Podcast
Questions and Answers
What function does the Investment Bank perform in creating capital for companies, government, and other entities?
What function does the Investment Bank perform in creating capital for companies, government, and other entities?
- Market-making
- Proprietary Trading
- Underwriting (correct)
- Mergers and Acquisitions
Which document contains information about the issuer and is often associated with primary offerings like Initial Public Offerings (IPOs)?
Which document contains information about the issuer and is often associated with primary offerings like Initial Public Offerings (IPOs)?
- Prospectus (correct)
- Gross Spread
- Road Show
- Syndicate
During a firm commitment underwriting, what does the underwriter do?
During a firm commitment underwriting, what does the underwriter do?
- Buys all securities at a specified price (correct)
- Conducts market-making activities
- Engages in proprietary trading
- Only attempts to sell the securities
What is the purpose of a Best efforts bid underwriting?
What is the purpose of a Best efforts bid underwriting?
What is the role of a syndicate in an underwriting process?
What is the role of a syndicate in an underwriting process?
What is settlement risk in an investment bank context?
What is settlement risk in an investment bank context?
Investment banks are not involved in bringing new securities to the market.
Investment banks are not involved in bringing new securities to the market.
A syndicate in an underwriting process involves multiple investment banks working together.
A syndicate in an underwriting process involves multiple investment banks working together.
In a Best efforts bid underwriting, the underwriter commits to buying all the securities at a specified price.
In a Best efforts bid underwriting, the underwriter commits to buying all the securities at a specified price.
The gross spread in underwriting represents the difference between the buying and selling price of securities.
The gross spread in underwriting represents the difference between the buying and selling price of securities.
The Investment Bank Road Show involves potential investors meeting with analysts from the company's management and investment banker.
The Investment Bank Road Show involves potential investors meeting with analysts from the company's management and investment banker.
Settlement risk in investment banking refers to the risk that the other party will not deliver on the transaction.
Settlement risk in investment banking refers to the risk that the other party will not deliver on the transaction.
Equity securities are always in the form of common stock.
Equity securities are always in the form of common stock.
Bonds with a maturity longer than 10 years are typically sold in the money market.
Bonds with a maturity longer than 10 years are typically sold in the money market.
A bond's face value is the same as its coupon rate.
A bond's face value is the same as its coupon rate.
Preferred stock represents ownership of a corporation just like common stock.
Preferred stock represents ownership of a corporation just like common stock.
Investing in equity securities always guarantees a fixed return.
Investing in equity securities always guarantees a fixed return.
The money market is where long-term financial instruments are traded.
The money market is where long-term financial instruments are traded.
Preferred stockholders have a higher claim on a company's assets than common shareholders.
Preferred stockholders have a higher claim on a company's assets than common shareholders.
Stock prices always reflect a company's current profits and dividends accurately.
Stock prices always reflect a company's current profits and dividends accurately.
Companies that sell bonds are obligated to pay dividends to their investors.
Companies that sell bonds are obligated to pay dividends to their investors.
Investors value firms with higher profits because they are more likely to pay higher dividends.
Investors value firms with higher profits because they are more likely to pay higher dividends.
Qualcomm's stock price increased continuously from 1999 to 2003 without any fluctuations.
Qualcomm's stock price increased continuously from 1999 to 2003 without any fluctuations.
Retaining all earnings within the firm and not paying dividends is a common strategy for companies needing funds for new investments.
Retaining all earnings within the firm and not paying dividends is a common strategy for companies needing funds for new investments.
Debt and equity are the only two types of securities available in the financial markets.
Debt and equity are the only two types of securities available in the financial markets.
The sale of securities in the primary market is when the firm raises money from selling securities to the public for the second time.
The sale of securities in the primary market is when the firm raises money from selling securities to the public for the second time.
When a firm sells securities in the primary market, it doesn't receive any money in return.
When a firm sells securities in the primary market, it doesn't receive any money in return.
Investors who provide money directly to firms in the securities markets can be compared to investors who deposit money in commercial banks for loans.
Investors who provide money directly to firms in the securities markets can be compared to investors who deposit money in commercial banks for loans.
The cash flow earned from a firm's investments is always distributed to shareholders as dividends.
The cash flow earned from a firm's investments is always distributed to shareholders as dividends.
All funds raised in the securities markets are immediately invested by the firm in tangible assets like real estate or factories.
All funds raised in the securities markets are immediately invested by the firm in tangible assets like real estate or factories.
Common stock provides a promised set of interest payments and a schedule for the repayment of principal, like a bond.
Common stock provides a promised set of interest payments and a schedule for the repayment of principal, like a bond.
Investors who purchase common stock are not the residual owners of the firm.
Investors who purchase common stock are not the residual owners of the firm.
As an owner of Disney's stock, you have unlimited voting rights.
As an owner of Disney's stock, you have unlimited voting rights.
Purchasing more shares of Disney's common stock increases the portion of Disney that you own.
