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Question 1 of 10
1. Question
What is the goal of the asset pricing model?
Correct
The goal of the asset pricing model known as the option pricing model is to determine the value of a call option. This model assumes that the call option is in the European rather than the American style, meaning it can be exercised only on its expiration date.
Incorrect
The goal of the asset pricing model known as the option pricing model is to determine the value of a call option. This model assumes that the call option is in the European rather than the American style, meaning it can be exercised only on its expiration date.
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Question 2 of 10
2. Question
What are the variables in the option pricing model?
I. Maturity amount
II. Interest rates
III. Prices of the underlying stock
IV. VolatilityCorrect
In the option pricing model, there are four variables: time to maturity, interest rates, the price of the underlying stock, and volatility. The value of a call will typically decrease with an increase in strike price.
Incorrect
In the option pricing model, there are four variables: time to maturity, interest rates, the price of the underlying stock, and volatility. The value of a call will typically decrease with an increase in strike price.
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Question 3 of 10
3. Question
What is the initial margin requirement set by the Federal Reserve, if an investor purchases stock on margin?
Correct
The Federal Reserve has at present set the initial margin requirement at 50%. Stock exchanges and brokerage houses will set a maintenance margin requirement, with maintenance margin being the minimum equity an investor must have for a margin position.
Incorrect
The Federal Reserve has at present set the initial margin requirement at 50%. Stock exchanges and brokerage houses will set a maintenance margin requirement, with maintenance margin being the minimum equity an investor must have for a margin position.
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Question 4 of 10
4. Question
When does the need of margin call arise?
I. When a portfolio declines a great deal in price.
II. When the equity in the account has dropped beneath the margin requirements.
III. When a stock declines a great deal in price.
IV. When portfolio rises a great deal in price.Correct
When a stock or portfolio declines a great deal in price, the result will be a margin call. Margin calls indicate that the equity in the account has dropped beneath the margin requirement. Investors will have to increase their equity by either selling assets or depositing cash or securities.
Incorrect
When a stock or portfolio declines a great deal in price, the result will be a margin call. Margin calls indicate that the equity in the account has dropped beneath the margin requirement. Investors will have to increase their equity by either selling assets or depositing cash or securities.
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Question 5 of 10
5. Question
In case of margin calls, how should the investors deal with the situation?
I. Investors should raise the equity by selling the assets.
II. Investors should buy few assets at the earliest.
III. Investors should raise the equity by depositing cash.
IV. Investors should do some investment elsewhere.Correct
When a stock or portfolio declines a great deal in price, the result will be a margin call. Margin calls indicate that the equity in the account has dropped beneath the margin requirement. Investors will have to increase their equity by either selling assets or depositing cash or securities.
Incorrect
When a stock or portfolio declines a great deal in price, the result will be a margin call. Margin calls indicate that the equity in the account has dropped beneath the margin requirement. Investors will have to increase their equity by either selling assets or depositing cash or securities.
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Question 6 of 10
6. Question
The strategy of selling options is called?
Correct
The strategy of selling options is frequently referred to as naked call writing. Typically, naked call writing will expose an investor to a substantial amount of risk, because if the call is exercised after a rise in the price of stick, the option writer will be forced to buy the stock back and then sell it to the buyer.
Incorrect
The strategy of selling options is frequently referred to as naked call writing. Typically, naked call writing will expose an investor to a substantial amount of risk, because if the call is exercised after a rise in the price of stick, the option writer will be forced to buy the stock back and then sell it to the buyer.
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Question 7 of 10
7. Question
Identify the points that bear on short selling:
I. Short sellers have to pay all dividends owed to the lender of the security.
II. Short sellers must deposit margin money to cover the repurchase of the security.
III. Short sellers have to receive all dividends owed from the lender of the security.
IV. Short sellers may or may not repurchase the security depending on the price of the stock in future.Correct
A short sell is when an investor sells borrowed securities because he or she anticipates a drop in price. The investor will profit by selling the securities and then buying them back at the reduced price.
Incorrect
A short sell is when an investor sells borrowed securities because he or she anticipates a drop in price. The investor will profit by selling the securities and then buying them back at the reduced price.
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Question 8 of 10
8. Question
What are the areas of fundamental investment analysis?
I. Economic levels
II. Social levels
III. Industry levels
IV. Individual company levelsCorrect
The three areas of fundamental investment analysis occur at the economic, industry, and individual company levels. Empirical data for each level is analyzed to determine whether the time for investment may be right.
Incorrect
The three areas of fundamental investment analysis occur at the economic, industry, and individual company levels. Empirical data for each level is analyzed to determine whether the time for investment may be right.
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Question 9 of 10
9. Question
The process of analyzing data and applying the data to ratios to determine the relative financial health of what is being analyzed is called:
Correct
The term fundamental analysis describes the process of analyzing data and applying the data to ratios to determine the relative financial health of what is being analyzed.
Incorrect
The term fundamental analysis describes the process of analyzing data and applying the data to ratios to determine the relative financial health of what is being analyzed.
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Question 10 of 10
10. Question
Identify the individuals who have the authority to represent someone else before IRS:
I. Certified public accountants
II. Enrolled agents
III. Financial planners
IV. AttorneysCorrect
The only individuals who have the authority to represent someone else before the IRS are certified public accountants, attorneys, and enrolled agents.
Incorrect
The only individuals who have the authority to represent someone else before the IRS are certified public accountants, attorneys, and enrolled agents.