CFP Final
the ex-dividend date is defined as _______ business day(s) before the date of record
2
shelf registration allows a firm to register multiple issues at one time with the SEC and then sell those registered shared anytime during the subsequent
2 years
which one of the following statements concerning convertible bonds is false?
a convertible bond should always be worth less than a comparable straight bond
answer this question based on the dividend growth model. if you expect the market rate of return to increase across the board on all equity securities, then you should also expect:
a decrease in all stock values
all of the following will increase the value of an american call except
a decrease in the risk-free rate of return
which one of the following will decrease the value of an american call option?
a decrease in the value of the underlying security
what is a prospectus?
a document that describes the details of a proposed security offering along with relevant information about the issuer
which one of the following transactions occurs in the primary market?
a purchase of newly issued stock from ATamp:T
which one of the following statements is correct?
a tv interview with a firm's CFO could cause a forced delay in the firm's IPO
with dutch auction underwriting
all successful bidders pay the same price per share
felicia purchased an option that she can exercise anytime within the next 6 months. what type of option did she purchase?
american
a stock currently sells for 32 a share. this stock is expected to increase in value over the next six months to as least 36 a share. assume there are 6 month options on this stock with an exercise price of 35. which of these options should have the most value today?
american call
which one of the following grants its owner the right to buy or to sell an asset at a prespecified price at any time during a stated period?
american option
julie opted to exercise her august option on june 20 and as a result received 2,500 for the sale of her shares. which one of the following did julie own?
american put
what is the primary difference between an american call option and a european call option
an american call can be exercised at any time up to the expiration date while the european call can only be exercised on the expiration date
individual investors might avoid requesting 100 shares in an upcoming IPO because they
are more apt to receive shares if they IPO is under allocated
blue stone builders recently offered to sell 45,000 newly issued shares of stock to the public. the underwriters charged a fee of 8 percent and paid blue stone builders 16.40 a share on 40,000 shares. which one of the following terms best describes this underwriting?
best efforts
if a firm enters a sale and leaseback agreement, then
both the lessor and lessee benefit
when you purchase insurance you are in essence:
buying a put option
the total direct costs of underwriting an equity IPO
can be as low as 5.5 percent and as high as 25 percent of proceeds
which one of the following considers all of the options implicit in a project?
contingency planning
the conversion value of a convertible bond is equal to which one of the following?
conversion ratio x stock price
jeff owns a 1,000 face value bond. his can exchange that bond for 25 shares of knj stock at any time within the next 2 years. what type of bond does jeff own?
convertible
dividend payments are distributed on which one of the following dates
date of payment
which one of the following dates is used to determine the names of shareholders who will receive a dividend payment
date of record
the board of directors of wilson sporting equipment met this afternoon and passed a resolution to pay a cash dividend of .42 a share next month. in relation to this dividend, today is referred to as which one of the following dates?
declaration date
when a firm announces an upcoming seasoned stock offering, the market place of the firm's existing shares tends to
decrease
which one of the following rights is never directly granted to all shareholders of a publicly held corporation?
determining the amount of the dividend to be paid per share
a decrease in which of the following will increase the current value of a stock according to the dividend growth model?
discount rate
frozen foods just paid out 3.62 a share to its shareholders. the cash for these payments came from a large sale of assets, not from any earnings of the firm. what are these payments to the shareholders called?
distributions
what is the model called that determines the present value of a stock based on its next annual dividend, the dividend growth rate, and the applicable discount rate?
dividend growth
green roof motels has more cash on hand than its operations require. thus, the firm has decided to pay out some of its earnings in the form of cash to its shareholders. what are these payments to shareholders called?
dividends
what are the distributions of either cash or stock to shareholders by a corporation called?
dividends
when warrants are exercised, the:
earnings per share decrease
brad purchased an option that he can only exercise on the final day of the option period. which type of option did he purchase?
european
steve owns an option that grants him the right to purchase shares of lokier tool stock at a price of 45 a share. currently the stock is selling for 52.40 a share. steve would like to realize his profits but is not permitted to exercise the option for another two weeks. which one of the following does steve own?
european call
which of the following applies to the dividend growth model?
even if the dividend amount and growth rate remain constant, the value of a stock can vary
elizabeth owns a call option on 100 shares of microsoft stock. she has decided to buy those shares. this purchase is commonly referred to as:
exercising the option
which one of the following statements concerning venture capitalists is correct?
exit strategy is a key consideration when selecting a venture capitalist
what is the final day on which an option can be exercised called?
expiration date
maria has a non-cancelable 10 year lease on a industrial grade sewing machine. for accounting purposes this is considered to be a capital lease. the life of the sewing machine is 12 years. maria must pay all taxes, maintenance costs, and insurance premiums related to this lease. what type of lease is this?
financial
travis owns both a september 30 call and a september 30 put. if the call finishes at the money then the put will
finish at the money
D.L. jones and company recently went public. the firm received 20.80 on the entire offer of 25,000 shares. keeser and company served as the underwriter and sold 23,700 shares to the public at an offer price of 22 a share. what type of underwriting was this?
firm commitment
which one of the following represents the capital gains yield as used in the dividend growth model?
g
which one of the following describes the intrinsic value of a put option?
greater of the strike price minus the stock price, or zero
mobile units recently offered 30,000 new shares of stock for sale. the underwriters sold a total of 32,000 shares to the public at a price of 14.50 a share. the additional 2,000 shares were purchased in accordance with which one of the following?
green shoe provision
mark owns both a march 20 put and a march 20 call on alpha stock. which one of the following statements correctly relates to marks position?
if the intrinsic value of marks put increases by 1 then the intrinsic vale of his call must either decrease by 1 or equal 0
a 20 put option on wildwood stock expires today. the current price of the stock is 18.50. which one of the following best describes this option?
