Question 1

A dividend reinvestment plan generally _______ on the security.

Accepted Answer

A)  decreases the return 
B)  increases the return 
C)  has no effect on the return 
D)  has an uncertain effect 
A)  decreases the return 
B)  increases the return 
C)  has no effect on the return 
D)  has an uncertain effect

Question 2

In consultation with a company,the promoter (an investment bank)will seek flotation of the company shares.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following statements is NOT a feature of ordinary shares?

Accepted Answer

A)  Ordinary shares are a major source of external equity financing for companies. 
B)  Ordinary shares entail voting rights at annual general meetings. 
C)  Ordinary shares have no fixed payment obligation. 
D)  Dividends of ordinary shares are always tax deductible. 
A)  Ordinary shares are a major source of external equity financing for companies. 
B)  Ordinary shares entail voting rights at annual general meetings. 
C)  Ordinary shares have no fixed payment obligation. 
D)  Dividends of ordinary shares are always tax deductible.

Question 4

Most companies raise funds by selling their securities in a:

Accepted Answer

A)  public float. 
B)  private placement. 
C)  stock exchange. 
D)  direct placement. 
A)  public float. 
B)  private placement. 
C)  stock exchange. 
D)  direct placement.

Question 5

Any unpaid dividends that must be paid before payment of dividends to ordinary shareholders are called _________ preference shares.

Accepted Answer

A)  participating 
B)  cumulative 
C)  non-cumulative 
D)  secured 
A)  participating 
B)  cumulative 
C)  non-cumulative 
D)  secured

Question 6

Which of the following about equity warrants is NOT correct?

Accepted Answer

A)  Adding equity warrants to a bond issue increases its marketability. 
B)  Warrants are similar to conversion features on some bonds. 
C)  Warrants can be detached from the bond issue and sold separately. 
D)  Dividends for warrants are usually lower than for ordinary shares. 
A)  Adding equity warrants to a bond issue increases its marketability. 
B)  Warrants are similar to conversion features on some bonds. 
C)  Warrants can be detached from the bond issue and sold separately. 
D)  Dividends for warrants are usually lower than for ordinary shares.

Question 7

Which of the following statements about financial risk is incorrect?

Accepted Answer

A)  The higher the debt-to-equity ratio, the higher the degree of financial risk. 
B)  Interest payments on debt must be paid when they fall due. 
C)  When a business fails equity holders rank ahead of providers of debt due to their higher financial risk. 
D)  The higher the proportion of debt the higher the potential return on shareholders' funds. 
A)  The higher the debt-to-equity ratio, the higher the degree of financial risk. 
B)  Interest payments on debt must be paid when they fall due. 
C)  When a business fails equity holders rank ahead of providers of debt due to their higher financial risk. 
D)  The higher the proportion of debt the higher the potential return on shareholders' funds.

Question 8

A person who is authorised to vote on a shareholder's behalf is called:

Accepted Answer

A)  an underwriter. 
B)  a proxy. 
C)  an authorised shareholder. 
D)  a substitute. 
A)  an underwriter. 
B)  a proxy. 
C)  an authorised shareholder. 
D)  a substitute.

Question 9

Discuss relevant issues for a company that needs to decide on how to finance its investment decisions.

Accepted Answer

The financing decision relates to the qu

Question 10

When warrants are converted by a holder:

Accepted Answer

A)  debt is decreased. 
B)  debt is decreased but equity also increases. 
C)  only the number of shares increases. 
D)  there is no impact on the company's capital structure. 
A)  debt is decreased. 
B)  debt is decreased but equity also increases. 
C)  only the number of shares increases. 
D)  there is no impact on the company's capital structure.

Question 11

Which of the following statements is NOT a feature of convertible notes?

