This file of BUS 405 Week 2 Chapter 5 The Stock Market contains:

1. High Color Detergent is issuing new shares of stock which will trade on NASDAQ. If Sue purchases 300 of these shares, the trade will occur in which one of the following markets?

2. Wilson just placed an order with his broker to purchase 500 of the outstanding shares of GE. This purchase will occur in which one of the following markets?

3. Hi-Tek Shoes is a private firm that has decided to issue shares of stock to the general public. This stock issue will be referred to as a(n):

4. A firm that specializes in arranging financing for companies is called a(n):

5. The process of purchasing newly issued shares from the issuer and reselling those shares to the general public is called:

6. The financing provided for new ventures that are frequently high-risk investments is referred to as “venture _______”.

7. Marco Painting Supplies is a publicly-traded firm with 250,000 shares of stock outstanding. If the firm issues an additional 10,000 shares, those shares will be referred to as a(n):

8. Under the provisions of a general cash offer, shares of stock are offered to:

9. A public offering of securities which are offered first to current shareholders is called a(n):

10. The difference between the price an underwriter pays an issuer and the underwriter’s offering price is called the:

11. When a group of underwriters jointly work together to sell a new issue of securities, the underwriters form a(n):

12. When an underwriting syndicate purchases an entire issue of new securities and accepts the risk of unsold shares, the underwriting is known as a _____ underwriting.

13. When the issuer assumes the risk for any shares the underwriters cannot sell, the underwriting is known as a _____ underwriting.

14. When the price of newly issued shares is determined by competitive bidding the underwriting is known as a _____ underwriting.

15. Which one of the following is the federal agency which regulates the financial markets in the U.S.?

16. The document that must be prepared in order to receive approval for a stock offering is called a:

17. A preliminary document provided to investors who are interested in a stock offering is called a(n):

18. A securities dealer is a(n):

19. Which one of the following best describes a broker?

20. Which one of the following prices will an individual investor receive if he or she sells shares of Microsoft?

21. Which one of the following prices will an investor pay to purchase shares of stock that are currently outstanding?

22. The profit a dealer makes on a purchase and resale of shares of stock is called the:

23. A private equity fund:

I. is set up as a limited partnership

II. usually use a 2/20 fee structure

III. place no constraints on manager compensation

IV. typically have a stated life of 7 to 10 years

24. Which of the following is correct regarding the compensation paid to private equity fund managers?

25. An owner of a trading license on the NYSE is called a:

26. An NYSE Supplemental Liquidity Provider:

I. can trade the same stocks as designated market makers

II. can trade only from offices outside the exchange

III. must quote bid or ask quotes a certain % of the day

IV. are paid 30 cents per 100 shares traded

27. The party who serves as a dealer for a few securities on an exchange floor and is obligated to maintain an orderly market for those securities is called a:

28. A trading floor broker:

29. The NYSE’s Super Display Book is an electronic system which:

30. A NYSE member who trades only for his or her own account is called a(n):

31. The location on an exchange floor where a particular security trades is called a(n):

32. You want to sell shares of stock at the current price. Which type of order should you place?

33. An order to buy shares of stock at a stated price or less is called a _____ order.

34. An order to sell that involves a preset trigger point is called a _____ order.

35. A market centered on dealers buying and selling for their own inventories is called a(n):

36. Which one of the following describes an ECN?

37. Inside quotes are the:

38. The off-exchange market in which exchange-listed securities trade is referred to as the _____ market.

39. The market where individual investors directly trade exchange-listed securities with other individual investors is referred to as the _____ market.

40. Which of the following types of indexes is a stock market index in which stocks are held in proportion to their share price?

41. When stocks are held in an index in proportion to their total company market value, the index is:

42. An index is valued on a daily basis. However, some stocks in this particular index have not traded recently. As a result, this index suffers from index:

43. Which one of the following statements concerning the NYSE is correct?

44. Which of the following are common sources of venture capital?

I. private individuals

II. NASDAQ

III. university endowment funds

IV. insurance companies

45. Which one of the following statements concerning venture capital is correct?

46. How long is the “lock-up” period that is commonly found in an IPO underwriting contract?

47. Which one of the following can be assumed when the SEC approves an IPO registration?

48. Which one of the following transactions occurs in the primary market?

49. Trevor currently owns 545,000 shares of ABC stock. He will sell those shares for $17.10 a share. He is also willing to purchase additional shares for $17.07 a share. Trevor is a securities:

50. Anna is an individual investor. She purchases shares at the _____ price and sells at the _____ price.

51. What is the current structure of the NYSE?

52. In 2007, NYSE Holdings merged with which one of the following?

53. In order to currently trade on the floor of the NYSE, members must:

54. Which one of the following has the greatest duty to provide liquidity to the financial market?

55. The SuperDOT system has lessened the role of which one of the following?

56. Which one of the following statements related to the NYSE Hybrid market is correct?

57. To be listed on the NYSE, a firm must have at least:

58. Lucas wants to sell 9,000 shares of stock and places a market order. The floor broker is unable to arrange the sale with another floor broker so the specialist agrees to “stop” the stock. What has the specialist agreed to do?

59. The duties of a specialist include which of the following?

I. maintain an orderly market

II. offer a higher bid price than the floor brokers

III. provide liquidity to the market

IV. purchase all shares offered as limit sells

60. Faith placed an order to sell 7,500 shares of stock she currently owned. As soon as the order reached the trading floor, the shares were immediately sold. Which type of order did Faith place?

61. Steve placed a limit order to sell 500 shares of stock at $14 a share. Which of the following does Steve know for sure?

