Investment Management 1. You want to buy 200 shares of IBM at a price no higher

Question

Investment Management

1. You want to buy 200 shares of IBM at a price no higher than $160, you would put in a _____ order.
A. limit
B. stop
C. market
D. short
E. bid

2. 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.

3. The maximum loss you can incur on a short position on call option for a stock is:
A. limited to initial price of the stock.
B. limited to your initial margin.
C. limited to the premium you get.
D. zero.
E. unlimited.

4. Who owns mutual fund?
A. Its fund holders.
B. The management company.
C. The financial institution.
D. The fund's board of directors.
E. The mutual fund family.

Explanation / Answer

A. limit
B. The effect a company has on the index is dependent solely on the price per share.

E. unlimited.

A. Its fund holders.

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