Question

4. If you’ve noticed rapidly rising gasoline prices, what could you infer?

   A. Gasoline prices have reached a new equilibrium.
   B. Supply for gasoline has surpassed a new high.
   C. Demand for gasoline is rising.
   D. The quantity of gasoline bought exceeds the quantity of gasoline sold.

5. Through diversification, investors can reduce _______ risk.
   A. unsystematic C. systematic

   B. purchasing power D. all

6. If you wanted to participate in the IPO market, which of the following documents should

   you study before investing?
   A. Preliminary prospectus C. Confirmation

   B. 10-K D. Security certificate

7. Which of the following statements is correct?

   1. Margin accounts describe accounts with marginal investments.

   2. Margin accounts expose the investor to increased risk and the potential for

      increased return.

   3. Margin accounts are commonly referred to as maintenance accounts.

   4. Margin accounts aren’t suitable for retired investors.

8. A chief executive office of a corporation is preparing to issue stock, and the executive wants to minimize the risk of raising less cash than needed. The executive should

   A. hire a brokerage firm to advise him or her on the issue.
   B. register the issue with the Securities and Exchange Commission. C. employ an underwriter under a firm commitment agreement.
   D. enter a best-efforts agreement with an investment banker.

Answer 1

Answer:- Option C:-  Demand for gasoline is rising

(Explanation:- Through rapidly rising gasoline prices, one can infer that the demand for gasoline must be rising)

Answer:- Option A :- unsystematic

(Explanation:- Unsystematic risk is the one which is specific to an entity irrespective to the whole market. So, unsystematic risk can be diversified)

Answer:- Option A:- Preliminary prospectus

(Explanation:- If anyone wants to participate in the IPO then they must read preliminary prospectus as it is a draft which is submitted before proceeding with the initial public offer)

Answer:- Margin accounts are commonly referred to as maintenance accounts.

(Explanation:- Margin accounts are the ones in which investors are required to deposit the money as the broker demand to maintain it to a minimum balance and that is why it is also known as maintenance account)

Answer:- Option C :- employ an underwriter under a firm commitment agreement.

(Explanation:- An Underwriter is the one that minimizes the risk of raising less cash than needed because they are responsible to undertake that much of securities which are short so that the IPO is successful.)