金融市场与金融机构基础

1、Foundations of Financial Markets and Institutions, 4e (Fabozzi/Modigliani/Jones)Chapter 13 Primary Markets and the Underwriting of SecuritiesMultiple Choice Questions1 The Traditional Process for Issuing New Securities1) The _ involves the distribution to investors of newly issued securities by cent

2、ral governments, its agencies, municipal governments, and corporationsA) OTC marketB) secondary marketC) primary marketD) stock marketAnswer: CDiff: 1Topic: 13.1 The Traditional Process for Issuing New SecuritiesObjective: 13.1 the role investment bankers play in the distribution of newly issued sec

3、urities2) The participants in the marketplace that work with issuers to distribute newly issued securities are called investment bankers. Investment banking is performed by two groups: _.A) commercial banks and securities houses.B) hometown banks and securities houses.C) commercial banks and bank ho

4、uses.D) savings & loans and bank houses.Answer: ADiff: 2Topic: 13.1 The Traditional Process for Issuing New SecuritiesObjective: 13.1 the role investment bankers play in the distribution of newly issued securities3) The traditional process in the United States for issuing new securities involves inv

5、estment bankers performing up to three functions. Which of the below is NOT one of these functions?A) One function is advising the issuer on the terms and the timing of the offering.B) One function is selling the securities to the issuer.C) One function is distributing the issue to the public.D) One

6、 function is buying the securities from the issuer.Answer: BComment: The traditional process in the United States for issuing new securities involves investment bankers performing one or more of the following three functions:(1) advising the issuer on the terms and the timing of the offering,(2) buy

7、ing the securities from the issuer, and(3) distributing the issue to the public.Diff: 1Topic: 13.1 The Traditional Process for Issuing New SecuritiesObjective: 13.1 the role investment bankers play in the distribution of newly issued securities4) An investment banker may merely act as an advisor and

8、/or distributor of the new security. The function of buying the securities from the issuer is called _.A) advising.B) distributing.C) purchasing.D) underwriting.Answer: DDiff: 2Topic: 13.1 The Traditional Process for Issuing New SecuritiesObjective: 13.1 the role investment bankers play in the distr

9、ibution of newly issued securities5) An _ is a common stock offering issued by companies that have NOT previously issued common stock to the public.A) initial private issuance (IPI)B) seasoned equity offering (SEO)C) initial public offering (IPO)D) seasoned offering (SO)Answer: CDiff: 1Topic: 13.1 T

10、he Traditional Process for Issuing New SecuritiesObjective: 13.1 the role investment bankers play in the distribution of newly issued securities6) Which of the below statements is FALSE?A) A secondary common stock offering is an offering of common stock that had been issued in the past by the corpor

11、ation.B) For a secondary offering, the range for the gross spread as a percentage of the amount raised is between 3% and 6%.C) For traditional bond offerings, the gross spread as a percentage of the principal is around 100 basis points.D) The typical underwritten transaction involves so much risk of

12、 capital loss that a single investment banking firm undertaking it alone would be exposed to the danger of losing a significant portion of its capital.Answer: CComment: For traditional bond offerings, the gross spread as a percentage of the principal is around 50 basis points.Diff: 2Topic: 13.1 The

13、Traditional Process for Issuing New SecuritiesObjective: 13.2 the risk associated with the underwriting of a security2 Regulation of the Primary Market1) Underwriting activities are regulated by the _.A) Initial Public Offerings Market (IPOM).B) Securities and Exchange Commission (SEC).C) Investment

14、 Banking Industry (IBI).D) Federal Bureau of Investigation (FBI).Answer: ADiff: 1Topic: 13.2 Regulation of the Primary MarketObjective: 13.4 how the SEC regulates the distribution of newly issued securities2) The type of information contained in the registration statement includes _.A) the nature of

15、 the business of the issuer and key provisions or features of the security.B) the nature of the investment risks associated with the security and the background of management.C) the nature of the business of the issuer and the background of management.D) All of theseAnswer: DComment: The type of inf

16、ormation contained in the registration statement is the nature of the business of the issuer, key provisions or features of the security, the nature of the investment risks associated with the security, and the background of management.Diff: 2Topic: 13.2 Regulation of the Primary MarketObjective: 13

17、.5 what a registration statement is3) The registration is actually divided into two parts. Part I is the _. It is this part that is typically distributed to the public as an offering of the securities. Part II contains _, which is not distributed to the public as part of the offering but is availabl

18、e from the SEC upon request.A) registration; additional informationB) prospectus; supplemental informationC) supplemental information; registrationD) beginning information; prospectusAnswer: BDiff: 2Topic: 13.2 Regulation of the Primary MarketObjective: 13.5 what a registration statement is4) The Se

19、curities Act of 1933 _.A) does not provide for penalties in the form of fines and/or imprisonment if the information provided is inaccurate or material information is omitted.B) governs the issuance of securities.C) provides that investors who purchase the security are entitled to sue the issuer but

