Chapter 10
Stock Offerings and Investor Monitoring
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1. Stocks are issued by corporations that need _____________.
a. short-term funds
b. long-term funds
c. debt with a fixed interest rate
d. none of the above
2. A firm has two million shares outstanding. The total value of the firm is $500 million. The price per share of stock is $_______.
a. 25.00
b. 40.00
c. 250.00
d. none of the above
3. Preferred stock:
a. allows for the same voting rights as common stock.
b. represents debt.
c. does normally not allow its owners to participate in the profits of the firm beyond the stated fixed annual dividend.
d. is generally a more desirable source of capital for a firm than bonds.
4. Before a firm goes public:
a. it develops a prospectus and files it with the Securities and Exchange Commission (SEC).
b. it ultimately sends the prospectus to investors who may want to invest in the initial public offering (IPO).
c. it attempts to gauge the price that will be paid for its shares.
d. all of the above
5. The transaction cost to the issuing firm associated with an IPO is usually _____ percent of the funds raised.
a. 1
b. 3
c. 7
d. 12
6. Flipping:
a. refers to the purchase of a stock at the offer price and subsequent sale of the stock shortly afterward.
b. refers to the short sale of a stock at the offer price and subsequent purchase of the stock shortly afterward.
c. may place excessive upward pressure on the stock's price.
d. is illegal.
7. There is evidence that IPOs of firms perform _________ immediately after issuance and ________ over a period of a year or longer, on average.
a. well; well
b. poorly; poorly
c. well; poorly
d. poorly; well
8. The _______________ is a telecommunications network.
a. American Stock Exchange
b. New York Stock Exchange
c. Pacific Stock Exchange
d. NASDAQ
9. The _________ lists stocks that have a price below $1 per share (penny stocks).
a. NASDAQ National Market
b. OTC Bulletin Board
c. New York Stock Exchange
d. none of the above
10. _______ stocks are listed on the New York Stock Exchange, and these stocks have a ________ aggregate market value than the stocks listed on the NASDAQ.
a. Fewer; lower
b. More; higher
c. Fewer; higher
d. More; lower
11. A company pays an annual dividend of $2 per share. The stock's prevailing price is $54. The dividend yield is _______ percent.
a. 2.00
b. 2.70
c. 3.70
d. none of the above
12. The ____________ is a price-weighted average of stock prices of 30 large U.S. firms.
a. Dow Jones Industrial Average
b. Standard and Poor's 500
c. Russell 3000
d. Wilshire 5000
13. __________ represent a barrier to corporate control.
a. Proxy contests
b. Antitakeover amendments
c. Shareholder lawsuits
d. Stock repurchases
14. _____________ are special rights awarded to shareholders or specific managers upon specified events.
a. Antitakeover amendments
b. Poison pills
c. Golden parachutes
d. none of the above
15. If an IPO stock is quickly sold by investors in the secondary market, there will be downward pressure on the stock's price.
a. True
b. False
16. A secondary stock offering is a new stock offering by a specific firm whose stock is not yet publicly traded.
a. True
b. False
17. With shelf registration, a corporation can fulfill SEC requirements up to two years before issuing new securities.
a. True
b. False
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