Question 1

Which of the following are advantages of being privately placed?

Accepted Answer

A)   Lower costs
B)   Basic registration with the SEC
C)   More investors to purchase shares
D)   Two of the aboveE) C) and D)
F) All of the above

Question 2

Investment banking has changed from a very competitive price-sensitive environment to one where relationships determine who gets the business.

Accepted Answer

A) True 
 B)False

Question 3

Between 1990 and 2009, the average first-day return for IPOs in the U.S. was over 30 percent.

Accepted Answer

A) True 
 B)False

Question 4

One of the reasons why the debt market is much larger than the equity market is because debt issuances mature periodically unlike equity issuances.

Accepted Answer

A) True 
 B)False

Question 5

In investment banking, the equity market is larger than the debt market.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is considered an advantage (for the corporation)  of going public?

Accepted Answer

A)   The president becomes a public relations man.
B)   Extensive and time-consuming reporting requirements.
C)   Increased liquidity for the corporation's shareholders.
D)   The cost of flotation.E) None of the above
F) A) and C)

Question 7

Newdex has net income of $3,000,000 and 1,000,000 shares outstanding. It needs to raise $5,000,000 in funds for a new asset. Its investment banker plans to sell an issue of common stock to the public for $40, less a spread of 10%. How much must Newdex's after-tax income increase to prevent dilution of EPS?

Accepted Answer

A)   $40,000
B)   $416,667
C)   $350,000
D)   None of theseE) All of the above
F) A) and D)

Question 8

Only the strong investment bankers are in a position to benefit from the new shelf registration process.

Accepted Answer

A) True 
 B)False

Question 9

In issuing stock, the term "spread" refers to

Accepted Answer

A)   the profit the managing investment banker gets for an issue of stock.
B)   the disparity between the initial asking price and the average price for the stock issued some months later.
C)   the difference between what the corporation gets for new issues of stock and what the public pays for the stock.
D)   the total cost to the corporation for issuing new stock.E) A) and B)
F) A) and C)

Question 10

The primary rationale for repealing the Glass-Steagall Act was that the U.S. Congress recognized the necessity for increased growth in the investment banking industry within the U.S.

Accepted Answer

A) True 
 B)False

Question 11

The investment banker may advise clients on a continuing basis about

Accepted Answer

A)   the types of securities being sold.
B)   the number of shares for distribution.
C)   the timing of the sale.
D)   all of these.E) A) and C)
F) C) and D)

Question 12

The Gramm-Leach-Bliley Act repealed the Bretton Woods Agreement.

Accepted Answer

A) True 
 B)False

Question 13

When a firm issues new stock, it always results in dilution of earnings in the long run.

Accepted Answer

A) True 
 B)False

Question 14

Investment banking is highly concentrated with the top 10 underwriters controlling 90% of the global market for stocks and bonds.

Accepted Answer

A) True 
 B)False

Question 15

Generally, the larger the dollar value of an issue, the smaller is the spread as a percentage of the offering price.

Accepted Answer

A) True 
 B)False

Question 16

When an investment banker acts as an "underwriter" he

Accepted Answer

A)   gives a "firm commitment" to purchase the securities from the corporation at a set price.
B)   The company suffers a decline in earnings after taxes.
C)   may sell as many securities as possible and return the rest unsold.
D)   may give advice to management.E) A) and B)
F) A) and C)

Question 17

Which of the following are advantages to private bond placement over public offerings?

Accepted Answer

A)   Higher interest costs
B)   Greater flexibility in negotiating terms
C)   Lower SEC registration fees
D)   Lower interest costsE) None of the above
F) All of the above

Question 18

Stock prices for Amazon and eBay managed to avoid the turbulent price movements that followed the collapse of the Internet bubble.

Accepted Answer

A) True 
 B)False

Question 19

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

Accepted Answer

A)   higher price for the stock than the public.
B)   lower price for the stock than the managing investment banker.
C)   higher price for the stock than the managing investment banker.
D)   lower price for the stock than members of the investment banking syndicate group.E) All of the above
F) None of the above

Question 20

The out-of-pocket cost to issue new common stock is always paid by the investment banker.