I. His order will execute but the time of execution is unknown.

II. His order may never execute.

III. He will receive exactly $7,000 if his order executes.

IV. He could receive more, but not less, than $14 a share.

62. Kelly wants to sell 600 shares of DeLux stock at the going market price after the stock reaches $42 a share. Which type of order should she place?

63. After the trigger point is reached, a stop-loss order will be executed at the:

64. Which one of the following orders is frequently used as a means to limit losses resulting from a short sale?

65. Marcus just placed a stop limit order to sell 100 shares at $21 stop, $18 limit. Which one of the following statements is correct concerning this order if the current market price is $16?

66. Which one of the following statements is correct regarding the NYSE uptick rule?

67. NASDAQ dealers post which one of the following in addition to their bid and ask prices?

68. NASDAQ has which of the following characteristics?

I. trading floor

II. computer network

III. specialist system

IV. multiple market makers

69. Which one of the following statements concerning NASDAQ is correct?

70. The orders displayed on NASDAQ are placed by:

71. Stocks which are listed on the NYSE can:

72. The stocks listed on the Pink Sheets:

73. Which of the following are common characteristic of the OTCBB market?

I. low stock prices

II. dual listings with NASDAQ

III. high percentage price changes

IV. thinly traded securities

74. The DJIA is an index of the stock prices of _____ firms.

75. Stock market indexes:

76. Which one of the following is the primary flaw of a price-weighted index?

77. Which one of the following statements related to stock indexes is correct?

78. Alco Metals just sold 2.7 million shares through an IPO offering. The shares were offered at $21 a share and all shares were sold. The firm received a total of $60,385,500 for this issue. What was the spread?

79. Reliant Underwriters has agreed to a firm commitment underwriting in which they will pay $36.75 million in exchange for 3 million shares of stock for an IPO offering. The offering price is expected to be $13.50 a share. How much will the underwriters earn if all of the shares can be sold?

80. In a recent IPO, the Sausage Co. offered 1.6 million shares of stock at an offer price of $18 a share. The underwriting was conducted on a best efforts basis with a spread of 7.0 percent. The Sausage Co. received a total of $25,079,868.00 in sale proceeds. How many shares were sold?

81. A best efforts IPO underwriting consisted of 2.2 million shares at an offer price of $17 a share. The underwriter’s fee was set at 6.65 percent. How many shares were sold if the issuer received $31,926,260.10?

82. ML Underwriters paid an issuer $37,748,700 as IPO proceeds. The IPO offered 1.86 million shares of which 1.835 million were sold at an offer price of $22 a share. The underwriting spread was 7.75 percent. What type of underwriting was this?

83. DT Metals is offering 700 shares in a Dutch auction IPO. The following bids have been received: What will the gross proceeds be for this offering?

84. Cee The Moon is offering 700 shares in a Dutch auction IPO. The following bids have been received: How much will Cee The Moon receive from this offering if the underwriter’s fee is 7 percent?

85. Mason Materials is offering 800 shares in a Dutch auction IPO. The following bids have been received: How many shares will be allocated to Bidder A?

86. Juno Markets is offering 900 shares in a Dutch auction IPO. The following bids have been received: How much will Bidder B have to spend to purchase all of the shares that have been allocated to him?

87. An index consists of the following securities and has an index divisor of 3.0. What is the priceweighted index return?

88. An index consists of the following securities and has an index divisor of 3.0. What is the priceweighted index return?

89. An index consists of the following securities and has an index divisor of 3.0. What is the priceweighted index return?

90. An index consists of the following securities and has an index divisor of 2.0. What is the priceweighted index return?

91. A price-weighted index consists of stocks A, B, and C which are priced at $38, $21, and $26 a share, respectively. The current index divisor is 2.7. What will the new index divisor be if stock B undergoes a 3-for-1 stock split?

92. A price-weighted index consists of stocks A, B, and C which are priced at $55, $38, and $17 a share, respectively. The current index divisor is 2.75. What will the new index advisor be if stock A undergoes a 5-for-1 stock split?

93. A price-weighted index consists of stocks A, B, and C which are priced at $27, $11, and $18 a share, respectively. The current index divisor is 2.24. If stock B undergoes a 1-for-3 reverse stock split, the new index divisor will be:

94. An index consists of the following securities. What is the value-weighted index return?

95. An index consists of the following securities. What is the value-weighted index return?

96. An index consists of the following securities. What is the value-weighted index return?

97. You have the following information: You want the beginning price-weighted index of these two stocks to be 100. Given this, what is the ending index value?

98. You have the following information: You want the beginning price-weighted index of these two stocks to be 500. Given this, what is the ending index value?

99. An index has a market value of $689,400 at the beginning of the period and $722,009 at the end of the period. If you want the beginning index value to be 100, what is the ending index value?

100. Assume the DJIA closed at 12,487 last night. The divisor is 0.123017848. Assume that 29 of the stocks in the index were unchanged today. One stock increased in value from $54.80 a share yesterday to $57.90 a share today. What is the DJIA index value at the close of trading today?

101. Yesterday, the DJIA closed at 12,309.16. The divisor is 0.123017848. Today, every one of the stocks in the index increased in value by $0.40 a share. What is the value of today’s closing DJIA?

102. An order book displays the following information: You place a market order to buy 100 shares. At what price will your order be executed?

103. An order book displays the following information: You place an order to sell 100 shares. At what price will your order be executed?

104. Describe some of the recent changes in the structure and operations of the NYSE.

105. Explain the NYSE uptick rule and the current controversy pertaining to that rule.

106. Describe the primary advantage and disadvantage of a limit sell order.