Question 1

Publicly-traded companies generally have

Accepted Answer

A)   more pressure for short-term performance.
B)   less pressure for short-term performance.
C)   very strong stock market performance.
D)   low distribution costs in selling securities.

Question 2

When a firm sells a new issue through an investment banker the costs incurred

Accepted Answer

A)   are the "give up" expense of the spread plus the legal and accounting fees, printing expense and other small fees.
B)   are the spread to the underwriter which includes all the costs of legal and accounting fees, printing expense and other small fees.
C)   are dependent upon the number of underwriters in the syndicate.
D)   a and c.

Question 3

Which of the following is a characteristic of leveraged buyouts?

Accepted Answer

A)   Buyouts are usually financed by debt.
B)   Some corporate assets are often sold after the buy-out is completed.
C)   Funds for the buy-out are raised through securities markets.
D)   All the above are characteristics.

Question 4

The managing investment banker is responsible for

Accepted Answer

A)   putting a syndicate together to aid in the distribution and share the underwriting risk.
B)   determining the value (price)  of the company.
C)   stabilizing the offering during the distribution period.
D)   all of these are the responsibility of the investment banker.

Question 5

Shelf registration requires the firm to file one comprehensive registration statement, which outlines the company's immediate long-term financing plans.

Accepted Answer

A) True 
 B)False

Question 6

The top 10 underwriters in the world are all large U.S. firms.

Accepted Answer

A) True 
 B)False

Question 7

A company's value based on the assumption that its divisions would be sold individually is called its ___________ value.

Accepted Answer

A)   book
B)   market
C)   break up
D)   real

Question 8

Dilution of earnings occurs because

Accepted Answer

A)   a new issue of common stock creates more shares outstanding which reduces earnings per share temporarily.
B)   the company suffers a decline in earnings after taxes.
C)   the investment banker collects an underwriting fee.
D)   all of these.

Question 9

A market maker transacts in stocks as a broker.

Accepted Answer

A) True 
 B)False

Question 10

Shelf Registration has been most frequently used with

Accepted Answer

A)   common stock.
B)   preferred stock.
C)   debt.
D)   commercial paper.

Question 11

An investment banker makes money from

Accepted Answer

A)   commissions from buyers.
B)   fees from other investment bankers in the syndicate.
C)   the spread between issue price and proceeds to the issuer.
D)   artificially supporting the stock price during and after the offering.

Question 12

Because there is more uncertainty involved in the initial market reaction to common stock, a larger underwriting spread often exists for stocks, compared to other types of offerings.

Accepted Answer

A) True 
 B)False

Question 13

While manipulation of security prices is normally illegal, the SEC allows underwriters to temporarily support the price of stocks that they have brought to market.

Accepted Answer

A) True 
 B)False

Question 14

The investment banker's function involves all of the following except

Accepted Answer

A)   take a portion of the risk in the distribution of an issue.
B)   always insure a company a given amount of equity can be sold so that long-range financial planning can be made accurately.
C)   make a market by buying and selling a security to insure a liquid market.
D)   contract to buy securities from the corporation and resell them to other security dealers and the public.

Question 15

Rule 415 allows corporations to quickly take advantage of market conditions.

Accepted Answer

A) True 
 B)False

Question 16

______________ occurs when a company is broken up into smaller divisions and sold for a profit.

Accepted Answer

A)   Liquidation
B)   Internal reorganization
C)   Chapter 11
D)   Restructuring

Question 17

Private placement of corporate bonds

Accepted Answer

A)   has increased in use as new bond issues increased.
B)   exceed 30% of all long-term corporate debt outstanding.
C)   are more expensive to issue than publicly placed bonds.
D)   have lower interest rates than mortgage-backed securities.

Question 18

Shelf Registration has contributed to the concentrated nature of the investment banking industry.

Accepted Answer

A) True 
 B)False

Question 19

The Gramm-Leach-Bliley Act

Accepted Answer

A)   repealed depression era laws separating commercial banking, insurance, brokerage and investment banking.
B)   allowed Citigroup to keep Salomon Smith Barney, Travelers, and CitiBank together as one entity.
C)   did not take away the ability of the Federal Reserve to impose restriction on banks.
D)   all of these are true.

Question 20

The Glass-Steagall Act of the 1930s required U.S. banks to separate their commercial banking operations and their investment banking operations into two different entities.

Accepted Answer

A) True 
 B)False

Exam 15: Investment Banking: Public and Private Placement

The top 10 underwriters in the world are all large U.S. firms.

Correct AnswerverifiedShow Answer

Publicly-traded companies generally have

Correct AnswerverifiedShow Answer

A market maker transacts in stocks as a broker.

Correct AnswerverifiedShow Answer

The managing investment banker is responsible for

Correct AnswerverifiedShow Answer

While manipulation of security prices is normally illegal, the SEC allows underwriters to temporarily support the price of stocks that they have brought to market.

Correct AnswerverifiedShow Answer

A company's value based on the assumption that its divisions would be sold individually is called its ___________ value.

Correct AnswerverifiedShow Answer

Shelf registration requires the firm to file one comprehensive registration statement, which outlines the company's immediate long-term financing plans.

Correct AnswerverifiedShow Answer

Which of the following is a characteristic of leveraged buyouts?

Correct AnswerverifiedShow Answer

Private placement of corporate bonds

Correct AnswerverifiedShow Answer

The investment banker's function involves all of the following except

Correct AnswerverifiedShow Answer

Shelf Registration has contributed to the concentrated nature of the investment banking industry.

Correct AnswerverifiedShow Answer

The Glass-Steagall Act of the 1930s required U.S. banks to separate their commercial banking operations and their investment banking operations into two different entities.

Correct AnswerverifiedShow Answer

______________ occurs when a company is broken up into smaller divisions and sold for a profit.

Correct AnswerverifiedShow Answer

Because there is more uncertainty involved in the initial market reaction to common stock, a larger underwriting spread often exists for stocks, compared to other types of offerings.

Correct AnswerverifiedShow Answer

When a firm sells a new issue through an investment banker the costs incurred

Correct AnswerverifiedShow Answer

The Gramm-Leach-Bliley Act

Correct AnswerverifiedShow Answer

Dilution of earnings occurs because

Correct AnswerverifiedShow Answer

An investment banker makes money from

Correct AnswerverifiedShow Answer

Shelf Registration has been most frequently used with

Correct AnswerverifiedShow Answer

Rule 415 allows corporations to quickly take advantage of market conditions.

Correct AnswerverifiedShow Answer

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