Choose wisely. There is only one correct answer to each question.
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1.
Full-service brokers who get paid by commission may have an interest in trading frequently for you. What are some possible downsides of this?
Both of the above. Frequent trading, while it may have other values, can lead to commissions that chip away at your returns, and it can lead to more taxes on gains that you make.
2.
If you are shorting a stock, and it increases greatly in price and keeps on increasing, what would be your reaction?
You would panic. With shorting, you only make money if the stock price decreases. If it rises, you must eventually pay it back by buying it, and that means you will pay through the nose to buy it back.
3.
Buying an investment on margin means _______.
Borrowing money from another to purchase it. Buying on margin involves borrowing money, usually from a broker, to purchase an investment and then returning the money along with a commission.
4.
If you choose a discount broker over a full-service broker, you may have to sacrifice certain services. Which of the following is not one of those services that might be sacrificed?
Trades. Trades are the one service that all brokers will offer, or else they would not be brokers at all. The other services are more likely to be offered by the full-service brokers.
5.
If you place a market order to buy 100 shares of fictional company Wolverines Sailboats Corp., at what price and when would the trade be executed?
The trade would be executed immediately at the best available price. A market order tells the broker to buy or sell at the best price available, and the trades are usually executed immediately, assuming the market is open.
6.
Financial planners and advisors get paid in one of three possible ways. Which of the following is not one of those ways?
None of the above. All of these are ways that planners and advisors get paid.