General advertising and solicitation allowed for reg d 506 offerings (more info to come on 506 offerings)
Internet crowdfunding for securities up to 1 mill
Regulation a plus as competitor to regulation A
Forced registration limit raised from 500 to 2000 shareholder s
Accredited Investor Exemption (investors who have sufficient financial expertise and wherewithal to make intelligent informed investment decisions are exempted)
SEC VERSUS MURPHY CASE (1980)
CONSIDERATIONS IDENTIFIED IN DETERMINING AN OFFERING IS A PRIVATE PLACEMENT:
Number of offerees must be limited
Offerees must be sophisticated
Size and manner of offering must not indicate widespread solicitation
Some relationship between offerees and issuer must be present
Other sets by this creator
The following multiple-choice problems are based on questions that appeared in past CFA examinations.
a. A bond with a call feature:
(1) Is attractive because the immediate receipt of principal plus premium produces a high return.
(2) Is more apt to be called when interest rates are high because the interest saving will be greater.
(3) Will usually have a higher yield to maturity than a similar noncallable bond.
(4) None of the above.
b. In which one of the following cases is the bond selling at a discount?
(1) Coupon rate is greater than current yield, which is greater than yield to maturity.
(2) Coupon rate, current yield, and yield to maturity are all the same.
(3) Coupon rate is less than current yield, which is less than yleld to maturity.
(4) Coupon rate is less than current yield, which is greater than yield to maturity.
c. Consider a five-year bond with a 10 % coupon selling at a yield to maturity of 8 %. If interest rates remain constant, one year from now the price of this bond will be:
(3) The same
d. Which of the following statements is true?
(1) The expectations hypothesis indicates a flat yield curve if anticipated future short-term rates exceed current short-term rates.
(2) The basic conclusion of the expectations hypothesis is that the long-term rate is equal to the anticipated short-term rate.
(3) The liquidity hypothesis indicates that, all other things being equal, longer maturities will have higher yields.
(4) The liquidity preference theory states that a rising yield curve necessarily implies that the market anticipates increases in interest rates.
Data related to the expected sales of two types of frozen pizzas for Norfolk Frozen Foods Inc. for the current year, which is typical of recent years, are as follows:
The estimated fixed costs for the current year are $46,800.
Determine the estimated units of sales of the overall (total) product, E, necessary to reach the break-even point for the current year.
Based on the break-even sales (units) in part (1), determine the unit sales of both the 12'' pizza and 16'' pizza for the current year.
Assume that the sales mix was 50% 12'' pizza and 50% 16'' pizza. Compare the break-even point with that in part (1). Why is it so different?
The Lake Placid Town Council decided to build a new community center to be used for conventions, concerts, and other public events, but considerable controversy surrounds the appropriate size. Many influential citizens want a large center that would be a showcase for the area. But the mayor feels that if demand does not support such a center, the community will lose a large amount of money. To provide structure for the decision process, the council narrowed the building alternatives to three sizes: small, medium, and large. Everybody agreed that the critical factor in choosing the best size is the number of people who will want to use the new facility. A regional planning consultant provided demand estimates under three scenarios: worst case, base case, and best case. The worst-case scenario corresponds to a situation in which tourism drops substantially; the base-case scenario corresponds to a situation in which Lake Placid continues to attract visitors at current levels; and the best-case scenario corresponds to a substantial increase in tourism. The consultant has provided probability assessments of 0.10, 0.60, and 0.30 for the worstcase, base-case, and best-case scenarios, respectively. The town council suggested using net cash flow over a 5-year planning horizon as the criterion for deciding on the best size. The following projections of net cash flow (in thousands of dollars) for a five-year planning horizon have been developed. All costs, including the consultant’s fee, have been included.
The consultant has suggested that an expenditure of $150,000 on a promotional campaign over the planning horizon will effectively reduce the probability of the worstcase scenario to zero. If the campaign can be expected to also increase the probability of the best-case scenario to 0.4, is it a good investment ?