Unless the offering is only for residents of ONE state it must be registered with the SEC. 2. The shareholder may dispose of rights issued in a rights offering simply by doing nothing.—false
Eventually the rights will expire. 3. In calculating the value of one right when the stock is selling "rights-on," the analyst needs to know the number of rights needed to buy one share of stock and: the subscription price per share. 4. Rule 144a makes it tougher to resell privately placed securities.-----false
It makes it EASIER, permitting the sale of letter stock to QUALIFIED BUYERS (large institutions) without a previously required waiting period 5. SEC Rule 415---permits what is known as a shelf registration. 6. A company can ensure the complete success of a rights offering by making use of a standby arrangement. 7. When a stock goes "ex-rights," its market price theoretically declines.----true
It does indeed decline theoretically (see equation 19-3), as Px = [(P0)(N) + S] / [N +1] < P0. 8. The value of a right will often differ from its theoretical value due to speculation and transaction costs.--ture
The actual market value of a right will not always be equal to its theoretical value because of transaction costs, speculation, and the irregular exercise and sale of rights. 9. The capital market involves financial instruments such as bonds, stocks, and six-month bank notes.---fales
The capital markets involve financial instruments with original maturities that exceed one year. 10. Which securities law(s) is (are) involved with state laws regulating the offering and sale of securities? Blue Sky Laws.
This is a quasi-private placement where the firm sells to an investment banker who then sells to investors with registration rights (often). 11. What happens, according to the text, to the average common stock price immediately after the announcement of a new equity issue by a publicly traded firm? The average stock price decreases a few percentage points.
Asymmetric information actually causes investors to bid the stock price down a few percentage points. 12. Which of the following is not a method a firm can use to publicly issue common stock?
Private placement. 13. How are investment bankers generally compensated under traditional underwriting?
Investment bankers actually earn a spread (sales price -- purchase price of all underwritten securities).
Chapter 20 long term debt, preferred stock, and common stock 1. A call provision allows the purchaser of a security to demand repayment of the principal.—false
It is the ISSUER of the security, not the purchaser, who initiates the call of a security. 2. A bond callable at 105 means that a 5 percent call premium will be paid on the face value if the bond is ever called. 3. From an investor's standpoint, a debenture issued by the Acme Aglet Company will appear "riskier" than a share of preferred stock issued by the Acme Aglet Company.---false
In the event of liquidation of the firm, holders of debentures have a higher claim on Acme´s assets over preferred shareholders. 4. The participating feature allows preferred shareholders to share in increasing dividends with the common shareholders.---true 5. A bond issue may be retired by:
calling the bonds if there is a call feature; converting the bonds (if convertible) into common stock. making a single-sum payment at final maturity. all of the above. 6. Which of the following bonds offer the investor the…