20、 not the underwriter to recover damages if they incur a loss as a result of the misleading information.D) provides that financial statements must be included after the registration statement.Answer: BComment: The Securities Act of 1933 governs the issuance of securities. The act requires that a regi

21、stration statement be filed with the SEC by the issuer of a security. Financial statements must be included in the registration statement, and they must be certified by an independent public accountant. The act provides for penalties in the form of fines and/or imprisonment if the information provid

22、ed is inaccurate or material information is omitted. Moreover, investors who purchase the security are entitled to sue the issuer to recover damages if they incur a loss as a result of the misleading information. The underwriter may also be sued if it can be demonstrated that the underwriter did not

23、 conduct a reasonable investigation of the information reported by the issuer. One of the most important duties of an underwriter is to perform due diligence.Diff: 2Topic: 13.2 Regulation of the Primary MarketObjective: 13.4 how the SEC regulates the distribution of newly issued securities5) Which o

24、f the below statements is TRUE?A) The filing of a registration statement with the SEC means that the security can be offered to the public.B) When the SEC declares the registration statement is effective, it means that an amendment to the registration statement can be filed.C) The registration state

25、ment must be reviewed and approved by the SECs Division of Corporate Finance before a public offering can be made.D) The approval of the SEC means that the securities have investment merit or are properly priced or that the information is accurate.Answer: CComment: The filing of a registration state

26、ment with the SEC does not mean that the security can be offered to the public. The registration statement must be reviewed and approved by the SECs Division of Corporate Finance before a public offering can be made. Typically, the staff of this division will find a problem with the registration sta

27、tement. The staff then sends a letter of comments or deficiency letter to the issuer explaining the problem it has encountered. The issuer must remedy any problem by filing an amendment to the registration statement. If the staff is satisfied, the SEC will issue an order declaring that the registrat

28、ion statement is effective, and the underwriter can solicit sales. The approval of the SEC, however, does not mean that the securities have investment merit or are properly priced or that the information is accurate. It merely means that the appropriate information appears to have been disclosed.Dif

29、f: 3Topic: 13.2 Regulation of the Primary MarketObjective: 13.5 what a registration statement is6) A red herring is _.A) a period of waiting for SEC approval.B) an amended prospectus.C) a preliminary prospectus.D) a prospectus printed fully in red ink.Answer: CComment: During the waiting period, the

30、 SEC does allow the underwriters to distribute a preliminary prospectus. Because the prospectus has not become effective, its cover page states this in red ink and, as a result, the preliminary prospectus is commonly called a red herring.Diff: 2Topic: 13.2 Regulation of the Primary MarketObjective:

31、13.4 how the SEC regulates the distribution of newly issued securities3 Variations in the Underwriting Process1) Not all deals are underwritten using the traditional syndicate process. For example, variations in the United States, the Euromarkets, and foreign markets include _.A) the auction process

32、 and rights offering for the underwriting of bonds.B) the bought deal of the Eurostock market.C) a rights offering for underwriting common stock.D) All of theseAnswer: CComment: Not all deals are underwritten using the traditional syndicate process we have described. Variations in the United States,

33、 the Euromarkets, and foreign markets include the bought deal for the underwriting of bonds, the auction process for both stocks and bonds, and a rights offering for underwriting common stock.Diff: 2Topic: 13.3 Variations in the Underwriting ProcessObjective: 13.3 the different types of underwriting

34、 arrangements2) The mechanics of a bought deal are that _.A) the lead manager or a group of managers offers a potential issuer of debt securities a firm bid to purchase an undetermined amount of the securities with an interest (coupon) rate and maturity to be announced later.B) the issuer is given a

35、 month or more to accept or reject the bid.C) if the bid is rejected, the underwriting firm has bought the deal.D) the underwriter can sell the securities to other investment banking firms for distribution to their clients and/or distribute the securities to its clients.Answer: DComment: The mechani

36、cs of a bought deal are as follows. The lead manager or a group of managers offers a potential issuer of debt securities a firm bid to purchase a specified amount of the securities with a certain interest (coupon) rate and maturity. The issuer is given a day or so (maybe even only a few hours) to ac

37、cept or reject the bid. If the bid is accepted, the underwriting firm has bought the deal. It can, in turn, sell the securities to other investment banking firms for distribution to their clients and/or distribute the securities to its clients. Typically, the underwriting firm that buys the deal wil

38、l have presold most of the issue to its institutional clients.Diff: 2Topic: 13.3 Variations in the Underwriting ProcessObjective: 13.7 what is a bought deal underwriting for a bond issue, and why it is used3) A consequence of _ is that underwriting firms need to expand their capital so that they can

39、 commit greater amounts of funds to such deals.A) accepting auction deals B) rejecting bought deals C) accepting bought deals D) rejecting auction deals Answer: CDiff: 2Topic: 13.3 Variations in the Underwriting ProcessObjective: 13.5 what a registration statement is4) A variation for underwriting s