Accepted Answer

A)  Convertible notes offer a lower interest rate than straight debt instruments. 
B)  Convertible notes are usually made available to ordinary shareholders. 
C)  Maturity of convertible notes is usually shorter than straight debt instruments. 
D)  Note holders can generally participate in new issues of equity. 
A)  Convertible notes offer a lower interest rate than straight debt instruments. 
B)  Convertible notes are usually made available to ordinary shareholders. 
C)  Maturity of convertible notes is usually shorter than straight debt instruments. 
D)  Note holders can generally participate in new issues of equity.

Question 12

A pro-rata offer of rights to existing shareholders must be accompanied by a prospectus.

Accepted Answer

A) True 
 B)False

Question 13

A company is likely to issue _____ if it has reached its optimal gearing level.

Accepted Answer

A)  options 
B)  rights 
C)  ordinary shares 
D)  preference shares 
A)  options 
B)  rights 
C)  ordinary shares 
D)  preference shares

Question 14

A low debt-to-equity ratio for a company means that a rise in interest rates will not affect the variable-rate debt issued by the company.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following statements about company-issued equity warrants is incorrect?

Accepted Answer

A)  The terms of a warrant may allow the warrant to be detachable from the bond issue. 
B)  A company-issued equity warrant generally attaches to a bond issue. 
C)  Because company-issued equity warrants are attached to a bond they have no value. 
D)  Warrants may lower the costs of borrowing associated with the issue of the underlying corporate bond. 
A)  The terms of a warrant may allow the warrant to be detachable from the bond issue. 
B)  A company-issued equity warrant generally attaches to a bond issue. 
C)  Because company-issued equity warrants are attached to a bond they have no value. 
D)  Warrants may lower the costs of borrowing associated with the issue of the underlying corporate bond.

Question 16

When a company decides to pay for an investment project using a short-term bank loan,this is best described as a/an:

Accepted Answer

A)  capital market decision. 
B)  money market decision. 
C)  financing decision. 
D)  investment decision. 
A)  capital market decision. 
B)  money market decision. 
C)  financing decision. 
D)  investment decision.

Question 17

If,for an IPO,circumstances change and the issue becomes unattractive,the underwriters:

Accepted Answer

A)  charge the company more for raising the funds. 
B)  charge the company less for the IPO. 
C)  may purchase unsubscribed shares. 
D)  offer the shares at a lower price. 
A)  charge the company more for raising the funds. 
B)  charge the company less for the IPO. 
C)  may purchase unsubscribed shares. 
D)  offer the shares at a lower price.

Question 18

Preference shares have a number of features similar to debt that distinguish them from ordinary shares.Which of the following features may be incorporated in a preference share issue?
i.Cumulative or non-cumulative
ii.Convertible or non-convertible
iii.Redeemable or non-redeemable
iv.Issued at different rankings
v.Participating or non-participating

Accepted Answer

A)  i, ii, iii, iv 
B)  i, ii, iv, v 
C)  ii, iii, iv, v 
D)  All of the given answers 
A)  i, ii, iii, iv 
B)  i, ii, iv, v 
C)  ii, iii, iv, v 
D)  All of the given answers

Question 19

Preference shares:

Accepted Answer

A)  have their dividend fixed at the issue date. 
B)  rank behind ordinary shares in the payment of dividends. 
C)  rank behind ordinary shareholders in their claim on company assets in the event of liquidation. 
D)  rank ahead of the company creditors. 
A)  have their dividend fixed at the issue date. 
B)  rank behind ordinary shares in the payment of dividends. 
C)  rank behind ordinary shareholders in their claim on company assets in the event of liquidation. 
D)  rank ahead of the company creditors.

Question 20

A company's debt-to-equity ratio is determined in practice with reference to four main criteria and not by finance theory.

Accepted Answer

A) True 
 B)False

A dividend reinvestment plan generally _______ on the security.

In consultation with a company,the promoter (an investment bank)will seek flotation of the company shares.

Which of the following statements is NOT a feature of ordinary shares?

Most companies raise funds by selling their securities in a:

Any unpaid dividends that must be paid before payment of dividends to ordinary shareholders are called _________ preference shares.

