1. A shareholder may receive a long -term capital gain on the following transactions except (assume ample E&P)

a. liquidating distribution

b. complete redemption of stock, not coupled with a 10-yr agreement

c. Sale of stock to another shareholder, while retaining the position as president and board member

d. sale of 50 percent of th stock in one corporation in which he is a 100 percent owner to another corporation in which he has only 50 percent control.

2. What is IPO? underpricing? If you decide to try to buy shares in every? IPO, will you necessarily make money from the underpricing? (Select all of the choices that? apply.)

A. Underpricing refers to the fact? that, on? average, underwriters pick the IPO issue price so that the average? first-day return is positive.

B. If you followed a strategy of placing an order for a fixed number of shares on every IPO, your order will be completely filled when the stock price goes? up, but you will be rationed when it goes down. In effect you only get substantial amounts of stock when you do not want it. The? winners' curse is substantial enough so that the strategy of investing in every IPO does not yield above market returns.

C. If you followed a strategy of placing an order for a fixed number of shares on every IPO, your order will be completely filled when the stock price goes? down, but you will be rationed when it goes up. In effect you only get substantial amounts of stock when you do not want it. The? winners' curse is substantial enough so that the strategy of investing in every IPO does not yield above market returns.

D. Underpricing refers to the fact that, on average, underwriters pick the IPO issue price so that the average first-day return is negative.