Chapter 3 - Practice quizzes
These are multiple choice questions that should be used to practice your level of mastery of the material.
They are sample exercises and should not be interpreted as a complete set of exercises that can be created for this chapter material.
Please note that doing the required readings is essential.
| Buy orders/Ordens de compra | Sell orders/Ordens de venda | ||
|---|---|---|---|
| Price/Preço | Qty./Qtd. | Price/Preço | Qty./Qtd. |
| $34.75 | 100 | $35.25 | 100 |
| $34.5 | 100 | $35.5 | 100 |
Consider the previous limit order book of a continuous market. The last trade in the stock occurred at a price of $35. If a buy order for 100 shares limited to $39 comes in, what happens?
Considere o seguinte livro de ofertas de um mercado de transacções em contínuo. A última transacção ocorreu ao preço de $35. Se chegar uma ordem de compra de 100 acções limitada a $39, o que irá acontecer?
✓the order is filled at $35.25 / a ordem é executada ao preço de $35.25
✗the order is registered but it will not be executed / a ordem é registada mas não executada
✗the order is filled at $39 / a ordem é executada ao preço de $39
✗the order is filled at $35.5 / a ordem é executada ao preço de $35.5
Recall that the traded price shall be determined by the limit price of orders sitting on the book. – Euronext Book I: Harmonized Rules - 4401/02
The order is matched with the best sell order that satisfies the price limit, registered in the order book. The traded price shall be determined by the limit price of orders sitting on the book. Therefore, the new buy order will be executed against the sell order with a price limit of $35.25. And the trading price will be $35.25.
Assume you purchased 153 shares of X common stock on margin at $86 per share from your broker. If the initial margin is 65%, the amount you borrowed from the broker is:
Assuma que comprou contra margem 153 acções da empresa X a $86 por acção. Se a margem inicial é de 65%, qual o montante que teve de pedir emprestado?
✗13158
✓4605
✗3290
✗8553
Note that the problem is asking you to calculate the amount of the loan!
\text{Loan} = (\text{Share price} \times \text{Number of shares}) \times (1 - \text{Margin}) \text{Loan} = 4605
You sold short 915 shares of common stock at $93 per share. The initial margin is 56%. Your initial investment was:
Você vendeu 915 acções a descoberto a $93 por acção. A margem incial foi de 56%. O seu investimento inicial foi de:
✗37442
✓47653
✗85095
✗132748
Please note that the problem requires you to calculate the initial investment (initial margin).
Margin = \frac{\text{Sales proceeds}+\text{Initial margin}-\text{Stock market value}}{\text{Stock market value}}
\text{Initial (margin) investment} = 47653
You short-sell 153 shares of ABC Co. at $86 per share. The initial margin is 65%. What is your maximum possible loss?
Você vendeu 153 acções a descoberto da empresa ABC a $86 por acção. A margem incial foi de 65%. Qual o valor máximo da sua perda potencial?
✗67
✗86
✗13158
✓unlimited/ilimitadas
Think about when does a short sale position results in a loss.
In a short-sale whenever there is an increase in the asset price there is a loss. Given that there isn’t an upper limit for asset prices, the loss is potentially unlimited.
You purchased 472 shares of ABC common stock on margin at $34 per share. Assume the initial margin is 59% and the maintenance margin is 44%. Below the stock price of ________ you would get a margin call. Assume the stock pays no dividend and ignore interest on margin.
Você comprou contra margem 472 acções da empresa ABC a $34 por acção. Assuma que a margem inicial é de 59% e a margem de manutenção é de 44%. Abaixo do preço ________ você será chamado para cobrir a margem. Assuma que a acção não paga dividendos e ignore juros sobre a margem.
✗34.0
✗33.29
✓24.89
✗9.68
You need to find first the amount of the loan, then find the price that sets the percentage margin to 44%.
\text{0.59} = \frac{\text{Stock Market Value} - \text{Borrowed Amount}}{\text{Stock Market Value}}
\text{0.59} = \frac{16048 - \text{Borrowed Amount}}{16048}
\text{Borrowed Amount} = 6579.68
\text{0.44} = \frac{n \times P - \text{Borrowed Amount}}{n \times P}
P=24.89
You purchased 625 shares of common stock on margin at $90 per share. The initial margin is 59% and stock pays no dividend. Your rate of return would be __________ if you sell the stock at $52. Ignore interest on margin.
Você comprou contra margem 625 acções de uma empresa a $90 por acção. A margem inicial foi de 59% e a empresa não paga dividendos. A taxa de rendibilidade desta operação será de ________ se vender a $52 cada acção. Ignore os juros sobre a margem.
✗-20.00%
✗-42.22%
✗-59.08%
✓-71.56%
Calculate the initial and final liquidation margin, and then use them to calculate the return.
\text{Liquidation margin} = n \times P - \text{Borrowed Amount}
\text{Liquidation margin}_0 = 625*90 - 23062.5
\text{Liquidation margin}_1 = 625*52 - 23062.5
\text{return} = \frac{\text{Liquidation margin}_1 - \text{Liquidation margin}_0}{\text{Liquidation margin}_0}
\text{return} = -71.56\%
Financial Investments, Chapter 3 - Practice quizzes