Stocks HW1 Review

Rank the following types of markets from least integrated and organized to most integrated and organized:
1. Brokered markets
2. Continuous auction markets
3. Dealer markets
4. Direct search markets
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Terms in this set (31)
Rank the following types of markets from least integrated and organized to most integrated and organized:
1. Brokered markets
2. Continuous auction markets
3. Dealer markets
4. Direct search markets
4, 1, 3, 2
Regulation NMS:
1. Supports the goal of integrating financial markets
2. Requires the use of specialists to execute trades
3. Requires that exchanges honor quotes of other exchanges when they can be executed automatically
1 and 3 only
You hold 5,000 shares of the 1 million outstanding shares of Wealthy Wranglers common stock. You've just learned that the company plans to issue more shares, so that 2 million shares will be outstanding. This is called _______.
A seasoned equity offering
When a firm decides to sell securities it must first ensure _______.
the preliminary registration statement is approved by the SEC
Initial public offerings (IPOs) are usually _______ relative to the levels at which their prices stabilize after they begin trading in the secondary market.
underpriced
The CFA Institute Standards of Professional Conduct require that members _______.
place their clients' interests before their own

disclose conflicts of interest to clients

inform their employers that they are obligated to comply with the Standards of Professional Conduct
Which of the following is not a financial intermediary?
A mutual fund
An insurance company
A real estate brokerage firm
A credit union
A real estate brokerage firm
Advantages of ECNs over traditional markets include all but which one of the following?
Ability to handle very large complex orders
The NYSE Hybrid Market allows _______.
brokers to send orders either to an electronic system or to a specialist
Which one of the following statements about IPOs is not true?
IPOs generally have been poor long-term investments.
IPOs often provide very good initial returns to investors.
IPOs generally provide superior long-term performance as compared to other stocks.
Shares in IPOs are often primarily allocated to institutional investors.
IPOs generally provide superior long-term performance as compared to other stocks.
Barnegat Light sold 200,000 shares in an initial public offering. The underwriter's explicit fees were $90,000. The offering price for the shares was $35, but immediately upon issue, the share price jumped to $43. What is the best estimate of the total cost to Barnegat Light of the equity issue?$1,690,000The term latency refers to _______.the amount of time it takes to accept, process, and deliver a trading order.Explicit costs of a stock IPO tend to be around _______ of the funds raised.7%The process of polling potential investors regarding their interest in a forthcoming initial public offering (IPO) is called ______.book buildingThe _______ is the most important dealer market in the United States, and the _______ is the most important auction market.NASDAQ; NYSEIn a _______ underwriting arrangement, the underwriter assumes the full risk that shares may not be sold to the public at the stipulated offering price.firm-commitmentFinancial intermediaries exist because small investors cannot efficiently _______.All of the choices are correct.Underwriting is one of the services provided by _______.investment bankersAccording to multiple studies by Ritter, initial public offerings tend to exhibit _______ performance initially and _______ performance over the long term.good; badPurchases of new issues of stock take place _______.in the primary marketWhich one of the following statements about IPOs is not true?IPOs generally provide superior long-term performance as compared to other stocks.Privately held firms may have only _______ shareholders.2,000Financial institutions that specialize in assisting corporations in primary market transactions are called _______.investment bankersThe term "underwriting syndicate" describes _______.the investment banks that participate in the underwritingAccording to SEC Rule 415 regarding shelf registration, firms can gradually sell securities to the public for _______ following initial registration.2 yearsPrivate placements can be advantageous, compared to public issue, because: 1. Private placements are cheaper to market than public issues. 2. Private placements may still be sold to the general public under SEC Rule 144A. 3. Privately placed securities trade on secondary markets.1 onlyThe _______ requires full disclosure of relevant information relating to the issue of new securities.Securities Act of 1933Which of the following is not an example of a financial intermediary? Goldman Sachs Allstate Insurance First Interstate Bank IBMIBMThe largest nongovernmental regulator of securities firms in the United States is _______.The Financial Industry Regulatory AuthorityIndividuals may find it more advantageous to purchase claims from a financial intermediary rather than directly purchasing claims in capital markets because: 1. Intermediaries are better diversified than most individuals. 2. Intermediaries can exploit economies of scale in investing that individual investors cannot. 3. Intermediated investments usually offer higher rates of return than direct capital market claims.Under firm-commitment underwriting, the _______ assumes the full risk that the shares cannot be sold to the public at the stipulated offering price.underwriter