Question :
“Flip” shares 1
Three companies went public last month with initial : 1325729
“Flip” shares 1
Three companies went public last month with initial public offerings (IPO). The offer price and first day closing price are shown below for the three firms. An investor was able to purchase 100 shares of each company at the offer price and then “flip” the shares at the end of the day for the full return.
StockOffer PriceClosing Price
A$10$12.50
B$80$96.00
C$40$55
63.Refer to “Flip” shares 1. What was the total dollar value of this investment at the end of the first day? (Ignore any tax implications for this question)
a.$13,000
b.$14,650
c.$15,850
d.$16,350
64.Refer to “Flip” shares 1. What was the return on this investment at the end of the first day? (Ignore any tax implications for this question)
a.23.1%
b.25.8%
c.27.5%
d.29.1%
“Flip” shares 2
Three companies went public last month with initial public offerings (IPO). An investor was able to purchase shares of each company at the offer price and then “flip” the shares at the end of the day for the full return. The shares of each company sold for a $20 offer price. The number of shares purchased and the first day return are shown below.
StockShares
BoughtFirst Day
Return
A5020%
B7512%
C755%
65.Refer to “Flip” shares 2. What was the return on this investment at the end of the first day? (Ignore any tax implications for this question)
a.11.38%
b.11.61%
c.11.88%
d.12.33%
66.Refer to “Flip” shares 2. What was the dollar value of the IPO investment after the first day? (Ignore any tax implications for this question)
a.$4,493
b.$4,477
c.$4,455
d.$4,400
ABC Logistics
The managers of ABC Logistics (ABC) have decided to expand the company’s operations into a few new markets. To fund this opportunity, ABC has decided to launch a seasoned equity offering to raise new equity capital. ABC currently has 12 million shares outstanding, and yesterday’s closing market price was $40.00 per ABC share. The company plans to sell 3 million newly issued shares in its seasoned offering. The investment banking firm of Armstrong Incorporated has agreed to underwrite the new stock issue for a 4 percent discount from the offering price, which ABC and Armstrong have agreed should be $0.50 per share lower than ABC’s closing price the day before the offering is sold.
67.If ABC’s stock price closes at $39.00 the day before the offering, what will be the net proceeds for ABC from this offering?
a.$109.55 million
b.$110.88 million
c.$112.32 million
d.$117.00 million
68.If ABC’s stock price closes at $39.00 the day before the offering, calculate the return earned by ABC’s existing stockholders on their shares from the time before the seasoned offering was announced through the time it was actually sold for $38.50 per share.
a.-3.75%
b.-2.00%
c.1.25%
d.3.75%
69.If ABC’s stock price closes at $39.00 the day before the offering, calculate the total cost of the seasoned equity offering to ABC’s existing stockholders as a percentage of the offering proceeds.
a.16.23%
b.18.51%
c.20.10%
d.20.40%
70.If ABC’s stock price closes at $46.75 the day before the offering, calculate the total cost of the seasoned equity offering to ABC’s existing stockholders as a percentage of the offering proceeds.
a.32.72%
b.31.65%
c.30.17%
d.29.89%
71.What is the term for the repackaging of loans and other traditional bank-based credit products into securities that can be sold to public investors?
a.Privatization
b.Asset Bundling
c.Securitization
d.Primary offering
72.Which statement is FALSE regarding the issuance of securities by investment banks?
a.The profits for an investment bank are determined by the size of the underwriting spread.
b.The prospectus is the legal document that describes the terms of the IPO.
c.Banks charge higher spreads for seasoned equity offerings than unseasoned equity offerings.
d.Banks charge higher spreads on equity issues than debt issues.
