FNAN405 (Das) Exam 2 (Ch 5-8) Questions with Correct Answers Graded A+
The process of purchasing newly issued shares from the issuer and reselling those shares to the general
public is called:
(Ch5 Connect) - Answers Underwriting
The DJIA is an index of the stock prices of _____ firms.
(Ch5 Connect) - Answers 30
After the trigger point is reached, a stop-loss order will be executed at the:
(Ch5 Connect) - Answers market price
The document that must be prepared in order to receive approval for a stock offering is called a:
(Ch5 Connect) - Answers prospectus
When stocks are held in an index in proportion to their total company market value, the index is:
(Ch5 Connect) - Answers 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) - Answers 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) - Answers 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) - Answers market
Which one of the following transactions occurs in the primary market?
(Ch5 Connect) - Answers 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) - Answers 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) - Answers secondary
A firm that specializes in arranging financing for companies is called a(n):
(Ch5 HW) - Answers 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) - Answers 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) - Answers firm commitment
Which one of the following prices will an individual investor receive if he or she sells shares of
Microsoft?
(Ch5 HW) - Answers 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) - Answers designated market maker
You want to sell shares of stock at the current price. Which type of order should you place?
(Ch5 HW) - Answers market
In order to currently trade on the floor of the NYSE, members must:
The process of purchasing newly issued shares from the issuer and reselling those shares to the general
public is called:
(Ch5 Connect) - Answers Underwriting
The DJIA is an index of the stock prices of _____ firms.
(Ch5 Connect) - Answers 30
After the trigger point is reached, a stop-loss order will be executed at the:
(Ch5 Connect) - Answers market price
The document that must be prepared in order to receive approval for a stock offering is called a:
(Ch5 Connect) - Answers prospectus
When stocks are held in an index in proportion to their total company market value, the index is:
(Ch5 Connect) - Answers 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) - Answers 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) - Answers 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) - Answers market
Which one of the following transactions occurs in the primary market?
(Ch5 Connect) - Answers 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) - Answers 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) - Answers secondary
A firm that specializes in arranging financing for companies is called a(n):
(Ch5 HW) - Answers 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) - Answers 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) - Answers firm commitment
Which one of the following prices will an individual investor receive if he or she sells shares of
Microsoft?
(Ch5 HW) - Answers 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) - Answers designated market maker
You want to sell shares of stock at the current price. Which type of order should you place?
(Ch5 HW) - Answers market
In order to currently trade on the floor of the NYSE, members must:
