Market Organization and Structure practice questions

What to know

Identify the rule, formula, or decision criterion before reading the answer choices. CFA Level I distractors often use the right vocabulary with the wrong condition.

How to practice

Work each item under time pressure, then compare your reasoning with the step-by-step explanation and key takeaway.

Review signal

Missed questions should become scheduled reviews when the error comes from a concept gap, formula setup, or answer-choice trap.

Equity Investments

Market Organization and Structure

A portfolio manager buys 1,000 shares at USD50 using 50% initial margin. The maintenance margin is 30%. Ignoring interest and dividends, the share price at which the manager would most likely receive a margin call is:

Equity Investments

Market Organization and Structure

The main function of a financial system is best described as:

Equity Investments

Market Organization and Structure

A trader shorts 800 shares at USD40. The initial margin requirement is 50%. The shares are covered at USD34 after the trader pays a USD0.50 per share dividend to the lender. Ignoring commissions and margin interest, the return on the initial margin is closest to:

Equity Investments

Market Organization and Structure

A company sells additional shares to investors after it is already listed on an exchange. The transaction is most likely in the:

Equity Investments

Market Organization and Structure

An institutional trader submits an order: 'Buy 50,000 shares at a limit price of USD24.20, good until canceled, all-or-nothing, settle regular way.' The all-or-nothing instruction is best classified as a:

Equity Investments

Market Organization and Structure

A dealer is best described as an intermediary that:

Equity Investments

Market Organization and Structure

A security trades in a market where dealers continuously post bid and ask prices from their own inventories. A client submits a market order during a fast market after the displayed ask changes sharply. The trade execution is most accurately described as occurring in a:

Equity Investments

Market Organization and Structure

A trading system that matches investor orders using a central limit order book is best described as:

Equity Investments

Market Organization and Structure

A stock is quoted at 19.96 bid and 20.04 ask. An investor who enters a market order to buy 500 shares will most likely pay, before commissions:

Equity Investments

Market Organization and Structure

An investor buys 100 shares at 50 using 50% initial margin. One year later, the shares are sold for 55. Dividends are 1.00 per share, and margin interest is 0.50 per share. The investor's return on the margin transaction is closest to:

Equity Investments

Market Organization and Structure

An investor buys shares at 80 using 40% initial margin. The maintenance margin is 25%. Ignoring interest and dividends, the share price at which the investor would receive a margin call is closest to:

Equity Investments

Market Organization and Structure

A market has narrow bid-ask spreads, large depth at the best quotes, timely trade reporting, and prices that quickly reflect new public information. The market is best described as having:

Equity Investments

Market Organization and Structure

By enabling savers to compare expected returns across investments and borrowers to compare financing costs, financial markets establish the price of capital that equates the total supply of savings with the total demand for borrowing. This activity is best described as the financial system's function of:

Equity Investments

Market Organization and Structure

A negotiable bank certificate of deposit that matures in six months is best classified as a:

Equity Investments

Market Organization and Structure

A trader holds a short position in a stock currently trading at USD 45 and wants a standing order that limits losses if the price rises. The most appropriate order is a:

Equity Investments

Market Organization and Structure

Liquid secondary markets most likely support primary markets by:

Equity Investments

Market Organization and Structure

An exchange collects orders submitted during the night session and executes all of them against one another at a single market-clearing price at the open. No trades occur between these scheduled auctions. This trading arrangement is best described as a:

Equity Investments

Market Organization and Structure

An investor purchases shares at USD 40.00 each, depositing the minimum initial margin of 25% and borrowing the remainder. Ignoring margin interest, commissions, and dividends, if the share price rises 7%, the return on the investor's equity is closest to:

Equity Investments

Market Organization and Structure

A trader sells short 400 shares at USD 36.00 per share with an initial margin requirement of 50% and a maintenance margin requirement of 30%. Ignoring interest and dividends, the share price at which the trader would first receive a margin call is closest to:

Equity Investments

Market Organization and Structure

An investor buys 200 shares at USD 25.00 per share using 60% initial margin, borrowing the rest at 8% annual interest. The stock pays no dividends. After exactly one year, the shares are sold at USD 30.00. Ignoring commissions, the one-year return on the investor's equity is closest to: