common currency with monetary policy controlled by European Central Bank.

The 1994 North American Free Trade Agreement was established between the U.S., Canada, and Mexico which helped

all of the answers are correct.

Private placement of corporate bonds

has increased in use as new bond issues increased.

Companies list their stock around the globe to

increase stockholder liquidity and provide stock sales in foreign countries

Which of the following activities is not a service provided by investment bankers?

Raising capital via mutual fund offerings

The investment banker’s function involves all of the following EXCEPT

Ensuring equity is sold so that long-range financial planning is accurate

If new shares of stock are offered, what's the correct equation to compute the earnings per share after stock issuances?

Earnings before issuances divided by (outstanding shares plus new shares)

Which of the following characteristics is NOT a disadvantage of being a publicly traded company?

Prestige is helpful in bank negotiations, executive recruitment & marketing

In a public distribution, the dealer group will generally pay a

higher price for the stock than the managing investment banker.

The efficient market hypothesis deals primarily with

the degree to which prices adjust to new information.

Publicly traded companies generally have

more pressure for short-term performance.

Guidelines for insider trading require that:

the investor hold securities for at least six months.

Which of the following statements about Hambrecht's Open IPO auctions is false?

Auctions are popular with institutional investors.

The market stabilization function usually

provides price support for the stock during the distribution period.

Security markets are efficient EXCEPT for when which of the following exists?

Security prices follow the leading indicators such as the DJIA very closely

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Foundations of Business Finance - Lesson 5 Quiz

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Answers

1
The euro is
the most important international currency.
established in all of the European countries.
all of these options are true.
common currency with monetary policy controlled by European Central Bank.
2
The 1994 North American Free Trade Agreement was established between the U.S., Canada, and Mexico which helped
reduce trade barriers.
allow trade to happen between these countries.
all of the answers are correct.
lower the amount of illegal trading.
3
Which of the following are advantages of being privately placed?
More investors available to purchase shares
Two of the options are correct
Basic registration with the SEC
Lower costs
4
Private placement of corporate bonds
have lower interest rates than mortgage-backed securities.
are more expensive to issue than publicly placed bonds.
exceed 70% of all long-term corporate debt outstanding.
has increased in use as new bond issues increased.
5
The emergence of trading via ECNs has
all of these options are true.
lowered the cost of trading.
made trading more difficult for insider traders.
provided a unique advantage not offered by the NYSE.
6
The Securities Act of 1933 is primarily concerned with
the national securities markets.
riginal issues of securities.
secondary trading of securities.
protecting customers of bankrupt securities firms.
7
Companies list their stock around the globe to
capitalize on the inefficiency inherent in foreign markets.
take advantage of currency differences.
increase stockholder liquidity and provide stock sales in foreign countries
decrease liquidity for their stockholders.
8
Which of the following activities is not a service provided by investment bankers?
Underwriting initial public offerings
Raising capital via mutual fund offerings
Advising in mergers
Advising on restructurings
9
Market stabilization
cannot always maintain high initial prices
usually lasts 2 to 3 days, but can last up to 30 days
is investment bankers keeping security price from falling below issue price
all of these options are true.
10
The most important capital markets in the world (in terms of dollar value) are located in
Tokyo.
London.
New York.
Toronto.
11
There is a continuous market where each successive trade is made at a price close to the previous trade.
strong
semi-strong
weak
weak and semi-strong
12
The investment banker’s function involves all of the following EXCEPT
Taking a portion of the risk in the distribution of an issue.
Making a market by buying and selling a security to ensure a liquid market.
Ensuring equity is sold so that long-range financial planning is accurate
Making a market by buying and selling a security to ensure a liquid market.
13
Which investment bank underwrote the most bonds in 2013 and 2014?
J.P. Morgan
Merrill Lynch
Deutsche Bank
Citigroup
14
Which of the following is not a money market instrument?
Treasury bills
Commercial paper
Treasury bonds
Negotiable certificates of deposit
15
If new shares of stock are offered, what's the correct equation to compute the earnings per share after stock issuances?
Earnings before issuances divided by (outstanding shares plus new shares)
Earnings before issuances minus outstanding shares
Outstanding shares minus earnings before issuances
Earnings before issuances divided by outstanding shares
16
Which of the following characteristics is NOT a disadvantage of being a publicly traded company?
Compliance costs because of various public disclosure requirements.
Prestige is helpful in bank negotiations, executive recruitment & marketing
Company must make public information available through SEC and State filing
Tremendous pressure for performance placed by analysts & large investors.
17
In a public distribution, the dealer group will generally pay a
lower price for the stock than the managing investment banker.
higher price for the stock than the managing investment banker.
lower price for stock than members of the investment banking syndicate
higher price for the stock than the public.
18
The efficient market hypothesis deals primarily with
the degrees to which price movements are the result of past trends.
random speculation in securities.
how an investor can significantly outperform the market in general.
the degree to which prices adjust to new information.
19
Publicly traded companies generally have
more pressure for short-term performance.
low distribution costs in selling securities.
less pressure for short-term performance.
very strong stock market performance.
20
Guidelines for insider trading require that:
all of the answers are correct.
the investor hold securities for at least six months.
the investor never profit from the sale of securities.
the investor includes everyone but employees of the company.
21
Which of the following statements about Hambrecht's Open IPO auctions is false?
Google and Morningstar have utilized the auction format in recent years.
Auctions are popular with institutional investors.
The auctions are built on the principles of Dutch tulip auctions.
Auctions give small investors a chance to participate in IPOs.
22
The market stabilization function usually
lasts six to nine months.
is illegal.
is performed by the issuing company.
provides price support for the stock during the distribution period.
23
Security markets are efficient EXCEPT for when which of the following exists?
Markets absorb large dollar amount of stock without destabilizing the price
Security prices follow the leading indicators such as the DJIA very closely
The market is where trade price is made close to the previous trade price
Prices adjust rapidly to new information.
24
______________ occurs when a company is broken up into smaller divisions and sold for a profit.
Chapter 11
Internal reorganization
Restructuring
Liquidation
25
Which of the following is not an advantage of private placement?
No expensive registration process
More flexibility in negotiation
Typically lower interest rates
No extensive public relations requirements

Foundations of Business Finance - Lesson 5 Quiz Flashcards | StudBud