Question 1

SEC registration is not required when a company makes

Accepted Answer

A)  a private placement of securities.
B)  a public offering of securities issue having a value less than $5 million and a maturity less than nine months.
C)  an issue of debt with a maturity less than nine months.
D)  both a private placement of securities and a public offering of securities issue having a value less than $5 million and a maturity less than nine months.

Question 2

An equity issue sold to the firm's existing stockholders is called a

Accepted Answer

A)  rights offer.
B)  general cash offer.
C)  private placement.
D)  discriminatory-price auction.

Question 3

Arrange the following in chronological order for a typical start-up firm:
I.VC financing;
II.mezzanine financing;
III.stage 1, 2, 3, 4, etc.,financing;
IV.IPO

Accepted Answer

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

Question 4

Wealthy individuals who provide equity investment for new firms are called
I.white knights;
II.red herrings;
III.angel investors

Accepted Answer

A)  I only
B)  I and II only
C)  III only
D)  II only

Question 5

Briefly discuss SEC rule 144A.

Accepted Answer

SEC rule 144A allows large financial ins...

Question 6

Briefly explain the basic procedure for a new issue.

Accepted Answer

The rules governing the sale of securiti...

Question 7

What are some of the costs to a firm associated with issuing new securities?

Accepted Answer

The most important cost is the underwrit...

Question 8

The following are advantages of shelf registration
I.securities can be issued in dribs and drabs without incurring excessive transaction costs;
II.securities can be issued on short notice;
III.security issues can be timed to take advantage of market conditions

Accepted Answer

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

Question 9

State laws that regulate sales of securities within the state are called

Accepted Answer

A)  red herrings.
B)  registration laws.
C)  Rule 415 regulations.
D)  blue-sky laws.

Question 10

The winner's curse is reduced in a(n)

Accepted Answer

A)  discriminatory auction.
B)  uniform-price auction.
C)  English auction.
D)  winner-take-all auction.

Question 11

The stock exchange that specializes in trading the shares of young and rapidly growing companies is the

Accepted Answer

A)  NASDAQ.
B)  NYSE.
C)  London Stock Exchange.
D)  Tokyo Stock Exchange.

Question 12

According to evidence from surveys of CFOs, the top-most motive for firms to go public is to

Accepted Answer

A)  broaden the base of ownership.
B)  enhance the reputation of the firm.
C)  establish a market price/value for our firm.
D)  create public shares for use in future acquisitions.

Question 13

The market for venture capital refers to the
I.private financial marketplace for providing equity investment for small, start-up firms;
II.bond market;
III.market for providing equity to well-established firms

Accepted Answer

A)  I only
B)  II only
C)  II and III only
D)  III only

Question 14

Generally, venture capital funds are organized as
I.proprietorships;
II.corporations;
III.limited private partnerships

Accepted Answer

A)  I only
B)  II only
C)  III only
D)  I and II only

Question 15

Most financial economists attribute the drop in the price of equity subsequent to the announcement of a new issue to

Accepted Answer

A)  an increase in the supply of shares.
B)  information effect.
C)  an increase in the supply of shares and information effect.
D)  neither an increase in the supply of shares nor information effect.

Question 16

Generally, IPOs are overpriced and are subject to the winner's curse.

Accepted Answer

A) True 
 B)False

Question 17

Shelf registration allows the firm to file a registration statement with the SEC to cover a series of subsequent issues.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following statements best describes shelf registration?

Accepted Answer

A)  The issuance of securities to qualified institutional investors
B)  The enforcement of blue-sky laws
C)  The provision that allows large companies to file a single registration statement covering financing plans up to three years into the future
D)  Registration of the sale of securities in the primary market

Question 19

Briefly explain the term private placement.

Accepted Answer

When an entire issue of a security is so...

Question 20

A new public equity issue from a company with public equity previously outstanding is called a(n)

Accepted Answer

A)  initial public offering (IPO) .
B)  American depository receipt (ADR) .
C)  seasoned equity offering (SEO) .
D)  private placement.

Exam 15: How Corporations Issue Securities

Shelf registration allows the firm to file a registration statement with the SEC to cover a series of subsequent issues.

Correct AnswerverifiedShow Answer

According to evidence from surveys of CFOs, the top-most motive for firms to go public is to

Correct AnswerverifiedShow Answer

Generally, IPOs are overpriced and are subject to the winner's curse.

Correct AnswerverifiedShow Answer

State laws that regulate sales of securities within the state are called

Correct AnswerverifiedShow Answer

The market for venture capital refers to the I.private financial marketplace for providing equity investment for small, start-up firms; II.bond market; III.market for providing equity to well-established firms

Correct AnswerverifiedShow Answer

The following are advantages of shelf registration I.securities can be issued in dribs and drabs without incurring excessive transaction costs; II.securities can be issued on short notice; III.security issues can be timed to take advantage of market conditions

Correct AnswerverifiedShow Answer

Most financial economists attribute the drop in the price of equity subsequent to the announcement of a new issue to

Correct AnswerverifiedShow Answer

Arrange the following in chronological order for a typical start-up firm: I.VC financing; II.mezzanine financing; III.stage 1, 2, 3, 4, etc.,financing; IV.IPO

Correct AnswerverifiedShow Answer

A new public equity issue from a company with public equity previously outstanding is called a(n)

Correct AnswerverifiedShow Answer

The winner's curse is reduced in a(n)

Correct AnswerverifiedShow Answer

What are some of the costs to a firm associated with issuing new securities?

Correct AnswerverifiedThe most important cost is the underwrit...View AnswerShow Answer

Briefly explain the basic procedure for a new issue.

Correct AnswerverifiedThe rules governing the sale of securiti...View AnswerShow Answer

SEC registration is not required when a company makes

Correct AnswerverifiedShow Answer

An equity issue sold to the firm's existing stockholders is called a

Correct AnswerverifiedShow Answer

Wealthy individuals who provide equity investment for new firms are called I.white knights; II.red herrings; III.angel investors

Correct AnswerverifiedShow Answer

Generally, venture capital funds are organized as I.proprietorships; II.corporations; III.limited private partnerships

Correct AnswerverifiedShow Answer

The stock exchange that specializes in trading the shares of young and rapidly growing companies is the

Correct AnswerverifiedShow Answer

Which of the following statements best describes shelf registration?

Correct AnswerverifiedShow Answer

Briefly explain the term private placement.

Correct AnswerverifiedWhen an entire issue of a security is so...View AnswerShow Answer

Briefly discuss SEC rule 144A.

Correct AnswerverifiedSEC rule 144A allows large financial ins...View AnswerShow Answer

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The most important cost is the underwrit...
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The rules governing the sale of securiti...
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When an entire issue of a security is so...
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SEC rule 144A allows large financial ins...
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