section: 5.6 Topic: Price-Weighted Divisor 94. An index consists of the following securities. What is the value-weighted index return? A. 13.67 percent B. 15.03 percent C. 15.49 percent D. 17.82 percent E. 19.67 percent Beginning value = (5,000 × 21) + (2,000 × 39) = 183,000 Ending value = (5,000 × 27) + (2,000 × 42) = 219,000 Return = (219,000 - 183,000)/183,000 = 19.67 percent Blooms: Application Jordan - Chapter 05 #94 Learning Objective: 05-04 How to calculate index returns. Level of Difficulty: Intermediate Section: 5.6 Topic: Value-Weighted Index 95. An index consists of the following securities. What is the value-weighted index return? A. -0.43 percent B. -1.46 percent C. 4.43 percent D. 4.51 percent E. 4.62 percent Beginning value = (1,000 × 32) + (4,000 × 22) + (6,000 × 57) = 462,000 Ending value = (1,000 × 38) + (4,000 × 23) + (6,000 × 55) = 460,000 Return = (460,000 - 462,000)/462,000 = -0.43 percent Blooms: Application Jordan - Chapter 05 #95 Learning Objective: 05-04 How to calculate index returns. Level of Difficulty: Intermediate Section: 5.6 Topic: Value-Weighted Index 96. An index consists of the following securities. What is the value-weighted index return? A. 0.72 percent B. 1.09 percent C. 3.61 percent D. 5.75 percent E. 8.52 percent Beginning value = (3,000 × 19) + (8,000 × 11) + (4,000 × 33) = 277,000 Ending value = (3,000 × 21) + (8,000 × 7) + (4,000 × 42) = 287,000 Return = (287,000 - 277,000)/277,000 = 3.61 percent Blooms: Application Jordan - Chapter 05 #96 Learning Objective: 05-04 How to calculate index returns. Level of Difficulty: Intermediate Section: 5.6 Topic: Value-Weighted Index 97. You have the following information: You want the beginning price-weighted index of these two stocks to be 100. Given this, what is the ending index value? A. 93.44 B. 98.10 C. 107.02 D. 108.36 E. 110.40 Beginning price-weighted index = [(35 + 22)/(35 + 22)] × 100 = 100 Ending price-weighted index = [(38 + 23)/(35 + 22)] × 100 = 107.02 Blooms: Application Jordan - Chapter 05 #97 Learning Objective: 05-04 How to calculate index returns. Level of Difficulty: Intermediate Section: 5.6 Topic: Reindexing 98. You have the following information: You want the beginning price-weighted index of these two stocks to be 500. Given this, what is the ending index value? A. 408.33 B. 487.08 C. 511.19 D. 591.84 E. 612.24 Beginning price-weighted index = [(18 + 31)/(18 + 31)] × 500 = 500 Ending price-weighted index = [(22 + 36)/(18 + 31)] × 500 = 591.84 Blooms: Application Jordan - Chapter 05 #98 Learning Objective: 05-04 How to calculate index returns. Level of Difficulty: Intermediate Section: 5.6 Topic: Reindexing 99. An index has a market value of $689,400 at the beginning of the period and $722,009 at the end of the period. If you want the beginning index value to be 100, what is the ending index value? A. 104.73 B. 105.42 C. 105.67 D. 105.89 E. 106.13 Beginning value-weighted index = (689,400/689,400) × 100 = 100 Ending value-weighted index = (722,009/689,400) × 100 = 104.73 Blooms: Application Jordan - Chapter 05 #99 Learning Objective: 05-04 How to calculate index returns. Level of Difficulty: Intermediate Section: 5.6 Topic: Reindexing 100. Assume the DJIA closed at 12,487 last night. The divisor is 0.123017848. Assume that 29 of the stocks in the index were unchanged today. One stock increased in value from $54.80 a share yesterday to $57.90 a share today. What is the DJIA index value at the close of trading today? A. 12,504 B. 12,508 C. 12,509 D. 12,512 E. 12,524 Old SP = 12,487 × 0.123017848 = 1,536.12 New SP = 1,536.12 + (57.90 - 54.80) = 1,539.22 New DJIA = 1,539.22/0.123017848 = 12,512.17 Blooms: Application Jordan - Chapter 05 #100 Learning Objective: 05-04 How to calculate index