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Exam 5: The Stock Market

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Question 31

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An index consists of the following securities and has an index divisor of 2.0. What is the price-weighted index return? $\begin{array}{cccc}\text { Index Stock } & \text { Shares Outstanding } & \text { Beglnning Share } & \text { Ending Share } \\& & \text { Price } & \text { Price } \\\text { S } & 4,800 & \$ 55 & \$ 51 \\\text { T } & 3,500 & \$ 32 & \$ 36\end{array}$

A) -1.69%
B) -.78%
C) 0
D) .92%
E) 1.43%

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Question 32

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Which one of the following can be assumed when the SEC approves an IPO registration?

A) The securities offering will provide value to the shareholders.
B) The issuer is financially sound.
C) The issuer will remain solvent.
D) All rules have been followed to allow for full disclosure of information.
E) The stock price is set at a level which will allow shareholders to earn a positive rate of return.

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Question 33

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Mason Materials is offering 800 shares in a Dutch auction IPO. The following bids have been received: $\begin{array} { c c c } \text { Bidder } & \text { Ouantity }&\text{Price} \\\text { A } & 200 & \$ 28 \\\text { B } & 300 & 27 \\\text { C } & 100 & 27 \\\text { D } & 500 & 26 \\\text { E } & 500 & 25\end{array}$ How many shares will be allocated to Bidder A?

Incorp has just sold 20 million shares through an IPO offering. The shares were offered at $20.00 a share and all of the shares were sold. The firm received a total of $422,000,000 for this issue. What was the spread?

Yesterday, the DJIA closed at 12,309.16. The divisor is .123017848. Today, every one of the stocks in the index increased in value by $.40 a share. What is the value of today's closing DJIA?

Trey currently owns 545,000 shares of ABC stock. He will sell those shares for $17.10 a share. He is also willing to purchase additional shares for $17.07 a share. Trey is a securities:

A price-weighted index consists of Stocks A, B, and C which are priced at $50, $35, and $15 a share, respectively. The current index divisor is 2.75. What will the new index advisor be if Stock A undergoes a 5-for-1 stock split?

Which one of the following has the greatest duty to provide liquidity to the financial market?

The difference between the price an underwriter pays an issuer and the underwriter's offering price is called the:

In a recent IPO, the Sausage Co. offered 1.4 million shares of stock at an offer price of $16 a share. The underwriting was conducted on a best efforts basis with a spread of 7.0%. The Sausage Co. received a total of $20,079,868 in sale proceeds. How many shares were sold?

Which one of the following best describes a broker?

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?

When stocks are held in an index in proportion to their total company market value, the index is:

When a group of underwriters jointly works together to sell a new issue of securities, the underwriters form a(n) :

Southaven, Inc., is offering 1,000 shares in a Dutch auction IPO. The following bids have been received: $\begin{array} { c c c } \text { Bidder } & \text { Ountity } & \text {Price } \\\text { A } & 300 & \$ 25 \\\text { B } & 200 & 25 \\\text { C } & 500 & 22 \\\text { D } & 400 & 21 \\\text { E } & 200 & 20\end{array}$ How much will the firm receive from this offering if the underwriter's fee is 7.5%?

Under the provisions of a general cash offer, shares of stock are offered to:

Which of the following is correct regarding the compensation paid to private equity fund managers?

A price-weighted index consists of Stocks A, B, and C which are priced at $30, $12, and $18 a share, respectively. The current index divisor is 2.40. If Stock C undergoes a 1-for-3 reverse stock split, the new index divisor will be:

Which one of the following is the primary flaw of a price-weighted index?

Reliant Underwriters has agreed to a firm commitment underwriting in which they will pay $36.75 million in exchange for 3 million shares of stock for an IPO offering. The offering price is expected to be $13.50 a share. How much will the underwriters earn if all of the shares can be sold?