Deck 1: Investment and Bond Market

Question 1

Which of the following statements about the over-the-counter market is true?

A)Only penny stocks are traded in the over-the-counter market.
B)Trades in the over-the-counter market are conducted via the auction process.
C)Only bonds and other debt instruments are traded in the over-the-counter market.
D)Stocks that are listed on exchange floors are also traded in the over-the-counter market.

Answer 1

Stocks that are listed on exchange floors are also traded in the over-the-counter market.

Question 2

Which of the following is not an auction market?

A)NASDAQ
B)NYSE
C)CHX
D)All of the above are auction markets.

Answer 2

NASDAQ

Question 3

The entity that serves as the auctioneer for trades conducted on an organized exchange floor is known as a:

A)registered trader.
B)specialist.
C)floor broker.
D)commission broker.

Answer 3

specialist.

Question 4

Which of the following statements about specialists is false?

A)Specialists are market makers in assigned stocks and, as such, can profit from these investments.
B)Specialists are required to maintain a fair and orderly market in their assigned stocks, meaning that they must buy if there is an excess of sell orders and sell out of their own portfolios if there is an excess of buy orders.
C)Specialists are employees of the exchange on which they oversee trades.
D)In addition to acting as market makers, specialists also act as agents and execute limit orders placed by commission brokers for their clients if the specified price is reached.

Question 5

NASDAQ market makers provide investors with assurance that:

A)there is a market for the listed security.
B)the investor will be able to buy or sell the security at a price he desires.
C)the investor will be investing in a high quality investment with relatively low risk.
D)NASDAQ market makers provide investors with no assurance whatsoever. It is "buyer beware."

Question 6

SuperDOT is:

A)an electronic communication network (ECN).
B)an electronic system whereby trades are executed on NASDAQ.
C)an electronic system used to place orders on the NYSE.
D)both A and C.

Question 7

GoForBroke Investments has registered with the SEC to be a market maker in certain NASDAQ-listed securities. In order to be able to enter bid and ask quotes for the securities in which it is going to make a market, GoForBroke must subscribe to which level of NASDAQ?

A)Level I
B)Level II
C)Level III
D)Level IV

Question 8

Which of the following is not a characteristic of all auction stock exchanges in the U.S.?

A)There is a central marketplace.
B)Stocks that are traded on the exchange must meet certain listing requirements, determined by the exchange.
C)In order to conduct a trade on the exchange, a broker must be a member of the exchange or hold a license to trade on the exchange.
D)If a stock is listed on one of these exchanges, it is not permitted to be listed on any other exchange.

Question 9

Which of the following is an example of a primary market transaction?

A)Exco Resources (XCO) sells a new issue of 7.5%, 8-year notes.
B)Ms. Talker calls her broker and places a market order to sell shares of AT&T (T) on the NYSE.
C)Mr. Safe purchases a Treasury bill with two weeks remaining to maturity.
D)Mr. Green places an order to buy shares of Sunvalley Solar, Inc. (SSOL), a stock selling on the OTC Bulletin Board.

Question 10

NASDAQ is:

A)an acronym for Norway's major stock exchange.
B)the government organization that insures accounts at U.S. brokerage firms.
C)a computerized system that links together the U.S. regional exchanges.
D)a computerized quotation system used in the over-the-counter market.

Question 11

All government bonds and the majority of corporate bonds are traded:

A)on the floor of the NYSE.
B)via electronic communication networks (ECNs).
C)on regional exchanges.
D)in the over-the-counter market.

Question 12

Which of the following types of securities would not be traded in the over-the-counter market?
I. stock options
II. government bonds
III. corporate bonds
IV. corporate stocks

A)I only
B)I and IV only
C)III and IV only
D)All of the choices are traded in the over-the-counter market.

Question 13

Which of the following are duties of the specialist on an exchange floor?
I. executing limit orders if/when the limit price specified is reached
II. minimizing any imbalance in supply and demand for the stock(s) that the specialist is assigned
III. determining an opening price for each assigned stock every day
IV. serving as an auctioneer for the shares of the assigned stocks

A)I and II only
B)I, II, and IV only
C)I and IV only
D)I, II, III, and IV

Question 14

The price at which an investor can sell a security to a market maker in the over-the-counter market is called the:

A)sale price.
B)put price.
C)bid price.
D)ask price.

Question 15

Mary is interested in buying shares of the Lambchops Corporation, which sells over-the-counter. The market maker with the best bid price--$3.15--is Veggie Investments. The market maker with the best ask price--$3.27-is Carnivor Investments. Mary conducts trades in NYSE-listed stocks through her broker, Omnivor and Associates. Given this scenario, which of the following statements is true?

A)Mary can buy shares of Lambchops Corporation at the bid price of $3.15 by contacting Veggie Investments directly.
B)Mary can buy shares of Lambchops Corporation at the ask price of $3.27 by contacting Carnivor Investments directly.
C)Mary can buy shares of Lambchops Corporation at the bid price of $3.15 by contacting Omnivor and Associates.
D)Mary can buy shares of Lambchops Corporation at the ask price of $3.27 by contacting Omnivor and Associates.

Question 16

Noah Mete is interested in selling his shares of the Lambchops Corporation, which trades over-the-counter. The market maker with the best bid price--$3.15--is Veggie Investments. The market maker with the best ask price--$3.27-is Carnivor Investments. Noah conducts trades in NYSE-listed stocks through his broker, Omnivor and Associates. Given this scenario, which of the following statements is true?

A)Noah can sell his shares of Lambchops Corporation at the bid price of $3.15 by contacting Veggie Investments directly.
B)Noah can sell his shares of Lambchops Corporation at the ask price of $3.27 by contacting Carnivor Investments directly.
C)Noah can sell his shares of Lambchops Corporation at the bid price of $3.15 by contacting Omnivor and Associates.
D)Noah can sell his shares of Lambchops Corporation at the ask price of $3.27 by contacting Omnivor and Associates.

Question 17

Which of the following represents a secondary market transaction?

A)An investor buys Treasury bills in the regular Monday auction.
B)An investor buys 300 shares of Electromed (ELMD) at its IPO offer price of $4.00 a share.
C)An investor sells her shares of Sunvalley Solar, Inc. (SSOL), which sells on the OTC Bulletin Board for $0.059 a share.
D)A home buyer obtains a mortgage through his savings and loan.

Question 18

Which of the following statements about primary market transactions is true?

A)A primary market transaction is defined as a transaction that is executed on either the NYSE or NASDAQ. Transactions that take place on ECNs are secondary market transactions.
B)In a primary market transaction, the issuer of the security receives the proceeds from the sale of the security.
C)A primary market transaction refers to the trading of stocks; a secondary market transaction is defined as a transaction that involves bonds.
D)Both A and B are true statements.

Question 19

A new issue of common stock can be classified in which of the following categories?
I. primary market
II. money market
III. secondary market
IV. capital market

A)I only
B)III only
C)I and IV only
D)II and III only

Question 20

Which of the following securities would be exempt from SEC registration requirements?
I. a 15-year bond issued by the state of Colorado
II. an issue of preferred stock that has an aggregate par value of $5 million
III. an issue of commercial paper that has a 5-month maturity

A)I only
B)III only
C)I and III only
D)I and II only

Question 21

The investment banker bears the risk if the securities do not sell in a(n):

A)firm commitment underwriting agreement.
B)best efforts agreement.
C)all-or-nothing commitment.
D)None of the above selections are correct. The investment banking firm is never exposed to risk if the securities don't sell.

Question 22

Which of the following steps in the underwriting process will occur last?

A)The underwriting syndicate is formed.
B)The selling group is organized.
C)The public offering price is set.
D)A red herring prospectus is circulated to the public.

Question 23

Which of the following is not a feature associated with an investment in preferred stock?

A)The dividend is typically a fixed amount.
B)If a dividend payment is skipped, it must typically be made up before common shareholders can receive any dividends.
C)Preferred shareholders usually have the right to vote on members of the board of directors, mergers, and shareholder proposals.
D)The preferred stock may be convertible to common stock.

Question 24

Nat Informed places a market order to buy 200 shares of Abercrombie & Fitch (ANF) on Thursday, September 16^th.When will Nat be required to pay for this Transaction?