returns. Level of Difficulty: Intermediate Section: 5.6 Topic: Djia 101. Yesterday, the DJIA closed at 12,309.16. The divisor is 0.123017848. Today, every one of the stocks in the index increased in value by $0.40 a share. What is the value of today's closing DJIA? A. 12,367 B. 12,407 C. 12,442 D. 12,564 E. 12,571 Old SP = 12,309.16 × 0.123017848 = 1,514.25 New SP = 1,514.25 + (.40 × 30) = 1,526.25 New DJIA = 1,526.25/0.123017848 =12,407 Blooms: Application Jordan - Chapter 05 #101 Learning Objective: 05-04 How to calculate index returns. Level of Difficulty: Intermediate Section: 5.6 Topic: Djia 102. An order book displays the following information: You place a market order to buy 100 shares. At what price will your order be executed? A. $28.13 B. $28.14 C. $28.16 D. $28.17 E. $28.18 You will pay the lowest selling price, which is $28.17. Blooms: Application Jordan - Chapter 05 #102 Level of Difficulty: Core Section: 5.4 Topic: Order Book 103. An order book displays the following information: You place an order to sell 100 shares. At what price will your order be executed? A. $18.05 B. $18.06 C. $18.07 D. $18.11 E. $18.12 You will receive the highest buying price, which is $18.07. Blooms: Application Jordan - Chapter 05 #103 Learning Objective: 05-03 How NASDAQ operates. Level of Difficulty: Core Section: 5.4 Topic: Order Book 104. Describe some of the recent changes in the structure and operations of the NYSE. Answer will vary Feedback: The NYSE has gone from a not-for-profit entity to its current for-profit structure as NYSE Euronext. Its operations are changing from a trading floor based specialist system to a hybrid system. The hybrid system is based more on an automated trading platform, allowing the majority of orders to be executed electronically. NYSE's historic specialist system has been replaced by a system based on designated market makers (DMMs). DMMs are still required to maintain a fair and orderly market but they do not face the same restrictions on trading previously imposed on specialists. DMMs can compete against other exchange members for trades but no longer receive advance notice of incoming orders. DMMs are complemented by a newly created class of market maker called a supplemental liquidity provider. (SLP). SLP's are allowed to trade only from outside the exchange and face less stringent quoting requirements than DMMs but receive lower compensation. Blooms: Comprehension Jordan - Chapter 05 #104 Learning Objective: 05-02 The workings of the New York Stock Exchange. Level of Difficulty: Intermediate Section: 5.2 Topic: Nyse Changes 105. Explain the NYSE uptick rule and the current controversy pertaining to that rule. Answer will vary Feedback: The uptick rule only permits short sales to be executed if the last price movement on a stock was an uptick. After many years, this rule was recently repealed. The current issue is whether the elimination of the uptick rule is increasing market volatility and if so, whether or not the rule should have been repealed. Blooms: Comprehension Jordan - Chapter 05 #105 Learning Objective: 05-02 The workings of the New York Stock Exchange. Level of Difficulty: Intermediate Section: 5.3 Topic: Uptick Rule 106. Describe the primary advantage and disadvantage of a limit sell order. Answer will vary Feedback: A limit sell order guarantees that a security will be sold for no less than the limit price, which is considered an advantage. The disadvantage is that the order may not execute. This is particularly disadvantageous if the stock price is rapidly deteriorating. Blooms: Comprehension Jordan - Chapter 05 #106 Learning Objective: 05-02 The workings of the New York Stock Exchange. Level of Difficulty: Core Section: 5.3 Topic: Limit Order