1. United States has a stock market-based financing system.
A. False
B. True
2. Most US Corporations have a majority voting system, which allows each shareholder to cast one vote per share for each open position on the board of directors.
A. False
B. True
3. Most publicly traded bonds issued by American corporations are secured debt.
A. True
B. False
4. A foreign bond is a single-currency bond sold in several countries simultaneously.
A. True
B. False
5. Corporate ownership is likely to be much less concentrated in common law countries than in other advanced economies.
A. True
B. False
6. Most US corporations have:
A. Two or more outstanding classes of stocks
B. Both preferred stock and common stock
C. A cumulative voting system
D. A majority voting system
7. Most of the publicly traded bonds issued by American corporations are:
A. Floating-rate bonds
B. Equipment trust receipts
C. Debentures
D. Secured debt
8. Which of the following statements about preferred stock is false?
A. Firms generally do not issue large quantities of preferred stock
B. A large fraction of the dividends that corporations holding preferred shares receive are tax deductible
C. Preferred stockholders hold claims that are senior to those held by bondholders
D. Preferred shareholders typically do not have voting rights
9. A single-currency bond sold in several countries simultaneously is called a:
A. Samurai bond
B. Foreign bond
C. Yankee bond
D. Eurobond
10. Which law offers the greatest protection to external creditors and minority shareholders?
A. Scandinavian Law
B. English Common Law
C. French Civil Law
D. German Law
11. Question The vast majority of equity sales are negotiated rather than competitive offers.
A. False
B. True
12. Question In a best-efforts arrangement, the investment bank purchases the shares from the issuing firm and resells them to investors.
A. True
B. False
13. Question Investment banks charge higher spreads for initial public offerings than they do for seasoned equity offerings.
A. True
B. False
14. Question Institutional investors generally receive 50-75 percent of shares offered in the typical IPOs.
A. False
B. True
15. Question Seasoned equity offerings are rare for both U.S. and non-U.S. companies.
A. True
B. False
16. A share issue privatization involves the sale of shares in a state-owned company to private investors via a public capital market share offering.
A. True
B. False
17. The maximum percentage of additional shares that a lead underwriter can sell under the Green Shoe option is:
A. 10 percent.
B. 8 percent.
C. 20 percent.
D. 15 percent.
18. Which of the following periods experienced the highest average first day return of initial public offerings?
A. 2000-01
B. 1990-99
C. 1980-89
D. 1975-79
19. Which of the following is not an advantage of an IPO to an American entrepreneur?
A. listed stock for use as a compensation vehicle
B. the managerial costs of an IPO
C. new capital for the company
D. personal wealth and liquidity
20. Which of the following is not a special type of IPOs:
A. tracking stocks.
B. spin-offs.
C. leveraged buyouts.
D. equity carve-outs.
21. The majority of both term loans and syndicated loans are fixed-rate issues.
A. False
B. True
22. An example of a negative covenant is that the borrower is required to maintain a minimum level of net working capital.
A. False
B. True
23. To issue a callable bond, the firm must pay a higher interest rate than that of noncallable bonds of equal risk.
A. True
B. False
24. Capital leases are rarely used for leasing land, buildings, and large pieces of equipment.
A. True
B. False
25. Which of the following is a private debt?
A. debentures
B. equipment trust certificates
C. mortgage bonds
D. syndicated loans
26. Which of the following bonds is unsecured?
A. collateral trust bonds
B. income bonds
C. equipment trust certificates
D. limited open-end mortgage bonds
27. Bonds that received investment-grade ratings when they were first issued but later fell to junk status are called:
A. income bonds.
B. fallen angels.
C. putable bonds.
D. subordinated debentures.
28. Which of the following is not an advantage of leasing?
A. Leasing allows the lessee, in effect, to depreciate land.
B. Leasing provides 100 percent financing.
C. A lessee avoids many of the restrictive covenants that are usually included as part of a long-term loan.
D. A lease does not have a stated interest cost.
29. Which of the following leases typically does not appear on the balance sheet of the lessee?
A. operating leases
B. building leases
C. large equipment leases
D. land leases
30. The term that requires the issuing firm to retire some portion of its bonds every year is called the:
A. indenture.
B. positive covenant.
C. sinking fund provision.
D. call provision.