A)by the end of the trading on September 15^th.
B)on the next trading day, September 16^th.
C)on Tuesday, September 21^st.
D)on Friday, September 17^th.

Question 25

Connie Serve placed an order to purchase five, $1,000 Treasury bonds in the secondary market on Tuesday, October 12^th.Connie will be required to pay for this purchase on which day?

A)Tuesday, October 12^th.
B)Wednesday, October 13^th.
C)Thursday, October 14^th.
D)Friday, October 15^th.

Question 26

On Monday, August 2^nd, the Board of Directors of Baldor Electric (BEZ) announced that the firm would pay a dividend of $0.17 a share. Payment will be made on Friday, October 8^th to shareholders of record as of Friday, September 17^th.In order to receive this dividend check, an investor would have to purchase shares of Baldor Electric before which day?

A)Monday, August 2^nd.
B)Wednesday, September 15^th.
C)Friday, September 17^th.
D)Friday, October 8^th.

Question 27

On Friday, August 6^th, the Board of Directors of Ecolab (ECI) announced that it would pay a dividend of $0.155 a share to shareholders of record as of Tuesday, September 21^st.The dividend checks were scheduled to be mailed on Friday, October 15^th.In this scenario, the ex-dividend date is:

A)Friday, August 6^th.
B)Friday, September 17^th.
C)Tuesday, September 21^st.
D)none of the above.

Question 28

On Friday, August 6^th, the Board of Directors of Ecolab (ECI) announced that it would pay a dividend of $0.155 a share to shareholders of record as of Tuesday, September 21^st.The dividend checks were scheduled to be mailed on Friday, October 15^th. In this scenario, the payment date is:

A)Friday, August 6^th.
B)Friday, September 17^th.
C)Tuesday, September 21^st.
D)none of the above.

Question 29

Given the same maturity, which of the following debt instruments would you expect to offer the highest yield-to-maturity?

A)a debenture issued by Abbott Laboratories
B)a bond issued by the Federal Home Loan Bank Board
C)a general obligation bond issued by the state of Massachusetts
D)a U.S. Treasury bond

Question 30

Jack purchased a new bond of the Candlestick Corporation for its face value of $1,000.The bond has a coupon rate of 3.5%, makes semiannual interest payments, and matures in fifteen years. A year after purchasing the bond, Jack needs to sell the bond to offset some major expenses he incurred when his home caught on fire. Interest rates in the economy at this time have fallen to 3.0%.Given this scenario, when Jack sells the bond, he can expect to receive which of the following?

A)more than what he originally paid for the bond.
B)less than what he originally paid for the bond.
C)exactly what he paid for the bond.
D)$965, which is what he paid for the bond less the $35 in interest he received during his year of owning the bond.

Question 31

MBIA, Inc., a municipal bond insuring company, has a bond issue that is selling for $80.05 per $100 of par. The bond has a coupon rate of 7%, with semiannual payments, and matures in 2025. The current yield on this bond is:

A)8.745%.
B)7.000%.
C)9.550%.
D)none of the above.

Question 32

MBIA, Inc., a municipal bond insuring company, has a bond issue that is selling for $80.05 to yield 9.5%. The bond has a coupon rate of 7%, with semiannual payments, and matures in 2025.If interest rates in the economy increase, which of the following statements will be true, all else equal?
I. the nominal yield of the bond will increase.
II. the yield-to-maturity of the bond will increase.
III. the current yield of the bond will increase.

A)I only
B)I and II only
C)II and III only
D)I, II, and III

Question 33

A bond has a face value of $1,000, matures in 10 years, and pays an 8% coupon, with interest paid semiannually. If the bond is priced to yield 8.8%, it is selling:

A)at par.
B)at a discount.
C)at a premium.
D)at its maturity value.

Question 34

A bond has a face value of $1,000, matures in 12 years, and pays an 4% coupon, with interest paid semiannually. If the bond is priced to yield 3.5%, it is selling:

A)at par.
B)at a discount.
C)at a premium.
D)at its maturity value.

Question 35

Which of the following is not a function performed by an investment banker as part of a full commitment underwriting?

