1.

QUESTION 1
The first public sale of company stock to outside investors is called a/an
1.
proxy fight.
2.

shareholders meeting.

3.

seasoned equity offering.

4.

initial public offering.

10 points
QUESTION 2
1.
Which statement about common shareholders is incorrect ?
1 Shareholders only have a residual claim.
.
2 Shareholders have a voting right.
.
3 Shareholders have precedence over all other claimholders in the case of bankruptcy.
.
4 Shareholders are the ultimate owners of a corporation.
.
10 points
1.

QUESTION 3
What is the market capitalization of a company?
1. The market value of all outstanding debt.
2. The book value of the companys debt.
3. The book value of the companys total equity.
4. The market value of all outstanding shares.
10 points

1.

QUESTION 4
Debt holders:
1 have little say in how the firm conducts its business.
.
2 are the residual owners of a corporation.
.
3 cannot force the firm into bankruptcy court if it fails to make the scheduled interest and principal
. payments on time.
4 are willing to accept more risk than the stockholders in the corporation.
.
10 points

1.

QUESTION 5
When valuing a preferred stock, the type of security that we treat the preferred stock like, for
valuation purposes, is
1.
a perpetuity.
2.

a bond.

3.

a common stock.

4.

none of the above.

10 points

QUESTION 6
1.
Which is TRUE concerning preferred stock?
1. Preferred stock is considered debt on the company balance sheet.
2. Preferred stock holders have voting rights for the company board of directors.
3. Preferred stock is viewed as less risky than a firms common stock.
4. Preferred stock payments are variable like common stock.
10 points
1.

QUESTION 7
Which of the following activities is not one of the three principal lines of business for U.S.-based
investment banks?
1.
Corporate finance
2.

Working capital management

3.

Asset management

4.

Trading

10 points
QUESTION 8
1.
A "dealer market" is:
1 when buyers and sellers contact each other directly to arrange an exchange of securities.
.
2 a market in which the buyer and seller are not brought together directly but, rather, have their
. orders executed by securities dealers.
3 a market in which buyers and sellers are brought together on a securities exchange to trade
. securities.
4 none of the above
.
10 points
QUESTION 9
1.
A "broker market" is:
1 when buyers and sellers contact each other directly to arrange an exchange of securities.
.
2 a market in which the buyer and seller are not brought together directly but, rather, have their
. orders executed by securities dealers.
3 a market in which buyers and sellers are brought together on a securities exchange to trade
. securities.
4 none of the above
.
10 points
1.

QUESTION 10
Which of the following would NOT fall under the classification of a broker market?

1. New York Stock Exchange

2. American Stock Exchange
3. NASDAQ
4. All of the above are classified as broker markets