Question 1

An investment banker assumes underwriting risk in both negotiated purchases and privileged subscriptions with standby agreements.

Accepted Answer

A) True 
 B)False

Question 2

A seasoned equity offering is the sale of additional shares by a company whose shares are already publicly traded.

Accepted Answer

A) True 
 B)False

Question 3

Three ways that savings can be transferred through the financial markets include all of the following except:

Accepted Answer

A)  direct transfer of funds. 
B)  indirect transfer using the investment banker. 
C)  indirect transfer using the venture capital firm. 
D)  indirect transfer using the financial intermediary.

Question 4

Spandra Electronics wants to raise money by selling stock.After talking to several investment banking firms,Spandra decides to hire Goldman Sachs to sell 5 million shares of its common stock.Goldman sells 4.5 million shares and returns the rest to Spandra.This is an example of

Accepted Answer

A)  a privileged subscription with a standby agreement. 
B)  a commission or best-efforts agreement. 
C)  a privileged subscription with a standby agreement 
D)  a competitive bid purchase.

Question 5

If provided the nominal rate of interest (r)of 7.4% and the anticipated rate of inflation (i)of 4.5%,what is the real rate of interest (R)?

Accepted Answer

The answer of If provided the nominal rate of interest...

Question 6

An example of a secondary market transaction involving a capital market security is

Accepted Answer

A)  a new issue of a security with a very short maturity. 
B)  a new issue of a security with a very long maturity. 
C)  the transfer of a previously-issued security with a very short maturity. 
D)  the transfer of a previously-issued security with a very long maturity.

Question 7

The costs associated with issuing securities to the public can be high.Some types of securities have greater expenses associated with them than others.Which of the following is the most costly security to issue?

Accepted Answer

A)  common stock 
B)  corporate bonds 
C)  preferred stock 
D)  all of the above

Question 8

Seasoned secondary offerings occur in the secondary market.

Accepted Answer

A) True 
 B)False

Question 9

All of the following securities are sold in money markets except:

Accepted Answer

A)  common stock. 
B)  commercial paper. 
C)  3-month U.S. Treasury Bills. 
D)  6-month certificates of deposit.

Question 10

The Sarbanes-Oxley Act,or SOX,

Accepted Answer

A)  holds corporate advisors strictly accountable in a legal sense for any instances of misconduct. 
B)  pretexts the interests of shareholders by providing greater protection against accounting fraud and financial misconduct. 
C)  reduces the cost of financial reporting by standardizing reporting requirements. 
D)  accomplishes both A and B.

Question 11

Only individual investors participate in public offerings,while institutional investors participate in private placements.

Accepted Answer

A) True 
 B)False

Question 12

The New York Stock Exchange (NYSE)is

Accepted Answer

A)  an automated electronic trading platform. 
B)  an auction market with face-to-face trading on the floor of the stock exchange in addition to automated, electronic trading. 
C)  a hybrid market, allowing for face-to-face trading on the floor of the stock exchange in addition to automated, electronic trading. 
D)  primarily a futures market.

Question 13

Saving surplus units include individuals and governments,but not corporations.

Accepted Answer

A) True 
 B)False

Question 14

The negotiated purchase is the most prevalent method of securities distribution in the private sector.

Accepted Answer

A) True 
 B)False

Question 15

If a corporation wants a guarantee that all of its shares of stock will be sold,it should use which of the following distribution methods?

Accepted Answer

A)  competitive bid purchase 
B)  privileged subscription with no standby agreement 
C)  commission or best-efforts contract 
D)  direct sale

Question 16

Which of the following represents the correct ordering of standard deviation of returns over the period 1926 to 2008 (from highest to lowest standard deviation of returns)?

Accepted Answer

A)  Treasury bills, Long-term corporate bonds, Common stocks, Small firm common stocks 
B)  Small firm common stocks, Common stocks, Long-term corporate bonds, Treasury bills 
C)  Treasury bills, Common stocks, Long-term corporate bonds, Small firm common stocks 
D)  Treasury bills, Common stocks, Small firm common stocks, Long-term corporate bonds

Question 17

The investment banker does not underwrite the securities to be issued in which of the following?

Accepted Answer

A)  initial public offering 
B)  primary market transaction 
C)  firm commitment 
D)  best efforts

Question 18

Financial intermediaries issue their own indirect securities and use the proceeds to purchase the direct securities of other economic units.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following would not normally be considered a "flotation cost? "

Accepted Answer

A)  underwriter's spread 
B)  dividends 
C)  legal fees 
D)  printing and engraving expenses

Question 20

Which of the following is an advantage of using private placements for debt?

Accepted Answer

A)  reduced costs from the elimination of the registration statement for the SEC, investment-banking underwriting fees and distribution costs 
B)  lower interest costs 
C)  fewer and less burdensome restrictive covenants 
D)  the possibility of future SEC registration

Exam 2: The Financial Markets and Interest Rates

An investment banker assumes underwriting risk in both negotiated purchases and privileged subscriptions with standby agreements.

A seasoned equity offering is the sale of additional shares by a company whose shares are already publicly traded.

Three ways that savings can be transferred through the financial markets include all of the following except:

Spandra Electronics wants to raise money by selling stock.After talking to several investment banking firms,Spandra decides to hire Goldman Sachs to sell 5 million shares of its common stock.Goldman sells 4.5 million shares and returns the rest to Spandra.This is an example of

If provided the nominal rate of interest (r)of 7.4% and the anticipated rate of inflation (i)of 4.5%,what is the real rate of interest (R)?

An example of a secondary market transaction involving a capital market security is

The costs associated with issuing securities to the public can be high.Some types of securities have greater expenses associated with them than others.Which of the following is the most costly security to issue?

Seasoned secondary offerings occur in the secondary market.

All of the following securities are sold in money markets except:

The Sarbanes-Oxley Act,or SOX,

Only individual investors participate in public offerings,while institutional investors participate in private placements.

The New York Stock Exchange (NYSE) is

Saving surplus units include individuals and governments,but not corporations.

The negotiated purchase is the most prevalent method of securities distribution in the private sector.

If a corporation wants a guarantee that all of its shares of stock will be sold,it should use which of the following distribution methods?

Which of the following represents the correct ordering of standard deviation of returns over the period 1926 to 2008 (from highest to lowest standard deviation of returns) ?

The investment banker does not underwrite the securities to be issued in which of the following?

Financial intermediaries issue their own indirect securities and use the proceeds to purchase the direct securities of other economic units.

Which of the following would not normally be considered a "flotation cost? "

Which of the following is an advantage of using private placements for debt?