in the money
JLK is a partnership that was formed two years ago for the purpose of creating new fad items and distributing them directly to consumers. the firm has been extremely successful thus far and has decided to incorporate and offer shares of stock to the general public. what is this type of an equity offering called?
initial public offeirng
which one of the following terms applies to the value of an option on its expiration date?
intrinsic value
if a firm commitment IPO is overpriced, then the
investors in the IPO may consider suing the underwriters
a financial lease:
is generally called a capital lease by accountants
an operating lease:
is reflected in the footnotes rather than on the balance sheet
with firm commitment underwriting, the issuing firm
knows upfront the amount of money it will receive from the stock offering
if a firm does not expect to owe taxes for a few years and needs some equipment, the firm generally should
lease the equipment with the lessor retaining the tax ownership of the asset
a leveraged lease is a:
lease where the lessor borrows on a nonrecourse basis
the party who uses a leased asset is called the
lessee
ron leases a car from uptown motors and pays $225 a month as a lease payment. which one of the following terms applies to uptown motors?
lessor
in a direct lease, the
lessor is generally an independent leasing company
if a lessor borrows money on a nonrecourse basis to purchase an asset that will be leased to another party, then the
lessor is only obligated to make loan payments as long as the lessor is collecting the lease payments
which one of the following statements is correct?
lessors provide a source of financing for lessees
equipment rentals borrows money on a nonrecourse basis to fund its purchases of construction equipment. this equipment is then leased to contractors. the leases are classified as tax-orientated leases. which of the following terms best describes one of these leases?
leveraged lease
which one of the following does not apply to the lessee of a sale and leaseback arrangement
maintains ownership rights
which one of the following describes the maximum value of a call option?
market price of the underlying stock
the secondary market is best defined by which one of the following?
market where outstanding shares of stock are resold
a financial lease:
may also be classified as a tax-orientated lease
a firm that is very cyclical in nature and requires extra equipment only during its peak periods should consider leasing that equipment using an _______ lease
operating
kate is leasing some equipment from ajax leasing for a period of one year. ajax pays the maintenance, taxes, and insurance costs for this equipment. the life of the equipment is 7 years. what type of lease does kate have?
operating
you own a july 15 call on abc stock. assume today is april 20 and the call has 0 intrinsic value. which one of the following describes this option?
out of the money
which one of the following is a type of equity security that has a fixed dividend and a priority status over other equity securities?
preferred stock
emst & frank stock is listed on NASDAQ. the firm is planning to issue some new equity shares for sale to the general public. this sale will definitely occur in which of the following markets?
primary
all of the following are supporting arguments in favor of IPO underpricing except which one?
provides better returns to issuing firms
which one of the the following is a preliminary prospectus?
red herring
the most cited reason why firms enter into lease agreements is to
reduce uncertainity
what is the form called that is filed with the SEC and discloses the material information on a securities issuer when that issuers offers new securities to the general public?
registration statement
a .45 quarterly cash payment paid by jones and co. to its shareholders in the normal course of business is called a
regular cash dividend
the dividend growth model:
requires the growth rate to be less than the required return
the owner of an american put option has the __________ an asset at a fixed price during a stated period of time
right to sell
alberto currently owns 2,500 shares of southern tools. he has just been notified that the firm is issuing additional shares and he is being given a chance to purchase some of these shares prior to the shares being offered to the general public. what is this type of an offer called?
rights offer
brentwood industries is selling its tool and die equipment to upward financial and then leasing that equipment from upward for a period of 10 years, which is the useful remaining life of the equipment. what type of lease arrangement is this?
sale and leaseback
what is a seasoned equity offering?
sale of newly issued equity shares by a firm that is currently publicly owned
pearson electric recently registered 250,000 shares of stock under sec rule 415. the firm plans to sell 150,000 shares this year and the remaining 100,000 shares next year. what type of registration was this?
shelf registration
which one of the following describes the lower bound of a call's value?
stock price minus the exercise price or zero, whichever is greater
which one of the following statements is correct?
stocks can have negative growth rates
marti owns an option that allows him to purchase abc stock at 50 a share. the 50 price is referred to as the:
strike price
to purchase a share in a rights offering, an existing shareholder generally just needs to
submit the required number of right along with the subscription price
which one of the following statements is correct concerning taxes and leasing?
tax reduction is a legitimate reason for leasing
a financial lease in which the lessor is the owner for tax purposes is called a ________ lease
tax-orientated
which one of the following describes the intrinsic value of a call option?
the call's lower bound value
an operating lease has which one of the following characteristics?
the lessee can cancel the lease prior to the expiration date
which one of the following statements is correct?
the value of a call increases as the exercise price decreases
which one of the following is most likely the primary reason why a lessee opts to lease an asset on a short-term basis rather than buy that asset?
to lower total cost
when selecting a venture capitalist which one of the following characteristics is probably the least important?
underwriting experience
the maximum value of a convertible bond is theoretically:
unlimited
business aid is funded by a group of wealthy investors for the sole purpose of providing funding for individuals and small firms that are trying to convert their new ideas into viable products. what is this type of funding called?
venture capital
which one of the following statements concerning venture capital financing is correct?
venture capitalists often require at least a 40 percent equity position as a condition of financing
amy is a current shareholder of dj industries. she has been given the right to purchase an additional 25 shares of dj industries stock at a price of 32 a share if she exercises that right within the next 12 months. what is this security called that amy has been given?
warrant
which one of the following statements related to warrants is correct?
warrants are generally added as an incentive to a private debt issue
which one of the following statements concerning warrants is correct?
when a warrant is exercised the number of outstanding shares increases
which one of the following statements correctly describes your situation as the holder of a european call option?
you have a right to buy but only on the expiration date