1. A major purpose of the prospectus is to:
a. advise investors of the security's potential risk.
b. list the security's dividend payment dates.
c. increase the company's level of debt.
d. inform investors of the security's rate of return.
e. distribute stock warrants to prospective investors.
2. When underwriters issue securities on a best efforts basis, they:
a. buy the entire issue from the firm.
b. submit a bid for purchase, which the issuer compares to other bids.
c. guarantee that the issuer will receive the spread.
d. lose money on the issue.
e. sell as much of the stock as possible, but with no guarantee.
3. The Securities and Exchange Commission:
a. verifies the accuracy of the information contained in the prospectus.
b. examines the registration statement during the Green Shoe period.
c. determines the final offer price once they have approved the registration statement.
d. is concerned only that an issue complies with all rules and regulations.
e. verifies the accuracy of the information contained in the red herring.
4. Stock underwriters are:
a. investment banking firms that coordinate equity offerings.
b. investors seeking low prices.
c. regulatory agencies that evaluate equity offerings.
d. the firm's founders who guarantee a stock's performance.
e. venture capitalists that are selling their stock.
5. Assume the SEC approved the registration statement for a new securities issue this morning. Which one of the following statements must be true about this issue?
a. The SEC believes the issue will be a profitable investment for all purchases made at the offer price.
b. The red herrings can now be distributed as the distribution was awaiting the SEC approval.
c. The final prospectuses were all delivered or the SEC would not have approved the issue.
d. The issuer is following all the required rules and regulations in regards to this issue.
e. The waiting period started when the approval was received this morning.
5. Which one of the following best describes an initial public offering?
a. Any shares initially offered to a firm's existing shareholders
b. Any newly issued shares offered to the general public
c. Shares issued to the public on a cash basis
d. Shares held by a firm's founder
e. The first sale of equity shares to the general public
6. Jersey T's is preparing to sell new shares of stock to the general public. As part of this process, the firm just filed the required paperwork with the SEC that contains the material information related to this issue of stock. What is the name associated with this paperwork?
a. Registration statement
b. Security agreement
c. Red herring
d. Standby agreement
e. Comment letter