Question : 91. An underwriter issues a firm commitment to sell 1 million : 1284333

 

 

91. An underwriter issues a firm commitment to sell 1 million shares at $20 each, including a $2 spread. How much does the issuing firm receive if only 500,000 shares are sold? 
A. $9 million
B. $10 million
C. $18 million
D. $20 million

92. Which of the following is correct if an underwriter is selling stock to the public at $40 per share, the underwriter receives a $3 per share spread, 2 million shares are sold, and the issuing firm receives $111 million from the underwriter? 
A. The underwriter’s spread was greater than $3.
B. The issue appreciated in price immediately.
C. The issue included 3 million shares.
D. The stock was issued on a best efforts basis.

93. One strategy that appears to be used by certain underwriters to reduce the risk of marketing a stock is to: 
A. offer a firm commitment on the issue.
B. set the initial stock price below its true value.
C. sell the securities in foreign countries.
D. offer price rebates on the stock purchases.

94. When a new issue goes wrong and the stock price crashes: 
A. investors can only blame their bad luck.
B. investors should sell the shares as soon as possible.
C. investors may sue the company executives for mismanagement.
D. investors may sue the underwriters for overhyping the issue.

95. In a firm commitment, the underwriter: 
A. encounters virtually no risk because the spread is fixed.
B. is allowed to sell the shares at any price they choose.
C. is protected against being stuck with unsold shares.
D. is allowed to sell the shares at a price slightly higher than the price it paid to the company.

96. Those subject to the winner’s curse are: 
A. underwriters.
B. uninformed investors.
C. firms issuing IPOs.
D. venture capitalists.

97. When securities are issued under a rights issue: 
A. existing shareholders have the opportunity to expand their holdings.
B. shares are offered to the public at a discount.
C. the existing shares will increase in price.
D. current shareholders have the right to resell their stock to the issuer.

98. What was the market price of a share of stock before a rights issue if one share of new stock could be purchased at $100 for every four shares that were previously owned? The stock price after the successful rights issue was $200. 
A. $150
B. $225
C. $241
D. $250

4x + $100 = $200 x 5
4x/4 = $900/4
x = $225

99. Stock that is sold through a rights issue: 
A. is offered for cash to the general investing public.
B. will not affect the market price of the shares.
C. is limited for sale to existing shareholders.
D. must be sold on a firm commitment basis.

100. What is the primary reason for a reduction in share value after a successful rights issue? The new shares: 
A. have higher underwriting expense.
B. are offered at attractive prices.
C. reduce the firm’s return on equity.
D. do not include voting rights.

101. A rights issue offers the firm’s shareholders one new share of stock at $40 for every three shares of stock they currently own. What should be the stock price after the rights issue if the stock sells for $80 per share before the issue? 
A. $56.67
B. $60.00
C. $70.00
D. $71.33

102. Currently, M & S Inc. has 2 million shares outstanding selling at $70 a share. A rights issue will be made that allows 1 share to be purchased for every 5 shares currently held by stockholders for $40 each. Which of the following is true? 
A. The number of shares outstanding will fall to 1.6 million.
B. The firm will raise $13.33 million.
C. The stock price will fall to $65.
D. The total value of the firm will equal $124 million.

 

 

Place your order
(550 words)

Approximate price: $22

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
$26
The price is based on these factors:
Academic level
Number of pages
Urgency
Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

Read more

Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

Read more

Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.

Read more

Privacy policy

Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.

Read more

Fair-cooperation guarantee

By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.

Read more