A)provides advice to the issuing firm on the projects in which it should invest the money raised
B)provides advice to the issuing firm on what type of security should be issued in order to raise the funds
C)purchases the securities from the issuing firm
D)provides short-term price support for the security after it begins trading in the secondary market

Question 36

A bond issued by the Needy Corporation pays an 8% coupon, matures in ten years, and is selling for its face value of $1,000.The yield-to-maturity on this bond is:

A)less than its coupon rate of 8%.
B)greater than its coupon rate of 8%.
C)equal to its coupon rate of 8%.
D)indeterminable with the information provided.

Question 37

Which of the following bonds will experience the greatest percentage change in price for a given change in interest rates?

A)a bond with 5 years to maturity that pays a 5% coupon
B)a bond with 10 years to maturity that pays a 5% coupon
C)a bond with 5 years to maturity that pays a 7% coupon
D)a bond with 10 years to maturity that pays a 7% coupon

Question 38

Pete Prophet, the manager of a bond mutual fund, is expecting interest rates to increase. All else equal, which of the following bonds would be the best investment under this assumption?

A)a Treasury strip with 15 years to maturity
B)a bond with a 10% coupon and 5 years to maturity
C)a bond with a 5% coupon and 10 years to maturity
D)a zero-coupon corporate bond with 12 years to maturity

Question 39

Common stock and preferred stock differ in that:

A)the firm is legally mandated to make the dividend payments on its preferred stock; there is no legal obligation to make dividend payments on its common stock.
B)common stock pays a fixed dividend while the dividend associated with preferred stock will typically increase as the earnings of the firm increases.
C)preferred stockholders have more voting rights than the common stockholders of the firm.
D)preferred stockholders will receive their part of the proceeds if the firm is liquidated before the common shareholders receive anything.

Question 40

An ADR is:

A)a bond issued by an American firm that is denominated in dollars, but is sold to foreign investors.
B)a receipt designating ownership of shares of a foreign stock that are held in a trust.
C)another name for bankers' acceptances.
D)a certificate of deposit offered by a foreign bank that is denominated in U.S. dollars.

Question 41

A preemptive right:

A)is a call option that is usually attached to a bond as a sweetener.
B)gives a bond owner the option to sell the bond back to the issuer at a pre-specified price.
C)entitles its owner to buy shares of stock at a specified price within a specified time period in order to maintain his proportionate ownership in the firm.
D)is a feature on some preferred stock issues that allows the preferred shareholders to exchange their preferred shares for shares of the common stock of the firm.

Question 42

Investor has purchased 100 shares of the common stock of the Everyman Corporation. As such, which of the following is not a right that Mr. Investor has?

A)the right to receive dividends, if declared
B)the right to vote on the members of Everyman's board of directors
C)the right to vote on any proposed changes to the corporate bylaws
D)the right to vote on the purchase of a major piece of property that Everyman is considering

Question 43

A feature that gives a bondholder or the owner of preferred stock of a corporation the option to exchange his security for shares of the common stock of the firm is called a:

A)call feature.
B)warrant.
C)convertible feature.
D)right.

Question 44

The stock of Southwest Airlines (LUV) is selling for $11.77 in mid-September. An October put on the stock is selling for $1.45 and gives the owner the right to sell the stock for $13.00 prior to its expiration. In this example, the option premium is:

A)$13.00.
B)$1.23.
C)$1.45.
D)$11.77.

Question 45

In mid-September, the stock of Oracle (ORCL) is selling for $25.60 a share. Ms. Hedge owns shares of Oracle and buys a put option on the stock with a strike price of $27 that expires in October for $2.20 per optioned share. Just prior to expiration, Oracle's stock is selling for $29. Ms. Hedge should:

A)let her option expire worthless.
B)exercise her option and sell Oracle for $29 a share.
C)exercise her option and buy more shares of Oracle for $27 a share.
D)exercise her option and sell Oracle for $27 a share.

Question 46

In mid-September, the stock of Amazon.com, Inc. (AMZN) is selling for $147.A January call option on the stock is selling for $6.10 and has a strike price of $160. This call option is:

A)at the money.
B)in the money.
C)out of the money.
D)overpriced. No one should pay $6.10 for the right to buy a share of stock for $160 when its current market price is only $147.