Accepted Answer

A) True 
 B)False

Exam 15: Investment Banking: Public and Private Placement

Generally, the larger the dollar value of an issue, the smaller is the spread as a percentage of the offering price.

Correct Answer
verified

Between 1990 and 2009, the average first-day return for IPOs in the U.S. was over 30 percent.

Correct Answer
verified

Which of the following are advantages to private bond placement over public offerings?

Correct Answer
verified

Correct Answer
verified

When a firm issues new stock, it always results in dilution of earnings in the long run.

Correct Answer
verified

One of the reasons why the debt market is much larger than the equity market is because debt issuances mature periodically unlike equity issuances.

Correct Answer
verified

The investment banker may advise clients on a continuing basis about

Correct Answer
verified

Investment banking has changed from a very competitive price-sensitive environment to one where relationships determine who gets the business.

Correct Answer
verified

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

Correct Answer
verified

Only the strong investment bankers are in a position to benefit from the new shelf registration process.

Correct Answer
verified

Stock prices for Amazon and eBay managed to avoid the turbulent price movements that followed the collapse of the Internet bubble.

Correct Answer
verified

Investment banking is highly concentrated with the top 10 underwriters controlling 90% of the global market for stocks and bonds.

Correct Answer
verified

In issuing stock, the term "spread" refers to

Correct Answer
verified

In investment banking, the equity market is larger than the debt market.

Correct Answer
verified

The out-of-pocket cost to issue new common stock is always paid by the investment banker.

Correct Answer
verified

When an investment banker acts as an "underwriter" he

Correct Answer
verified

Which of the following are advantages of being privately placed?

Correct Answer
verified

The primary rationale for repealing the Glass-Steagall Act was that the U.S. Congress recognized the necessity for increased growth in the investment banking industry within the U.S.

Correct Answer
verified

Which of the following is considered an advantage (for the corporation) of going public?

Correct Answer
verified

The Gramm-Leach-Bliley Act repealed the Bretton Woods Agreement.

Correct Answer
verified

Exam 15: Investment Banking: Public and Private Placement

Generally, the larger the dollar value of an issue, the smaller is the spread as a percentage of the offering price.

Correct AnswerverifiedShow Answer

Between 1990 and 2009, the average first-day return for IPOs in the U.S. was over 30 percent.

Correct AnswerverifiedShow Answer

Which of the following are advantages to private bond placement over public offerings?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When a firm issues new stock, it always results in dilution of earnings in the long run.

Correct AnswerverifiedShow Answer

One of the reasons why the debt market is much larger than the equity market is because debt issuances mature periodically unlike equity issuances.

Correct AnswerverifiedShow Answer

The investment banker may advise clients on a continuing basis about

Correct AnswerverifiedShow Answer

Investment banking has changed from a very competitive price-sensitive environment to one where relationships determine who gets the business.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Only the strong investment bankers are in a position to benefit from the new shelf registration process.

Correct AnswerverifiedShow Answer

Stock prices for Amazon and eBay managed to avoid the turbulent price movements that followed the collapse of the Internet bubble.

Correct AnswerverifiedShow Answer

Investment banking is highly concentrated with the top 10 underwriters controlling 90% of the global market for stocks and bonds.

Correct AnswerverifiedShow Answer

In issuing stock, the term "spread" refers to

Correct AnswerverifiedShow Answer

In investment banking, the equity market is larger than the debt market.

Correct AnswerverifiedShow Answer

The out-of-pocket cost to issue new common stock is always paid by the investment banker.

Correct AnswerverifiedShow Answer

When an investment banker acts as an "underwriter" he

Correct AnswerverifiedShow Answer

Which of the following are advantages of being privately placed?

Correct AnswerverifiedShow Answer

The primary rationale for repealing the Glass-Steagall Act was that the U.S. Congress recognized the necessity for increased growth in the investment banking industry within the U.S.

Correct AnswerverifiedShow Answer

Which of the following is considered an advantage (for the corporation) of going public?

Correct AnswerverifiedShow Answer

The Gramm-Leach-Bliley Act repealed the Bretton Woods Agreement.

Correct AnswerverifiedShow Answer

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