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1.
In order for arbitrage to work, the security must be priced the same in the two separate markets.
False. Arbitrage is done in an attempt to profit from temporary price differences in the security in the two separate markets.
2.
A call option grants the owner the right to buy 100 shares of a particular security at a pre-determined price.
True. A call option grants the owner the right to buy 100 shares of a particular security at a pre-determined price.
3.
Because a margin account charges interest, there are no additional commission charges as in other stock accounts.
False. Each time a margin investor executes a trade, the responsible broker is paid a commission, calculated as a percentage of the total transaction value.
4.
The investor information required to establish a cash account includes all of the following except _______.
The investors occupation. In order to establish a cash account, the investor is responsible for providing basic personal information, including his or her name, address and phone number, a tax ID or Social Security number, and proof that he or she is of legal age.
5.
A wrap account is one in which all associated costs are wrapped into a single fee.
True. A wrap account is a brokerage account in which all associated costs--broker commissions, money management fees, and transaction costs--are wrapped into a single fee.