Question 47

A warrant differs from a standard call option in that:

A)a standard call option generally has a longer period to expiration than a warrant.
B)when a warrant is exercised, the firm whose stock is being purchased will have an increase in cash; this is not the case when a standard call option is exercised.
C)a warrant gives the holder the right to sell shares of the underlying stock; a call option gives the holder the right to buy shares of the underlying stock.
D)when a call option is exercised, the outstanding shares of the firm whose stock is being purchased increases; this does not occur when a warrant is exercised.

Question 48

A type of preferred stock for which any dividends missed in prior years must be paid before common shareholders may receive any dividends is referred to as:

A)cumulative preferred.
B)participating preferred.
C)convertible preferred.
D)adjustable rate preferred.

Question 49

The stock of Hasbro Corporation (HAS) is selling for $44.50 and pays a dividend of $1.00 a share. What is its dividend yield, rounded to the nearest hundredth of a percent?

A)1.00%
B)2.25%
C)4.45%
D)none of the above

Question 50

Simple Simon owns 1,000 shares in the Pasty Pie Corporation, which has just declared a stock dividend of 5%.Just prior to this announcement, Pasty Pie was selling for $10 a share. This announcement will:

A)increase Pasty's shares outstanding and reduce Simple's proportionate ownership in the firm.
B)increase the number of shares that Simple owns to 1,050, which will increase the market value of the shares that he owns from $10,000 to $10,500.
C)increase the number of shares that Simple owns to 1,050, but this will not affect the market value of Simple's holdings.
D)increase Simple's cash by the amount of the dividend paid: 0.05 x $10 = $0.50 x 1,000 shares = $500.

Question 51

Cliff places an order to sell 500 shares of the stock of Gap, Inc. (GPS) via his broker's website. Cliff does not currently own any shares of GPS. This order is:

A)illegal, and the broker's website will reject it.
B)an example of a stop loss order.
C)referred to as a short sale.
D)indicating that Cliff expects the price of Gap, Inc. to rise.

Question 52

An order to buy or sell a stock at the prevailing market price is called a(n):

A)open-ended order.
B)market order.
C)stop order.
D)limit order.

Question 53

The stock of Nutrisystem, Inc. (NTRI) is selling for $17.70 when Miss Piggy places a limit order to buy the stock at $17.65. During the period the order is open, NTRI falls to $17.60 and then increases to $17.67.Which of the following statements is most likely to be true in this scenario?

A)Miss Piggy bought NTRI at $17.67 a share.
B)Miss Piggy bought the stock for no more than $17.65 a share.
C)Miss Piggy bought the stock for no more than $17.60 a share.
D)Miss Piggy bought the stock for $17.66 a share.

Question 54

A. D. Venturer owns 10,000 shares of Risky Corporation, which is currently selling for $8 a share. He is leaving shortly for an extended trip to Antarctica and will be out of communication for that time. He doesn't want to liquidate his investment in Risky before he goes, but he doesn't want to return to find that his $80,000 investment is worth little to nothing. Which of the following options would make sense for Mr. Venturer?

A)buy a call option on Risky stock with an $8 strike price and an expiration date that occurs after his return
B)place a stop sell order at a price less than $8 a share-perhaps $6 or $7 a share
C)place a limit order to sell Risky at either $8 a share or a price slightly less than $8 a share
D)enter a good 'til cancelled (GTC) market order to sell Risky

Question 55

Steel Dynamics (STLD) has a convertible bond issue that matures in four years. The bond has a face value of $1,000 and pays a coupon of 5.125%, with interest paid semiannually. The conversion ratio is 56.9801.If the stock of Steel Dynamics is currently priced at $15 a share, what is the conversion value of this bond, to the nearest cent?

A)$854.70
B)$569.80
C)$175.50
D)Until it matures, the conversion value of the bond is equal to its face value of $1,000.

Question 56

Which of the following relationships regarding shares of common stock are necessarily true?
I. shares outstanding > issued shares
II. authorized shares ≥ issued shares
III. issued shares = treasury shares
IV. issued shares ≥ shares outstanding

A)I and II only
B)II and IV only
C)I, II, and III only
D)II, III, and IV only

Question 57

Which of the following statements regarding zero-coupon bonds is true?

