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31. Which of the following is true about a best-efforts offering?

a.The investment bank is compensated based on the number of securities sold.

b.The risk of the securities not selling or not selling at a desired price is borne by the issuing firm, not the investment bank.

c.Typically, the smaller and more risky issuers are forced to use this type of offering.

d.All of the above is true.

 

32.Which of the following is NOT a source of funds for security brokers and dealers?

a.customer credit balances

b.federal funds sold

c.repurchase agreements

d.call loans from banks

e.All of the above are sources of funds for security brokers and dealers.

 

33. A venture capitalist provides seed financing

a.at the "idea" stage of a new business

b.at the product development stage.

c.at the time of the IPO.

d.in the year prior to the public offering.

 

34.Mezzanine or bridge financing is provided by a venture capital firm to finance

a.seasonal inventory needs.

b.long-term capital needs.

c.before the IPO.

d.research and development.

 

35.Which of the following is not a form of a venture capital firm?

a.a private fund

b.a corporate subsidiary

c.a publicly funded small business investment corporation

d.a trust department of a commercial bank

 

36.Venture capital firms provide _______ financing to be used for product development and               initial marketing and _______ financing to initiate manufacturing and sales.

a.start-up; first-stage

b.seed; start-up

c.seed; first-stage

d.first-stage; start-up

e.first-stage; second-stage

 

37.  Rehman Sisters, an investment bank, agrees to a firm commitment offering of 2 million               shares of Pear Computer stock.  The offer price is set at $55 and the spread is 50 cents per               share.  If the stock is actually sold to the public at $53.80 however, what is Rehman               Sisters’ gain or loss?

a.$1,400,000 gain

b.$1,400,000 loss

c.$500,000 gain

d.$500,000 loss

e.$1,000,000 loss

 

38.  Megan Stanlee, an investment bank, agrees to a best efforts offering of 2.5 million shares               of Macrohard Computer stock.  The offer price is set at $35 per share.  There are no other               fees or expenses. If the stock is actually sold to the public at $34.50 and the banker               charges a 3.45 cent commission per share sold, what is the amount of funds that               Macrohard Computer receives?

a.$88,750,000

b.$87,500,000

c.$86,163,750

d.$85,176,430

e.$84,122,560

 

39.  Which one of the following securities firms’ activities is generally the most risky?

a.Best efforts offering

b.Private placement

c.Program trading

d.Pure arbitrage

e.Firm commitment offering

 

40.  Which one of the following statements about venture capitalists is NOT correct?

a.Venture capitalists are aggressive investors

b.Venture capitalists contribute liability financing rather than invest in equity

c.Most private venture capitalists are organized as limited partnerships

d.The federal government licenses some private firms to provide lower cost funds to entrepreneurs

e.Angel venture capitalists are wealthy individuals who fund business startups.

 

 

 

 

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