40、ecurities is the auction process. In this method, _.A) the issuer announces the terms of the issue, and interested parties submit bids for part of the issue.B) the auction form is mandated for certain securities of regulated public utilities but not for municipal debt obligations.C) the issuer annou

41、nces the terms of the issue, and interested parties submit bids for the entire issue.D) mandated for many municipal debt obligations but not for certain securities of regulated public utilities.Answer: CComment: A variation for underwriting securities is the auction process. In this method, the issu

42、er announces the terms of the issue, and interested parties submit bids for the entire issue. The auction form is mandated for certain securities of regulated public utilities and for many municipal debt obligations. It is more commonly referred to as a competitive bidding underwriting.Diff: 2Topic:

43、 13.3 Variations in the Underwriting ProcessObjective: 13.3 the different types of underwriting arrangements5) In a variant of the auction process, a security is allocated to bidders from the highest bid price (_) to the lower ones (_) until the entire issue is allocated.A) (highest yield in the cas

44、e of a bond); (higher yield in the case of a bond)B) (lowest yield in the case of a bond); (higher yield in the case of a bond)C) (lowest yield in the case of a bond); (lower yield in the case of a bond)D) (highest yield in the case of a bond); (lower yield in the case of a bond)Answer: BComment: Th

45、e security is then allocated to bidders from the highest bid price (lowest yield in the case of a bond) to the lower ones (higher yield in the case of a bond) until the entire issue is allocated.Diff: 3Topic: 13.3 Variations in the Underwriting ProcessObjective: 13.3 the different types of underwrit

46、ing arrangements6) Suppose that an issuer is offering $600 million of a bond issue, and nine bidders submit the following yield bids:BidderAmount BidA$150 million5.1%B$140 million5.2%C$130 million5.2%D$100 million5.3%E$75 million5.4%F$25 million5.4%G$80 million5.5%H$70 million5.6%Which of the below

47、statements is FALSE?A) The first five bidders (A, B, C, D, and E) will be allocated the amount for which they bid because they submitted the lowest-yield bids. In total, they will receive $595 million of the $600 million to be issued.B) After allocating $420 million to the highest three bidders, the

48、n $180 million can be allocated to the next two highest bidders.C) The lowest bidders will receive an amount proportionate to the amount for which they bid.D) After allocating $595 million to the highest bidders, then $5 million can be allocated to the next lowest bidders.Answer: BComment: If we all

49、ocate $420 million to the highest three bidders, then $180 million cannot be allocated to the next two highest bidders because they only have bid for $175 million.Diff: 2Topic: 13.3 Variations in the Underwriting ProcessObjective: 13.8 what a competitive bidding underwriting is7) When all bidders bu

50、y the amount allocated to them, then the auction is referred to _.A) as a multiple-price auction or a Dutch auction.B) as a single-price auction or a German auction.C) as a single-price auction or a Dutch auction.D) as a multiple-price auction or a German auction.Answer: CDiff: 2Topic: 13.3 Variatio

51、ns in the Underwriting ProcessObjective: 13.8 what a competitive bidding underwriting is8) Which of the below statements is FALSE?A) The value of a right can be found by calculating the difference between the price of a share before the rights offering and the price of a share after the rights offer

52、ing.B) The difference between the price before the rights offering and after the rights offering expressed as a percentage of the original price is called the concentration effect of the rights issue.C) Value of a right = Share price rights on - Share price ex rightsD) Value of a right = Price befor

53、e rights offering - Price after rights offeringAnswer: BComment: The difference between the price before the rights offering and after the rights offering expressed as a percentage of the original price is called the dilution effect of the rights issue.Diff: 3Topic: 13.3 Variations in the Underwriti

54、ng ProcessObjective: 13.9 what a rights offering for the sale of common stock is9) Which of the below statements is FALSE?A) Using an auction allows corporate issuers to place newly issued debt obligations directly with institutional investors rather than follow the indirect path of using an underwr

55、iting firm.B) By dealing with just a few institutional investors, investment bankers argue, issuers cannot be sure of obtaining funds at the lowest cost.C) A preemptive right grants existing shareholders the right to buy some proportion of the new shares issued at a price below market value.D) For t

56、he shares sold via a preemptive rights offering, the underwriting services of an investment banker are needed.Answer: DComment: For the shares sold via a preemptive rights offering, the underwriting services of an investment banker are not needed.Diff: 2Topic: 13.3 Variations in the Underwriting Pro

57、cessObjective: 13.8 what a competitive bidding underwriting is4 Private Placement of Securities1) In addition to underwriting securities for distribution to the public, securities may be placed with a limited number of institutional investors such as _.A) insurance companies.B) investment companies.C) pension funds.D) All of theseAnswer: DDiff: 2Topic: 13.4 Private Placement of SecuritiesObjective: 13.10 the advantag