1. What is the legal document called that is provided to potential investors and

Question

1. What is the legal document called that is provided to potential investors and describes a new security offering?

A. Prospectus

B. Security agreement

C. Formal filing

D. Registration statement

E. Public statement

2. A publicly-traded firm has just decided to issue an additional 10,000 shares of common stock. The firm plans to offer these shares to the general public next month. Which term applies to this issue of securities?

A. Initial public offering

B. Private placement

C. In-house offering

D. Rights offering

E. Seasoned equity offer

3. The difference between the price an underwriter pays to a securities' issuer and the price at which the securities are offered for sale is called the:

A. markup.

B. commission.

C. spread.

D. rights price.

E. private price.

4. Which one of the following terms is defined as an underwriting for which the underwriters assume full responsibility for any unsold shares?

A. Initial public offering

B. Best efforts underwriting

C. Firm commitment underwriting

D. Rights offer

E. Private placement

5. Which one of the following is an underwriting of securities where the final offer price is determined by investor bids?

A. Private placement

B. Best efforts underwriting

C. Initial public offering

D. Green Shoe option

E. Dutch auction

6. The Green Shoe option is most apt to be exercised when an IPO is ______ and _____.

A. underpriced; undersubscribed

B. underpriced; oversubscribed

C. correctly priced; neither over nor undersubscribed

D. overpriced; oversubscribed

E. overpriced; undersubscribed

7.Galactic Travel wants to do an IPO but is quite concerned that the underwriters might underprice the issue. Which one of the following might the firm consider to address this concern?

A. Extended lockup period

B. Dutch auction underwriting

C. Extended quiet period

D. Best efforts underwriting

E. Standby underwriting

8. Which of these are two major benefits a firm derives from going public? I. Investment bank customers remain content II. Increased ability of the firm to raise capital III. Reselling IPO shares at higher prices on the first day of trading IV. Shareholders are better able to diversify their holdings

A. I and III only

B. II and IV only

C. I and II only

D. III and IV only

E. I and IV only

9. Spring Aire is attempting to sell 700 shares of stock via a Dutch auction. The bids received were: Bidder A: 300 shares at $44; Bidder B: 200 shares at $43; Bidder C: 400 shares at $42; and Bidder D: 300 shares at $40. How many shares will Bidder A be able to purchase?

A. 0 shares

B. 50 shares

C. 140 shares

D. 233 shares

E. 300 shares

10. Rowyn placed an order with her broker to purchase 200 shares of each of three IPOs that are being released this month. Each IPO has an offer price of $18 a share. She received allocations of 40 shares of A, 200 shares of B, and 130 shares of C. On their respective first days of trading Stock A closed at $27 a share, Stock B closed at $15 a share, and Stock C closed at $20 a share. What is her combined total first-day profit or loss on these three IPOs?

A. -$120

B. $20

C. -$30

D. $70

E. $60

Explanation / Answer

ANs 1) ans is A Prspectus : It is prospectus that is provided to any one who is newly investing in the company

ANs 2) ans is E : Seasoned equity offer : When shares are offered to general public after IPO it is called Seasoned equity offer

Ans 3) ans is C : Spread : This is the difference and called as spread.

Ans 4) ans is C : Firm commitment underwriting: under Firm commitment underwriting underwriter takes full responsibility of selling shares else bear the loss.

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