In Evaluating the Coverage of a Bank's Regulation U Compliance

question 311

Multiple Choice

In evaluating the coverage of a bank's Regulation U compliance for loans to purchase or carry margin stocks, which of the following securities is NOT covered in the regulatory definition of "margin stock"?

• A) Any OTC stock
• B) A security issued by an investment company that is licensed under the Small Business Administration Act
• C) A warrant or right to subscribe to, or purchase, a margin stock
• D) An equity security registered, or having unlisted trading privileges, on a national exchange

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Definitions:

Semistrong-Form

Part of the Efficient Market Hypothesis that asserts all publicly available information is reflected in asset prices, including historical data and all public disclosures.

Expected Return

The average return anticipated on an investment, factoring in the probabilities of each possible outcome.

Constant Rate

A fixed percentage or value used in calculations, often assumed in models forecasting growth or decay over time.

Required Rate of Return

The least annual percentage profit that must be earned by an investment to draw interest from companies or individuals into a given security or scheme.