Purchasing more shares of Disney's common stock increases the portion of Disney that you own.
The more shares you buy, the smaller the portion of Disney you own.
The more shares you buy, the smaller the portion of Disney you own.
100 shares of Disney's stock represent about 0.00000617 percent of Disney's total shares.
100 shares of Disney's stock represent about 0.00000617 percent of Disney's total shares.
Preferred shareholders always receive dividends before common stockholders.
Preferred shareholders always receive dividends before common stockholders.
If a company does not earn enough to pay interest expenses, common stockholders will still receive a dividend.
If a company does not earn enough to pay interest expenses, common stockholders will still receive a dividend.
Dividends promised to preferred stockholders do not accrue and need not be paid in full before common shareholders can receive any dividends.
Dividends promised to preferred stockholders do not accrue and need not be paid in full before common shareholders can receive any dividends.
Cumulative preferred stock is often associated with the feature where dividends must be paid in full before common stockholders receive any dividends.
Cumulative preferred stock is often associated with the feature where dividends must be paid in full before common stockholders receive any dividends.
Preferred stockholders have a preferred claim on the distribution of assets if a firm goes bankrupt, followed by common stockholders.
Preferred stockholders have a preferred claim on the distribution of assets if a firm goes bankrupt, followed by common stockholders.
All firms issue cumulative preferred stock with the feature where dividends must be paid in full to preferred stockholders first.
All firms issue cumulative preferred stock with the feature where dividends must be paid in full to preferred stockholders first.
What term is used for debt sold in the short-term debt market that must be repaid in less than a year?
What term is used for debt sold in the short-term debt market that must be repaid in less than a year?
What type of securities represent ownership of a corporation?
What type of securities represent ownership of a corporation?
What is the interest rate payment per year for a bond with a face value of PHP1,000 that pays an 8 percent coupon rate with two payments per year?
What is the interest rate payment per year for a bond with a face value of PHP1,000 that pays an 8 percent coupon rate with two payments per year?
In the context of securities, what does it mean when it is mentioned that equity securities provide 'unlimited voting rights'?
In the context of securities, what does it mean when it is mentioned that equity securities provide 'unlimited voting rights'?
What is the market where bonds with maturity longer than 10 years are typically sold?
What is the market where bonds with maturity longer than 10 years are typically sold?
What type of securities would typically pay a fixed interest rate throughout its lifetime?
What type of securities would typically pay a fixed interest rate throughout its lifetime?
What is one benefit of holding preferred stock over common stock?
What is one benefit of holding preferred stock over common stock?
What is the primary market?
What is the primary market?
Why might a company choose not to pay dividends to its shareholders?
Why might a company choose not to pay dividends to its shareholders?
What does a firm do in step 2 of raising money in the securities markets?
What does a firm do in step 2 of raising money in the securities markets?
How did Qualcomm's stock price fluctuate between 1999 and 2003?
How did Qualcomm's stock price fluctuate between 1999 and 2003?
What is the purpose of debt securities in the financial markets?
What is the purpose of debt securities in the financial markets?
Why do investors generally value firms with higher profits?
Why do investors generally value firms with higher profits?
What is the main difference between debt and equity securities?
What is the main difference between debt and equity securities?
What does the term 'cumulative preferred stock' typically entail?
What does the term 'cumulative preferred stock' typically entail?
Which investment alternative falls under the category of debt securities?
Which investment alternative falls under the category of debt securities?
When a firm initially sells securities, what type of market is this transaction considered?
When a firm initially sells securities, what type of market is this transaction considered?
What is a key difference between a bond and an equity security?
What is a key difference between a bond and an equity security?
Which of the following statements about owning Disney's common stock is true?
Which of the following statements about owning Disney's common stock is true?
What percentage of Disney's shares do 100 shares of Disney's common stock represent?
What percentage of Disney's shares do 100 shares of Disney's common stock represent?
As a common stockholder, when do you earn returns on your investment?
As a common stockholder, when do you earn returns on your investment?
What do common stockholders become once all other security-holder claims are met?
What do common stockholders become once all other security-holder claims are met?
What kind of ownership rights do common stockholders have?
What kind of ownership rights do common stockholders have?
What is the primary characteristic of cumulative preferred stock?
What is the primary characteristic of cumulative preferred stock?
What happens if a company does not earn enough to pay its interest expenses?
What happens if a company does not earn enough to pay its interest expenses?
What is the significance of cumulative feature in preferred stock?
What is the significance of cumulative feature in preferred stock?
In the event of bankruptcy, what is the order of priority for distributing assets?
In the event of bankruptcy, what is the order of priority for distributing assets?
What is the term used to describe preferred stock where dividends accrue and must be paid in full before common shareholders receive any dividends?
What is the term used to describe preferred stock where dividends accrue and must be paid in full before common shareholders receive any dividends?
How are distributions of assets handled in bankruptcy for a firm that issued cumulative preferred stock?
How are distributions of assets handled in bankruptcy for a firm that issued cumulative preferred stock?
