Investments HW 3
Explicit costs of an IPO tend to be around --- of the funds raised
7%
The __ price is the price at which a dealer is willing to sell a security
ask
The __ price is the price at which a dealer is willing to purchase a security.
bid
The difference between the price at which a dealer is willing to buy and the price at which a dealer is willing to sell is called the ___.
bid-ask spread
The process of polling potential investors regarding their interest in a forthcoming initial public offering (IPO) is called ___. -market analysis -interest building -book building -customer identification
book building
Purchases of new issues of stock take place _________. -at the desk of the Fed -in the primary market -in the secondary market -in the money markets
in the primary market
Underwriting is one of the services provided by _____.
investment bankers
Transactions that do not involve the original issue of securities take place in _________. -primary markets -secondary markets -over-the-counter markets -institutional markets
secondary markets
The bid-ask spread exists because of ___. -the need for dealers to cover expenses and make a profit -lack of trading in thin markets -market inefficiencies -discontinuities in the markets
the need for dealers to cover expenses and make a profit
Initial public offerings (IPOs) are usually ___ relative to the levels at which their prices stabilize after they begin trading in the secondary market.
under priced
Private placements can be advantageous, compared to public issue, because: I. Private placements are cheaper to market than public issues. II. Private placements may still be sold to the general public under SEC Rule 144A. III. Privately placed securities trade on secondary markets. -I, II, and III -I and III only -II and III only -I only
I only
Rank the following types of markets from least integrated and organized to most integrated and organized: I. Brokered Markets II. Continuous auction markets III. Dealer markets IV. Direct search markets
IV, I, III, II