FNAN405 (Das) Exam 2 (Ch 5-8) questions &
answers graded A+ passed
The process of purchasing newly issued shares from the issuer and reselling those shares to the
general public is called:
(Ch5 Connect) - correct answer ✔✔Underwriting
The DJIA is an index of the stock prices of _____ firms.
(Ch5 Connect) - correct answer ✔✔30
After the trigger point is reached, a stop-loss order will be executed at the:
(Ch5 Connect) - correct answer ✔✔market price
The document that must be prepared in order to receive approval for a stock offering is called a:
(Ch5 Connect) - correct answer ✔✔prospectus
When stocks are held in an index in proportion to their total company market value, the index
is:
(Ch5 Connect) - correct answer ✔✔value-weighted
High Color Detergent is issuing new shares of stock which will trade on NASDAQ. If Sue
purchases 300 of these shares, the trade will occur in which one of the following markets?
(Ch5 Connect) - correct answer ✔✔Primary
Hi-Tek Shoes is a private firm that has decided to issue shares of stock to the general public. This
stock issue will be referred to as a(n):
,(Ch5 Connect) - correct answer ✔✔IPO - Initial Public Offering
Faith placed an order to sell 7,500 shares of stock she currently owned. As soon as the order
reached the trading floor, the shares were immediately sold. Which type of order did Faith
place?
(Ch5 Connect) - correct answer ✔✔market
Which one of the following transactions occurs in the primary market?
(Ch5 Connect) - correct answer ✔✔sale of newly issued shares by the issuer to a shareholder
You have the following information:
Stock, Shares OS, Beg Price, End Price
L, 3000, $15, $18
K, 57000, $31, $35
You want the beginning price-weighted index of these two stocks to be 500. Given this, what is
the ending index value?
(Ch5 Connect) - correct answer ✔✔Formula
End PWI = [Sum(EOY Price)]/[Sum(BOY Price)]xBeg. PWI
[(18+35)/(15+31)] x 500 = 576.087
End Index = 576.09
Wilson just placed an order with his broker to purchase 500 of the outstanding shares of GE.
This purchase will occur in which one of the following markets?
(Ch5 HW) - correct answer ✔✔secondary
, A firm that specializes in arranging financing for companies is called a(n):
(Ch5 HW) - correct answer ✔✔investment banking firm
Marco Painting Supplies is a publicly-traded firm with 250,000 shares of stock outstanding. If the
firm issues an additional 10,000 shares, those shares will be referred to as a(n):
(Ch5 HW) - correct answer ✔✔seasoned equity offering
When an underwriting syndicate purchases an entire issue of new securities and accepts the
risk of unsold shares, the underwriting is known as a _____ underwriting.
(Ch5 HW) - correct answer ✔✔firm commitment
Which one of the following prices will an individual investor receive if he or she sells shares of
Microsoft?
(Ch5 HW) - correct answer ✔✔bid
The party who serves as a dealer for a few securities on an exchange floor and is obligated to
maintain an orderly market for those securities is called a:
(Ch5 HW) - correct answer ✔✔designated market maker
You want to sell shares of stock at the current price. Which type of order should you place?
(Ch5 HW) - correct answer ✔✔market
In order to currently trade on the floor of the NYSE, members must:
(Ch5 HW) - correct answer ✔✔purchase a trading license
An index consists of the following securities and has an index divisor of 3.0. What is the price-
weighted index return?
Stock, Shares Outstanding, Beg Price, End Price
answers graded A+ passed
The process of purchasing newly issued shares from the issuer and reselling those shares to the
general public is called:
(Ch5 Connect) - correct answer ✔✔Underwriting
The DJIA is an index of the stock prices of _____ firms.
(Ch5 Connect) - correct answer ✔✔30
After the trigger point is reached, a stop-loss order will be executed at the:
(Ch5 Connect) - correct answer ✔✔market price
The document that must be prepared in order to receive approval for a stock offering is called a:
(Ch5 Connect) - correct answer ✔✔prospectus
When stocks are held in an index in proportion to their total company market value, the index
is:
(Ch5 Connect) - correct answer ✔✔value-weighted
High Color Detergent is issuing new shares of stock which will trade on NASDAQ. If Sue
purchases 300 of these shares, the trade will occur in which one of the following markets?
(Ch5 Connect) - correct answer ✔✔Primary
Hi-Tek Shoes is a private firm that has decided to issue shares of stock to the general public. This
stock issue will be referred to as a(n):
,(Ch5 Connect) - correct answer ✔✔IPO - Initial Public Offering
Faith placed an order to sell 7,500 shares of stock she currently owned. As soon as the order
reached the trading floor, the shares were immediately sold. Which type of order did Faith
place?
(Ch5 Connect) - correct answer ✔✔market
Which one of the following transactions occurs in the primary market?
(Ch5 Connect) - correct answer ✔✔sale of newly issued shares by the issuer to a shareholder
You have the following information:
Stock, Shares OS, Beg Price, End Price
L, 3000, $15, $18
K, 57000, $31, $35
You want the beginning price-weighted index of these two stocks to be 500. Given this, what is
the ending index value?
(Ch5 Connect) - correct answer ✔✔Formula
End PWI = [Sum(EOY Price)]/[Sum(BOY Price)]xBeg. PWI
[(18+35)/(15+31)] x 500 = 576.087
End Index = 576.09
Wilson just placed an order with his broker to purchase 500 of the outstanding shares of GE.
This purchase will occur in which one of the following markets?
(Ch5 HW) - correct answer ✔✔secondary
, A firm that specializes in arranging financing for companies is called a(n):
(Ch5 HW) - correct answer ✔✔investment banking firm
Marco Painting Supplies is a publicly-traded firm with 250,000 shares of stock outstanding. If the
firm issues an additional 10,000 shares, those shares will be referred to as a(n):
(Ch5 HW) - correct answer ✔✔seasoned equity offering
When an underwriting syndicate purchases an entire issue of new securities and accepts the
risk of unsold shares, the underwriting is known as a _____ underwriting.
(Ch5 HW) - correct answer ✔✔firm commitment
Which one of the following prices will an individual investor receive if he or she sells shares of
Microsoft?
(Ch5 HW) - correct answer ✔✔bid
The party who serves as a dealer for a few securities on an exchange floor and is obligated to
maintain an orderly market for those securities is called a:
(Ch5 HW) - correct answer ✔✔designated market maker
You want to sell shares of stock at the current price. Which type of order should you place?
(Ch5 HW) - correct answer ✔✔market
In order to currently trade on the floor of the NYSE, members must:
(Ch5 HW) - correct answer ✔✔purchase a trading license
An index consists of the following securities and has an index divisor of 3.0. What is the price-
weighted index return?
Stock, Shares Outstanding, Beg Price, End Price
