File: ch04, Chapter 4: Securities Markets and Market Indexes
Multiple Choice Questions
1. The sale of a new issue of common stock of which there are already shares
publicly held is known as:
a. an IPO.
b. a secondary market issue.
c. an EPO.
d. a seasoned new issue.
Ans: d
Difficulty: Easy
Ref: The Primary Markets
2. In a firm commitment underwriting arrangement, the risk of placing the
security is typically assumed by the:
a. issuer of the security
b. investment bankers
c. commercial bankers
d. institutional investors
Ans: b
Difficulty: Easy
Ref: The Primary Markets
3. The ___________ summarizes information about a new security issue.
a. syndicate offer
b. IPO
c. prospectus
d. shelf rule
Ans: c
Difficulty: Easy
Ref: The Primary Markets
4. Investment bankers are compensated by:
a. the underwriting spread
b. commissions paid by the buyers of the security
c. commission paid by the sellers of the security
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Securities Market
, d. guaranteed investment contracts
Ans: a
Difficulty: Moderate
Ref: The Primary Markets
5. A major appeal for U.S. firms selling bonds in private placements is potential:
a. lower interest expense
b. greater regulatory protection
c. savings from not registering with the SEC or incurring an underwriting spread
d. fewer restrictions on subsequent borrowing activities
Ans: c
Difficulty: Moderate
Ref: The Primary Markets
6. Automatic Shelf Registration refers to the practice of allowing:
a. well-seasoned issuers to file shelf registration statements with the SEC that become
effective immediately, or the filing of a “base prospectus,” enabling efficient stock
issue
b. well-seasoned issuers to file shelf registration statements with the SEC that become
effective immediately, or the filing of a “base prospectus,” enabling efficient debt
issue
c. well-seasoned issuers to file shelf registration statements with the SEC that become
effective immediately, or the filing of a “base prospectus,” enabling efficient stock or
debt issue
d. well-seasoned issuers to file shelf registration statements with the SEC that become
effective immediately upon filing of a “red herring prospectus,” enabling efficient
stock or bond issue
Ans: c
Difficulty: Difficult
Ref: The Primary Markets
7. Investment bankers operate in the:
a. primary market
b. secondary market
c. tertiary market
d. fourth market
Ans: a
Difficulty: Easy
Chapter Four 39
Securities Market
Multiple Choice Questions
1. The sale of a new issue of common stock of which there are already shares
publicly held is known as:
a. an IPO.
b. a secondary market issue.
c. an EPO.
d. a seasoned new issue.
Ans: d
Difficulty: Easy
Ref: The Primary Markets
2. In a firm commitment underwriting arrangement, the risk of placing the
security is typically assumed by the:
a. issuer of the security
b. investment bankers
c. commercial bankers
d. institutional investors
Ans: b
Difficulty: Easy
Ref: The Primary Markets
3. The ___________ summarizes information about a new security issue.
a. syndicate offer
b. IPO
c. prospectus
d. shelf rule
Ans: c
Difficulty: Easy
Ref: The Primary Markets
4. Investment bankers are compensated by:
a. the underwriting spread
b. commissions paid by the buyers of the security
c. commission paid by the sellers of the security
Chapter Four 38
Securities Market
, d. guaranteed investment contracts
Ans: a
Difficulty: Moderate
Ref: The Primary Markets
5. A major appeal for U.S. firms selling bonds in private placements is potential:
a. lower interest expense
b. greater regulatory protection
c. savings from not registering with the SEC or incurring an underwriting spread
d. fewer restrictions on subsequent borrowing activities
Ans: c
Difficulty: Moderate
Ref: The Primary Markets
6. Automatic Shelf Registration refers to the practice of allowing:
a. well-seasoned issuers to file shelf registration statements with the SEC that become
effective immediately, or the filing of a “base prospectus,” enabling efficient stock
issue
b. well-seasoned issuers to file shelf registration statements with the SEC that become
effective immediately, or the filing of a “base prospectus,” enabling efficient debt
issue
c. well-seasoned issuers to file shelf registration statements with the SEC that become
effective immediately, or the filing of a “base prospectus,” enabling efficient stock or
debt issue
d. well-seasoned issuers to file shelf registration statements with the SEC that become
effective immediately upon filing of a “red herring prospectus,” enabling efficient
stock or bond issue
Ans: c
Difficulty: Difficult
Ref: The Primary Markets
7. Investment bankers operate in the:
a. primary market
b. secondary market
c. tertiary market
d. fourth market
Ans: a
Difficulty: Easy
Chapter Four 39
Securities Market
