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Quiz 2 Chapter 3
and 4
Chapter 3:
___________________________________________________________________________
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1.
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Underwriting is one
of the services provided by _____.
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C.
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publicly traded
companies
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2.
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Under firm-commitment
underwriting, the ______ assumes the full risk that the shares cannot be sold
to the public at the stipulated offering price.
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3.
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Explicit costs of an
IPO tend to be around ______ of the funds raised.
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4.
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Barnegat Light sold
200,000 shares in an initial public offering. The underwriter's explicit fees
were $90,000. The offering price for the shares was $35, but immediately upon
issue, the share price jumped to $43. What is the best estimate of the total
cost to Barnegat Light of the equity issue?
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5.
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A red herring becomes
a prospectus when ____.
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A.
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the preliminary
registration statement is approved by the SEC
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C.
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the offering is
seasoned
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D.
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the lockup period
expires
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6.
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Private placements
can be advantageous, compared to public issue, because:
I. Private placements are cheaper to market
than public issues.
II. Private placements may still be sold to
the general public under SEC Rule 144A.
III. Privately placed securities trade on
secondary markets.
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7.
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A level _____
subscriber to the NASDAQ system may enter bid and ask prices.
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8.
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Which one of the
following statements about IPOs is not
true?
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A.
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IPOs generally
underperform in the short run.
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B.
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IPOs often provide
very good initial returns to investors.
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C.
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IPOs generally
provide superior long-term performance as compared to other stocks.
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D.
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Shares in IPOs are
often primarily allocated to institutional investors.
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9.
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The margin requirement
on a stock purchase is 25%. You fully use the margin allowed to purchase 100
shares of MSFT at $25. If the price drops to $22, what is your percentage
loss?
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10.
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The NYSE acquired the
ECN _______, and NASDAQ recently acquired the ECN ________.
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11.
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Rank the following
types of markets from least integrated and organized to most integrated and organized:
I. Brokered markets
II. Continuous auction markets
III. Dealer markets
IV. Direct search markets
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12.
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As a result of flash
crashes, the SEC is trying circuit breakers that will halt trading for 5
minutes if large stocks' prices change by more than _____ in a 5-minute
period.
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13.
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Which one of the
following is not an example of a
brokered market?
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A.
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Residential real
estate market
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B.
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Market for large
block security transactions
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C.
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Primary market for
securities
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14.
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More than ______ of
all trading is believed to be initiated by computer algorithms.
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15.
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Purchases of new
issues of stock take place _________.
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A.
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at the desk of the
Fed
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C.
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in the secondary
market
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16.
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Initial margin
requirements on stocks are set by _________.
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A.
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the Federal Deposit
Insurance Corporation
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C.
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the New York Stock
Exchange
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D.
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the Securities and
Exchange Commission
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17.
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Which one of the
following types of markets requires the greatest level of trading activity to
be cost-effective?
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C.
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Continuous auction
market
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18.
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Which one of the
following is a false statement
regarding NYSE specialists?
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A.
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On a stock exchange
most buy or sell orders are executed via an electronic system rather than
through specialists.
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B.
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Specialists cannot
trade for their own accounts.
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C.
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Specialists
maintain limit order books, which contain the outstanding unexecuted limit
orders.
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D.
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Specialists stand
ready to trade at narrower bid-ask spreads in cases where the spread has
become too wide.
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19.
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Restrictions on
trading involving insider information apply to:
I. Corporate officers and directors
II. Major stockholders
III. Relatives of corporate directors and
officers
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20.
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An order to buy or
sell a security at the current price is a ______________.
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21.
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The term insidequotes refers to _____.
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A.
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the difference
between the lowest bid price and the highest ask price in the limit order
book.
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B.
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the difference
between the highest bid price and the lowest ask price in the limit order
book.
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C.
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the difference
between the lowest bid price and the lowest ask price in the limit order
book.
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D.
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the difference
between the highest bid price and the highest ask price in the limit order
book.
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22.
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The term latency refers to _____.
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A.
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the lag between
when an order is placed on the NYSE and when it is executed.
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B.
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the amount of time
it takes to accept, process, and deliver a trading order.
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C.
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the time it takes
to implement new rules and procedures for stock exchanges and computer
trading systems.
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D.
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the lag between
when an order is executed and when the investor takes possession of the
securities.
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23.
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If an investor places
a _________ order, the stock will be sold if its price falls to the stipulated
level. If an investor places a __________ order, the stock will be bought if
its price rises above the stipulated level.
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24.
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On a given day a stock
dealer maintains a bid price of $1,000.50 for a bond and an ask price of
$1003.25. The dealer made 10 trades that totaled 500 bonds traded that day.
What was the dealer's gross trading profit for this security?
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