CFA CFA Global Markets & Trading

Question 1

Which type of market order guarantees execution but not the execution price?

Accepted Answer

Market order

Answer

A market order is executed immediately at the best available current price, guaranteeing execution but not a specific price.

Question 2

A limit order to buy a security is placed:

Accepted Answer

At or below the specified limit price

Answer

A buy limit order specifies the maximum price the investor is willing to pay, and execution occurs only at that price or lower.

Question 3

The bid-ask spread in financial markets represents:

Accepted Answer

The transaction cost paid by investors and profit for market makers

Answer

The bid-ask spread is the difference between the highest price a buyer will pay and the lowest price a seller will accept, representing the implicit cost of trading.

Question 4

Which global index is considered the primary benchmark for international developed market equities?

Accepted Answer

MSCI EAFE Index

Answer

The MSCI EAFE (Europe, Australasia, Far East) Index is the standard benchmark for developed international equity markets outside North America.

Question 5

Short selling involves:

Accepted Answer

Borrowing shares and selling them with the intent to repurchase at a lower price

Answer

Short selling is a strategy where an investor borrows shares, sells them, and hopes to buy them back at a lower price to profit from the decline.

CFA Practice Test

CFA Practice Test

CFA CFA Global Markets & Trading