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Which one of the following specifies the length of time that must pass after an initial public offering (IPO) before insiders are permitted to sell their shares?


A) Lockup period
B) Quiet period
C) Comment period
D) Green Shoe period
E) Rights offer period

F) All of the above
G) C) and D)

Correct Answer

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Which one of the following statements is correct?


A) Oral offers can be made for new securities during the waiting period.
B) A Green Shoe letter must be provided to all investors who purchase shares of a new equity offering.
C) Corporate directors have the authority to authorize additional shares of stock for a new issue.
D) The underwriters must approve any increase in the authorized number of shares for a firm.
E) When issuing new securities, the first step is the distribution of the prospectus.

F) A) and B)
G) All of the above

Correct Answer

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Which one of the following is probably the most effective means of increasing investors' interest in an IPO?


A) Extending the lockup period
B) Issuing the IPO through a rights offering
C) Underpricing the IPO
D) Eliminating the quiet period
E) Eliminating the Green Shoe option

F) A) and C)
G) All of the above

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When issuing securities, which of the following can occur prior to receiving the approval by the SEC of a registration statement? I.Oral offer to buy shares II.Written offer to buy shares III.Final determination of the offer price IV.Distribution of a preliminary prospectus


A) I only
B) III only
C) III and IV only
D) I and IV only
E) None of the listed activities can occur until after the SEC approval is received.

F) A) and D)
G) A) and C)

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Monster Truck Company would like to sell 700 shares of stock using the Dutch auction method.The bids received are as follows: Monster Truck Company would like to sell 700 shares of stock using the Dutch auction method.The bids received are as follows: Bidder B will receive _____ shares and pay a price per share of ____.Bidder C will receive no allocation. A) 0; $0 B) 75; $17 C) 100; $17 D) 233; $18 E) 100; $18 Bidder B will receive _____ shares and pay a price per share of ____.Bidder C will receive no allocation.


A) 0; $0
B) 75; $17
C) 100; $17
D) 233; $18
E) 100; $18

F) A) and C)
G) A) and B)

Correct Answer

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A registration of securities under SEC 415 which permits a firm to issue the securities over a two-year period is which type of registration?


A) Seasoned registration
B) Negotiated registration
C) Shelf registration
D) Extended registration
E) Delayed registration

F) C) and E)
G) C) and D)

Correct Answer

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Which of the following duties belong to the underwriters of a firm commitment securities offer? I.Duty to offer the Green Shoe provision to all investors who buy at the offer price II.Duty to set the offer price III.Duty to distribute the offered shares IV.Duty to purchase any unsold shares


A) I and III only
B) II and IV only
C) II, III, and IV only
D) I, II, and III only
E) I, II, III, and IV

F) C) and D)
G) A) and B)

Correct Answer

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Which one of the following describes a Green Shoe provision?


A) Determination of underwriters' fees
B) Guarantee of sale for all offered shares
C) Price auction
D) Overallotment option
E) Description of issue excluding the offer price

F) A) and E)
G) C) and D)

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Nermine placed an order with her broker to purchase 1,500 shares of each of three IPOs that are being released this month.Each IPO has an offer price of $21 per share.The number of shares allocated to her along with the closing stock price at the end of the first day of trading for each stock, are as follows: Nermine placed an order with her broker to purchase 1,500 shares of each of three IPOs that are being released this month.Each IPO has an offer price of $21 per share.The number of shares allocated to her along with the closing stock price at the end of the first day of trading for each stock, are as follows: What is her total profit or loss on these three stocks as of the end of the first day of trading for each stock? A) -$1,950 B) $4,500 C) $5,145 D) $3,220 E) $2,450 What is her total profit or loss on these three stocks as of the end of the first day of trading for each stock?


A) -$1,950
B) $4,500
C) $5,145
D) $3,220
E) $2,450

F) A) and B)
G) C) and D)

Correct Answer

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Which one of the following projects is most apt to be financed with venture capital?


A) Additional warehouse space for a profitable trucking firm
B) New product for an international plastics manufacturing company
C) Prototype for a newly patented hand tool by an individual inventor
D) Seasonal merchandise for a major retailer
E) Domestic outlet for a large global exporter

F) A) and B)
G) A) and C)

Correct Answer

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Which statement is true?


A) Venture capitalists tend to be long-term investors in a firm.
B) Venture capitalists generally have an exit strategy.
C) Venture capitalists generally provide all of their funding in one lump sum.
D) Venture capital is relatively easy to obtain given today's markets.
E) Venture capitalists tend to invest in a vast array of enterprises rather than specialize in a few areas.

F) B) and D)
G) A) and E)

Correct Answer

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Pork King Farms would like to sell 2,600 shares of stock using a Dutch auction.The bids received are as follows: Pork King Farms would like to sell 2,600 shares of stock using a Dutch auction.The bids received are as follows: What is the total amount the issuer will receive from this auction? Ignore costs. A) $88,400 B) $85,800 C) $88,400. D) $91,000 E) $93,600 What is the total amount the issuer will receive from this auction? Ignore costs.


A) $88,400
B) $85,800
C) $88,400.
D) $91,000
E) $93,600

F) None of the above
G) All of the above

Correct Answer

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Present Tense Tonic wants to raise $13 million to purchase equipment by issuing new securities.Management estimates the issue will cost the firm $875,500 for accounting, legal, and other costs.The underwriting spread is 6.5 percent and the issue price is $24 per share.How many shares of stock must be sold if the firm is to have sufficient funds remaining after costs to purchase all of the desired equipment?


A) 608,010 shares
B) 521,121 shares
C) 618,338 shares
D) 647,666 shares
E) 582,139 shares

F) C) and E)
G) A) and B)

Correct Answer

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ALC needs to raise $12 million to finance its expansion into new markets and has decided to sell new shares of equity via a general cash offering.The offer price will be $28 per share, the accounting and legal fees are expected to be $645,000, and the company's underwriters will charge a spread of 8.2 percent.How many shares need to be sold?


A) 489,889 shares
B) 521,208 shares
C) 523,467 shares
D) 491,947 shares
E) 515,323 shares

F) A) and C)
G) A) and B)

Correct Answer

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Which statement is correct?


A) Underwriters exercise the Green Shoe option whenever the market price of an IPO declines initially.
B) Underwriters guarantee the number of shares to be sold in a best efforts underwriting.
C) Competitive underwriting is generally more expensive than negotiated underwriting.
D) The majority of equity underwritings in the U.S.are competitive underwritings.
E) Underwriters may receive warrants as part of their compensation.

F) D) and E)
G) C) and E)

Correct Answer

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Stock prices tend to _____ following the announcement of a new equity issue and tend to _____ following the announcement of a new debt issue.


A) increase; increase
B) increase; decrease
C) increase; remain relatively constant
D) decrease; increase
E) decrease; remain relatively constant

F) A) and D)
G) B) and C)

Correct Answer

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