CFA1 2024 EQ M1 e-l

12. Tony Harris is planning to start trading in commodities. He has heard about the use of futures contracts on commodities and is learning more about them. Which of the following is Harris least likely to find associated with a futures contract?

• 1. Existence of counterparty risk.

• 1. Standardized contractual terms.

• 1. Payment of an initial margin to enter into a contract.

12. A book publisher requires substantial quantities of paper. The publisher and a paper producer have entered into an agreement for the publisher to buy and the producer to supply a given quantity of paper four months later at a price agreed upon today. This agreement is a:

• 1. futures contract.

• 1. forward contract.

• 1. commodity swap.

• future contract.

17. An online brokerage firm has set the minimum margin requirement at 50 percent. What is the maximum leverage ratio associated with a position financed by this minimum margin requirement?

• 2

• Need more data

• 2.2

• 0.5

26. You have placed a sell market-on-open order—a market order that would au- tomatically be submitted at the market’s open tomorrow and would fill at the market price. Your instruction, to sell the shares at the market open, is a(n):

• 1. execution instruction.

• 1. validity instruction.

• 1. clearing instruction.

In an underwritten offering, the risk that the entire issue may not be sold to the public at the stipulated offering price is borne by the:

• 1. issuer.

• 1. investment bank.

• 1. buyers of the part of the issue that is sold.

A British company listed on AIM (formerly the Alternative Investment Market) of the London Stock Exchange announced the sale of 6,686,665 shares to a small group of qualified investors at £0.025 per share. Which of the following best describes this sale?

• 1. Shelf registration.

• 1. Private placement.

• 1. Initial public offering.

A German publicly traded company, to raise new capital, gave its existing share- holders the opportunity to subscribe for new shares. The existing shareholders could purchase two new shares at a subscription price of €4.58 per share for every 15 shares held. This is an example of a(n):

• 1. rights offering.

• 1. private placement.

• 1. initial public offering.

Which is the market that its trades occur at any time the

market is open

• Call market

• Continuous market

• Primary market

• Secondary market

Which statement is NOT true about Best efforts offering and Underwritten offering?

• Underwritten offering: the investment bank agrees to purchase the

  entire issue

• Underwritten offering: If

  the issue is undersubscribed, the investment bank must return the unsold

  portion.

• Best efforts offering: the investment bank acts only as a broker

• Best efforts offering: If the issue is

  undersubscribed, the bank is not obligated to buy the unsold portion

What type of order is automatically submitted at the market's open and fills at the market price?

• Execution instruction.

• Validity instruction.

• Clearing instruction.