Question 1

A firm can avoid the time lag between registering new securities with the SEC and actually selling them by using

Accepted Answer

A)   a proxy.
B)   shelf registration.
C)   a margin call.
D)   preemptive rights.E) None of the above
F) A) and D)

Question 2

Venture capital funds commonly exit their investment in a business by

Accepted Answer

A)   receiving dividends from the business .
B)   engaging in a credit default swap with the business.
C)   selling shares of the business when the business engages in an IPO.
D)   repurchasing shares of their own stock in the secondary market.E) None of the above
F) A) and D)

Question 3

Whenever _____, the stock price will be driven up.

Accepted Answer

A)   supply exceeds demand
B)   demand exceeds supply
C)   demand is reduced
D)   none of the aboveE) All of the above
F) None of the above

Question 4

Private equity funds commonly exit their investment in a business by

Accepted Answer

A)   selling their stake to another company.
B)   engaging in a credit default swap with the business.
C)   investing in shares of the business when the business engages in an IPO.
D)   repurchasing shares of their own stock in the secondary market.E) B) and D)
F) All of the above

Question 5

____ represents ownership of a foreign stock.

Accepted Answer

A)   ADR
B)   SEAQ
C)   Nasdaq
D)   AMEXE) All of the above
F) B) and D)

Question 6

Initial public offerings (IPOs) tend to occur more frequently during bearish (weak) stock markets.

Accepted Answer

A) True 
 B)False

Question 7

Private equity funds tend to use mostly _________ when acquiring stakes in businesses.

Accepted Answer

A)   their equity from issuing common stock
B)   their equity from retaining earnings
C)   their equity from issuing preferred stock
D)   borrowed fundsE) A) and B)
F) B) and D)

Question 8

According to financial research, there is evidence that the stock price associated with an IPO typically rises on the first day but then declines over time.

Accepted Answer

A) True 
 B)False

Question 9

The Sarbanes-Oxley Act has improved transparency, but investors may still have limited information about publicly traded firms.

Accepted Answer

A) True 
 B)False

Question 10

Venture capital (VC) funds commonly serve as advisers to the businesses in which they invest.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is not true regarding overallotment options?

Accepted Answer

A)   Overallotment options are rarely used in IPOs today.
B)   An overallotment option allows the lead underwriter to allocate an additional 15 percent of the shares of a firm engaging in an IPO.
C)   The option allows the lead underwriter to purchase additional shares at the offer price.
D)   The lead underwriter may use the shares from an overallotment option to help stabilize the stock price in the days after the IPO.E) A) and B)
F) A) and C)

Question 12

Which of the following is not true with respect to preferred stock?

Accepted Answer

A)   Preferred stock usually does not allow for significant voting rights.
B)   If the firm does not have sufficient earnings from which to pay the preferred stock dividends, the preferred shareholders may force the firm into bankruptcy.
C)   Normally, the owners of preferred stock do not participate in the profits of the firm beyond the stated fixed annual dividend.
D)   Payment of preferred dividends is not a tax-deductible expense.
E)   All of the above are true.F) A) and B)
G) B) and E)

Question 13

Venture capital (VC) funds usually invest in publicly traded businesses.

Accepted Answer

A) True 
 B)False

Question 14

To discourage flipping, some securities firms make ____ shares of future IPOs available to institutional investors that retain shares for a ____ period of time.

Accepted Answer

A)   fewer; long
B)   more; short
C)   more; long
D)   Answers A and B are correct.E) None of the above
F) B) and C)

Question 15

If managers believe that their firm's stock price is weak because it is undervalued by the market, they may consider repurchasing a portion of the shares that are outstanding.

Accepted Answer

A) True 
 B)False

Question 16

Preferred shareholders

Accepted Answer

A)   typically have the same voting rights as common shareholders.
B)   do not share the ownership of the firm with common shareholders.
C)   typically participate in the profits of the firm beyond the stated fixed annual dividend.
D)   may not receive a dividend every year.E) B) and C)
F) B) and D)

Question 17

The practice of purchasing IPO stock at the offer price and selling the stock shortly afterward is called

Accepted Answer

A)   flipping.
B)   skiing.
C)   flopping.
D)   none of the aboveE) A) and D)
F) A) and C)

Question 18

All countries that have stock markets have similar laws regarding the financial information that must be provided by public companies.

Accepted Answer

A) True 
 B)False

Question 19

The government enforcement of securities laws varies among countries.

Accepted Answer

A) True 
 B)False

Question 20

When brokers encourage investors to place first-day bids for IPO shares that are above the offer price, this is referred to as

Accepted Answer

A)   flipping.
B)   spinning.
C)   laddering.
D)   none of the aboveE) B) and D)
F) B) and C)

Exam 10: Stock Offerings and Investor Monitoring

The practice of purchasing IPO stock at the offer price and selling the stock shortly afterward is called

Correct AnswerverifiedShow Answer

Which of the following is not true regarding overallotment options?

Correct AnswerverifiedShow Answer

According to financial research, there is evidence that the stock price associated with an IPO typically rises on the first day but then declines over time.

Correct AnswerverifiedShow Answer

Private equity funds tend to use mostly _________ when acquiring stakes in businesses.

Correct AnswerverifiedShow Answer

A firm can avoid the time lag between registering new securities with the SEC and actually selling them by using

Correct AnswerverifiedShow Answer

The government enforcement of securities laws varies among countries.

Correct AnswerverifiedShow Answer

Preferred shareholders

Correct AnswerverifiedShow Answer

Which of the following is not true with respect to preferred stock?

Correct AnswerverifiedShow Answer

Venture capital (VC) funds usually invest in publicly traded businesses.

Correct AnswerverifiedShow Answer

Private equity funds commonly exit their investment in a business by

Correct AnswerverifiedShow Answer

All countries that have stock markets have similar laws regarding the financial information that must be provided by public companies.

Correct AnswerverifiedShow Answer

If managers believe that their firm's stock price is weak because it is undervalued by the market, they may consider repurchasing a portion of the shares that are outstanding.

Correct AnswerverifiedShow Answer

When brokers encourage investors to place first-day bids for IPO shares that are above the offer price, this is referred to as

Correct AnswerverifiedShow Answer

The Sarbanes-Oxley Act has improved transparency, but investors may still have limited information about publicly traded firms.

Correct AnswerverifiedShow Answer

Whenever _____, the stock price will be driven up.

Correct AnswerverifiedShow Answer

Venture capital (VC) funds commonly serve as advisers to the businesses in which they invest.

Correct AnswerverifiedShow Answer

____ represents ownership of a foreign stock.

Correct AnswerverifiedShow Answer

Venture capital funds commonly exit their investment in a business by

Correct AnswerverifiedShow Answer

Initial public offerings (IPOs) tend to occur more frequently during bearish (weak) stock markets.

Correct AnswerverifiedShow Answer

To discourage flipping, some securities firms make ____ shares of future IPOs available to institutional investors that retain shares for a ____ period of time.

Correct AnswerverifiedShow Answer

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To discourage flipping, some securities firms make shares of future IPOs available to institutional investors that retain shares for a period of time.

Correct Answer
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