Your Results For - Multiple Choice Questions
Your Results For - Multiple Choice Questions
Your Results For - Multiple Choice Questions
1. The preliminary prospectus, which has a statement on its cover that the
registration statement has not yet become effective, is referred to as a (an)
__________.
2. A market where new securities are bought and sold for the first time is known as a
__________ market.
The secondary market is for existing (used) securities rather than new issues.
3. A market for existing (used) securities, such as the NYSE or AMEX, rather than new
issues is known as the __________ market.
The tertiary market is a phony market, while the secondary market is where
securities are resold after the initial sale.
4. A market for relatively long-term (greater than one year original maturity) financial
instruments (e.g., bonds and stocks) is known as the __________ market.
The tertiary market is a phony market, while the capital market is where relatively
long-term securities are bought and sold.
5. Which securities law requires that public offerings be registered with the federal
government before they are sold?
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This is a quasi-private placement where the firm sells to an investment banker who
then sells to investors with registration rights (often).
6. Which securities law regulates the secondary market for long-term securities
already outstanding?
8. Which securities law(s) is (are) involved with state laws regulating the offering and
sale of securities?
10. Which of the following is a short-term option to buy a certain number of securities
from the issuing corporation?
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place
Correct Answer: This occurs when one party, say management, has better
information than another party, say investors, about relevant
information to each party.
This is a theory that does indeed have relevance in the financial market place and
is generally accepted that management has better information than investors.
12. A temporary combination of investment banking firms formed to sell a new security
issue, can be referred to as a (an) __________.
13. What happens, according to the text, to the average common stock price
immediately after the announcement of a new equity issue by a publicly traded
firm?
Your Answer: The average stock price does not generally change because of
asymmetric information.
Correct Answer: The average stock price decreases a few percentage points.
Asymmetric information actually causes investors to bid the stock price down a few
percentage points.
14. The New York Stock Exchange (NYSE) can be considered as being a part of the
__________ and the __________.
The NYSE is part of the capital market, but not the money market.
15. Which of the following is not a method a firm can use to publicly issue common
stock?
16. Which of the following is not a method a firm can use to finance their long-term
needs externally?
This is a viable method where the firm uses investment bankers and registers the
securities with the SEC.
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Your Answer: The issuing firm pays a flat fee, usually $1 million, plus all of
the commissions charge by stockbrokers who are ultimately
selling the securities to investors.
Correct Answer: Investment bankers earn a spread based on the difference
between the purchase price from the firm and the sales price to
investors of the securities being underwritten.
Investment bankers actually earn a spread (sales price -- purchase price of all
underwritten securities).
18. If the market price of a stock "rights-on" is $50 a share, the subscription price is
$40 a share, and it takes nine rights to buy an additional share of common stock,
the theoretical value of a right when the stock is selling "rights-on " is how much?
19. The __________ is a disclosure document filed with the SEC in order to register a
new security and includes the prospectus and other SEC required information.
Me Text
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