A)An advantage of investing in zero-coupon bonds is that the bondholder does not receive interest income that he must pay taxes on each year and instead receives profits from the bond investment in the form of tax-preferred capital gain income when the bond matures.
B)Only governments at the federal, state, or local levels, or government agencies are permitted to issue zero-coupon bonds.
C)All else equal, zero-coupon bonds will have less price fluctuation when interest rates change.
D)Although the bondholder receives no interim interest payments from his investment in zero-coupon bonds, the difference between the purchase price and the maturity value of the bond is considered to be interest income, and the bondholder must pay taxes on a percentage of this amount each year.

Question 58

Which of the following statements regarding CMOs is false?

A)CMOs are zero-coupon bonds that are backed by real estate.
B)Relative to other bonds, CMOs are illiquid.
C)CMO investors are divided into classes, and the class determines when the investor will receive payments of principal.
D)CMOs are considered to have lower risk and, therefore, offer lower returns.

Question 59

You have a client, Richie Rich, who is in the 39.6% marginal tax bracket, and one of his investment goals is to minimize his payments to the IRS. Which of the following instruments would serve this purpose?

A)U.S. Treasury bills
B)general obligation bonds
C)an investment-grade corporate bond
D)Both Selections A and B would serve to minimize his payments to the IRS.

Question 60

Which of the following statements regarding callable bonds is false?

A)Callable bonds offer a higher yield than non-callable bonds, all else equal.
B)Investors in callable bonds are subject to prepayment risk.
C)The issuer of a callable bond is most likely to redeem the bond early when interest rates fall.
D)A callable bond protects the investor by allowing him to sell his bond back to the issuer and invest in another, similar-risk bond that pays a higher rate of interest should the investor choose to do so.

Question 61

Which of the following securities always sell at a discount from their face values?
I. Treasury bills
II. Treasury notes
III. industrial revenue bonds
IV. bankers acceptances

A)I only
B)I and II only
C)II and III only
D)I and IV only

Question 62

Which of the following is true about treasury bonds?

A)have no default risk.
B)have no interest-rate risk.
C)have no prepayment risk.
D)are totally risk-free.

Question 63

Which of the following is true about a hedge fund?

A)It is designed to help investors hedge their risk and, as such, is a low risk alternative to a mutual fund.
B)It is closed to all but sophisticated, wealthy investors.
C)It is more liquid than almost any investment other than a money market mutual fund.
D)It has very low management fees since it is passively managed.

Question 64

Which of the following is not an advantage that an exchange traded fund (ETF) has over a traditional mutual fund?

A)There are no fees (i.e., loads, commissions) associated with buying and selling ETFs.
B)ETFs trade continuously throughout the day.
C)Investors can use limit and stop orders when trading ETFs.
D)All of the above are advantages that an ETF has over a traditional mutual fund.

Question 65

Commercial paper is:

A)long-term debt issued by commercial banks.
B)short-term, unsecured debt issued by large corporations.
C)issued with maturities of 1 to 2 years.
D)short-term debt that is backed by stocks and bonds that the issuing firm owns.

Question 66

A general decrease in price levels in the economy is referred to as:

A)disinflation.
B)stagflation.
C)recession.
D)deflation.

Question 67

The Federal Reserve announces that it plans to buy $3.89 billion in Treasury securities on the open market. All else equal, which of the following is a likely result of this Fed action?

A)Interest rates will rise, causing security prices to fall.
B)Money supply will increase, causing interest rates to fall.
C)Stock and bond prices should increase.
D)Both B and C are likely results of this Fed action.

Question 68

Which of the following are fiscal policy tools under the jurisdiction of the U.S. Congress?

A)the decision on the amount of cash reserves that a bank must hold
B)the decision on whether to raise or lower effective tax rates
C)the decision on whether to raise or lower the rate at which banks can borrow money from the Federal Reserve.
D)Both A and B are fiscal policy tools.

Question 69

When the U.S. dollar appreciates relative to other world currencies,
I. the prices of all domestic stocks and bonds can be expected to increase.
II. the prices of securities offered by manufacturers that import a lot of their parts can be expected to increase.
III. an increase in the purchase of U.S. securities by foreign investors can be expected.