Which of the following about equity warrants is NOT correct?

Which of the following statements about financial risk is incorrect?

A person who is authorised to vote on a shareholder's behalf is called:

Discuss relevant issues for a company that needs to decide on how to finance its investment decisions.

When warrants are converted by a holder:

Which of the following statements is NOT a feature of convertible notes?

A pro-rata offer of rights to existing shareholders must be accompanied by a prospectus.

A company is likely to issue _____ if it has reached its optimal gearing level.

A low debt-to-equity ratio for a company means that a rise in interest rates will not affect the variable-rate debt issued by the company.

Which of the following statements about company-issued equity warrants is incorrect?

When a company decides to pay for an investment project using a short-term bank loan,this is best described as a/an:

If,for an IPO,circumstances change and the issue becomes unattractive,the underwriters:

Preference shares:

A company's debt-to-equity ratio is determined in practice with reference to four main criteria and not by finance theory.

A Modern Financial System: An Overview

Commercial Banks

Non-Bank Financial Institutions

The Share Market and the Corporation

Investors in the Share Market

Forecasting Share Price Movements

Mathematics of Finance: An Introduction to Basic Concepts and Calculations

Short-Term Debt

Medium-To-Long-Term Debt

International Debt Markets

Government Debt, monetary Policy and the Payments System

An Introduction to Interest Rate Determination and Forecasting

Interest Rate Risk

Foreign Exchange: The Structure and Operation of the Fx Market

Foreign Exchange: Factors That Influence the Exchange Rate

Foreign Exchange: Risk Identification and Management

An Introduction to Risk Management and Derivatives

Future Contracts and Forward Rate Agreements

Options

Interest Rate Swaps, Cross-Currency Swaps and Credit Default

Filters

Exam 5: Corporations Issuing Equity in the Share Market

A dividend reinvestment plan generally _______ on the security.

In consultation with a company,the promoter (an investment bank)will seek flotation of the company shares.

Which of the following statements is NOT a feature of ordinary shares?

Most companies raise funds by selling their securities in a:

Any unpaid dividends that must be paid before payment of dividends to ordinary shareholders are called _________ preference shares.

Which of the following about equity warrants is NOT correct?

Which of the following statements about financial risk is incorrect?

A person who is authorised to vote on a shareholder's behalf is called:

Discuss relevant issues for a company that needs to decide on how to finance its investment decisions.

When warrants are converted by a holder:

Which of the following statements is NOT a feature of convertible notes?

A pro-rata offer of rights to existing shareholders must be accompanied by a prospectus.

A company is likely to issue _____ if it has reached its optimal gearing level.

A low debt-to-equity ratio for a company means that a rise in interest rates will not affect the variable-rate debt issued by the company.

Which of the following statements about company-issued equity warrants is incorrect?

When a company decides to pay for an investment project using a short-term bank loan,this is best described as a/an:

If,for an IPO,circumstances change and the issue becomes unattractive,the underwriters:

Preference shares:

A company's debt-to-equity ratio is determined in practice with reference to four main criteria and not by finance theory.

A Modern Financial System: An Overview

Commercial Banks

Non-Bank Financial Institutions

The Share Market and the Corporation

Investors in the Share Market

Forecasting Share Price Movements

Mathematics of Finance: An Introduction to Basic Concepts and Calculations

Short-Term Debt

Medium-To-Long-Term Debt

International Debt Markets

Government Debt, monetary Policy and the Payments System

An Introduction to Interest Rate Determination and Forecasting

Interest Rate Risk

Foreign Exchange: The Structure and Operation of the Fx Market

Foreign Exchange: Factors That Influence the Exchange Rate

Foreign Exchange: Risk Identification and Management

An Introduction to Risk Management and Derivatives

Future Contracts and Forward Rate Agreements

Options

Interest Rate Swaps, Cross-Currency Swaps and Credit Default

Filters