16: ORDERS AND QUOTATION (250)

Question 1

If a customer is long 650 shares of DEF in a margin account and the debit balance in the account is $9,200. If DEF pays a 10% stock dividend, will the equity in the account increase?

Answer 1

No, equity will stay the same
Even though the investor receives more shares, the price per share falls; there is no effect on the market value of the customer’s holdings.

Question 2

Primary reason companies give stock dividends

Answer 2

make the market price more attractive to investors (if the market price gets too high, it limits the number of investors who can purchase the stock), thus adding liquidity

Question 3

What is a subject quote?

Answer 3

BD must confirm with the OTC market maker/trader that they actually want to be filled before executing clients order

Question 4

Can SMA used to meet minimum maintenance requirements?

Answer 4

No

SMA cannot be used to meet minimum maintenance requirements.

Question 5

The determination as to whether an over-the-counter stock is eligible for purchase on margin is made by

A)
the Federal Deposit Insurance Corporation.
 B)
the Securities and Exchange Commission.
 C)
the Financial Industry Regulatory Authority.
 D)
the Federal Reserve Board.

Answer 5

D) the Fed

Explanation
All decisions regarding initial margin eligibility are the role of the Federal Reserve Board.

LO 16.d

Question 6

When a customer’s margin account contains both long and short positions it it known as a ____ or _____ margin account

Answer 6

Combined or mixed margin account

Question 7

T/F: A “combined margin account” or “mixed margin account” is when a customer’s margin account contains both long as short positions

Answer 7

True

Whn account has both long and short positions
“combined margin account” or “mixed marign account”