A)I, II, and III
B)I and II only
C)II only
D)III only

Question 70

The Securities Act of 1933 did what?

A)It established the requirement that investment advisers be registered with the SEC.
B)It established the SEC as the regulatory agency for the secondary market.
C)It established the requirement that new securities be registered.
D)All of the above are correct answers.

Question 71

Scatty is a registered representative with a well-known family of mutual funds. When selling one of the funds, she forgets to give her buyer a prospectus. Which of the following statements is true?

A)Ms. Scatty can be held civilly liable under the Securities Act of 1933.
B)Ms. Scatty can be held criminally liable under the Securities Act of 1933.
C)Since mutual funds are not covered under the Securities Act of 1933, there is no liability in this instance.
D)Both A and B are true statements.

Question 72

Big of HiGrow Corporation needs more money to support the exceptional growth rate that his firm is enjoying. He meets with BigFee Investment Banker, who agrees to handle the IPO for HiGrow. Subsequently, InTheLoop Brokerage is tapped to be part of the selling group that will handle the sale of the new stock to the public. In this example, the issuer is:

A)Mr. Big
B)HiGrow Corporation
C)BigFee Investment Banker
D)InTheLoop Brokerage

Question 73

Big of HiGrow Corporation needs more money to support the exceptional growth rate that his firm is enjoying. He meets with BigFee Investment Banker, who agrees to handle the IPO for HiGrow. Subsequently, InTheLoop Brokerage is tapped to be part of the selling group that will handle the sale of the new stock to the public. In this example, the underwriter is:

A)Mr. Big
B)HiGrow Corporation
C)BigFee Investment Banker
D)InTheLoop Brokerage

Question 74

Any person who willfully acts in violation of the Securities Act of 1933, or any SEC rule, is subject to a penalty of:

A)10 years in prison or a $10,000 fine, or both.
B)5 years in prison or a $10,000 fine, or both.
C)10 years in prison or a $25,000 fine, or both.
D)5 years in prison or a $5,000 fine, or both.

Question 75

Big of HiGrow Corporation needs more money to support the exceptional growth rate that his firm is enjoying. He meets with BigFee Investment Banker, who agrees to handle the IPO for HiGrow. As part of the process, BigFee's staff works with HiGrow's accountants to prepare the registration statement that is filed with the SEC. After the issue has been sold to the public, Mr. Sharp, a CPA who has invested in the stock of HiGrow, discovers that there are some accounting irregularities in the financial statements provided in HiGrow's prospectus. Who can be sued for the misleading statements?
I. Mr. Big
II. Big Fee Investment Banker
III. HiGrow's accountants
IV. HiGrow's attorneys

A)I and II only
B)II and III only
C)I, III, and IV only
D)I, II, III, and IV

Question 76

Which of the following securities is not exempt from registration requirements?

A)private-placement variable universal life insurance
B)a revenue bond issued by the state of Florida to raise money to build an airport
C)a bond issued by the U.S. post office
D)a new issue of stock issued by a corporation that already has shares of its stock trading on the NYSE

Question 77

Private placements are exempt from the registration requirements of the Securities Act of 1933 under the rules contained in:

A)Regulation A .
B) Regulation D .
C)Regulation E .
D)the Securities Exchange Act of 1934.

Question 78

Regulation D:
I. enables smaller firms to raise capital more quickly and more cheaply.
II. exempts the issuing firm from all disclosure requirements as long as the issue is being sold to no more than five investors.
III. has restrictions regarding the resale of the securities being sold.

A)I only
B)I and II only
C)I and III only
D)I, II, and III

Question 79

Which of the following would qualify as accredited investors for a Regulation D offering?
I. your 45-year-old, spinster aunt who has earned in excess of $200,000 annually over the last ten years as a pediatric surgeon
II. your Uncle Miserly, who is reputed to have a net worth of $1.2 million
III. Tiny Brokers, a small broker-dealer with a single office in the state of Kentucky
IV. a trust containing assets that are valued between $3.5 and $4 million

A)I and II only
B)III and IV only
C)I, II, and III only
D)II and IV only

Question 80

Private placements may be sold to whom?

A)only to institutional investors.
B)only to accredited investors.
C)to as many as 35 non-accredited investors.
D)to only 35 investors.