Question 1

Venture capital (VC) funds receive money from wealth investors and from pension funds that need to receive their money back in one year or less.

Accepted Answer

Venture capital funds typically receive money from wealth investors and institutions that are able to invest for a longer time horizon, usually five to ten years, as it can take several years for a startup to generate significant returns.

Question 2

____ sell shares to investors and use the proceeds to invest in portfolios of international stocks created and managed by portfolio managers.

Accepted Answer

International mutual funds are the only option listed that sell shares to investors and use the proceeds to invest in portfolios of international stocks managed by portfolio managers. ADRs and WEDRs are simply alternative ways for investors to own shares of individual international companies, and IPDRs are not a real investment product.

Question 3

Underwriters sell most of the shares of an IPO to institutional investors.

Accepted Answer

Underwriters are responsible for assisting companies in the IPO process by setting the initial price of the shares and selling them to investors. While retail investors may have access to IPO shares through their brokerage accounts, underwriters often sell the majority of the shares to institutional investors such as mutual funds, pension funds, and hedge funds.

Question 4

Private firms that need a large equity investment but are not yet in a position to go public may attempt to obtain funding from a venture capital (VC) fund.

Accepted Answer

VC funds specialize in providing funding for private companies that need a large equity investment but are not yet ready to go public.

Question 5

If the secondary market is inactive, then the shares would be illiquid.

Accepted Answer

An inactive secondary market means that there are no buyers or sellers for the shares, making it difficult to buy or sell them. This lack of liquidity makes the shares illiquid, as there is no easy way to turn them into cash.

Question 6

The phrase "leaving money on the table" refers to investors who pay more for a stock in the secondary market than was paid by those investors who were able to buy shares at the initial (offer) price on the IPO date.

Accepted Answer

The phrase "leaving money on the table" refers to investors who could have sold their shares at a higher price but chose not to, rather than investors who paid more for a stock in the secondary market than others who bought at the IPO price.

Question 7

Listing stock on a foreign stock exchange

Accepted Answer

Listing stock on a foreign stock exchange can enhance the stock's liquidity, as it increases the number of potential investors. It may also increase the firm's perceived financial standing, as it is seen as a sign of global reach and credibility. Additionally, listing on a foreign stock exchange may protect a firm against hostile takeovers, as it may make it more difficult for other companies to acquire a controlling stake in the firm. Therefore, all of the options are correct.

Question 8

Initial public offerings (IPOs) perform ____ on the day following the IPO and ____ for periods of a year or longer after the IPO.

Accepted Answer

The answer of Initial public offerings (IPOs) perform ____ on...

Question 9

____ are portfolios of international stocks created and managed by various financial institutions.

Accepted Answer

International mutual funds are portfolios of international stocks managed by financial institutions. Options B and C refer to specific financial instruments and not portfolios, while option D refers to the process of a company going public, not a portfolio of international stocks.

Question 10

Whenever ____ exceeds ____, the stock price will be driven ____.

Accepted Answer

When demand exceeds supply, the stock price is driven up due to increased competition among buyers.

Question 11

Venture capital (VC) funds commonly serve as advisors to the businesses in which they invest.

Accepted Answer

Venture capital funds often provide advice and guidance to the companies they invest in, in addition to providing funding. This can include strategic planning, management consulting, and introductions to potential partners or customers.

Question 12

Which of the following is not a form of shareholder activism?

Accepted Answer

Poison pills are a defensive tactic used by management to ward off hostile takeovers, and are not a form of shareholder activism. The other options, communicating concerns to other investors, shareholder lawsuits, and other forms of shareholder engagement, are all examples of shareholder activism.

Question 13

The total cost of engaging in an IPO is usually about 1 percent of the total proceeds.

Accepted Answer

The total cost of engaging in an IPO can vary, but it is typically higher than 1 percent. The cost includes underwriting fees, legal fees, accounting fees, and other expenses, which can add up to 5-7% or more of the total proceeds.

Question 14

Initial public offerings (IPOs) tend to occur more frequently during bearish (weak) stock markets.

Accepted Answer

IPOs tend to occur more frequently during bullish (strong) stock markets, when investor confidence is high and companies feel more optimistic about the potential success of their offerings. During bearish markets, companies may hold off on going public due to decreased demand and a lower likelihood of achieving their desired price per share.

Question 15

A firm has a current stock price of $15.32.The firm's annual dividend is $1.14 per share.The firm's dividend yield is

Accepted Answer

To calculate dividend yield, you need to divide the annual dividend per share by the current stock price and multiply the result by 100 to get a percentage.  So, dividend yield = (1.14/15.32) * 100 = 7.44%. Therefore, the best choice is C) 7.44 percent.

Question 16

When a firm buys some of its shares that it had previously issued, this is referred to as a:

Accepted Answer

When a firm buys back its shares that were previously issued, it is known as a stock repurchase. This is often done to return value to shareholders or to prevent dilution of ownership. The other options (reverse IPO, leveraged buyout, ladder spin) do not refer to this specific action of a company buying back its own shares.

Question 17

Which of the following is not a part of the over-the-counter market?

Accepted Answer

The answer of Which of the following is not a...

Question 18

American Depository Receipts (ADRs) are similar to

Accepted Answer

American Depository Receipts (ADRs) are a type of security that represent ownership in shares of a foreign company. They are traded on U.S. stock exchanges just like domestic stocks, making them similar to stocks. ADRs are not stock options, bank deposits, or bonds.

Question 19

Venture capital (VC) funds typically plan to exit from their original investment within a period of about one year.

Accepted Answer

Venture capital funds typically invest in startups with high-growth potential and therefore usually plan to exit their investments within a period of 3-7 years, depending on the stage of the startup and the nature of the investment. 1 year is a very short timeframe for a VC exit.

Question 20

Venture capital (VC) funds usually invest in publicly-traded businesses.

Accepted Answer

Venture capital funds typically invest in startups and private companies, not publicly-traded businesses.

Quiz 10: Stock Offerings and Investor Monitoring