Test ID: 252254061

The Big Shoe Sneaker Company is a small manufacturer of athletic shoes. It is selling $100 million of its stock. This will be its third public offering of the company stock. It will use the money to enhance both marketing and production with a plan to grow the business and obtain a Nasdaq listing in two or three years. After the initial sale of the new shares, buyers of the stock in the over-the-counter market should expect to receive the final prospectus for how many days? A)Buyers in the secondary market are never entitled to the initial public offering (IPO) prospectus B)25 days C)90 days D)40 days

D)40 days This is an additional public offering (APO) of an unlisted, non-Nasdaq, security. The requirement is that the prospectus be made available to buyers in the secondary market for 40 days after the release date. The other requirements are: listed IPO—25 days, listed APO—0, non-listed IPO—90 days. LO 1.b

Risk that is difficult to reduce by diversification within an asset class is called which of these? A)Unsystematic risk B)Nonsystematic risk C)Financial risk D)Systematic risk

D)Systematic risk Systematic risk affects an entire asset class in the same way, so diversification does little to reduce systematic risks. Market and interest rate risk are examples. Unsystematic and nonsystematic risk are different terms for the same class of risk. Financial risk is a specific nonsystematic risk. LO 7.a

Which of the reasons for termination on the U5 form would require a further explanation? I. Voluntary II. Death III. Permitted to resign IV. Discharged A)II and III B)III and IV C)I and III D)I and II

B)III and IV The causes permitted to resign, discharged, and other all require a more detailed explanation. Of the five reasons for termination on the form, only voluntary and deceased do not require further explanation. In a voluntary termination, the representative may not have stated the reasons for leaving. If deceased, that explains itself. LO 12.a

Records of original entry must be recorded no later than the next business day and must be kept readily available for A)three years. B)two years. C)six years. D)four years.

B)two years. The records must be maintained for a period of six years, but must be readily available for two years. LO 10.g

ABC Corporation raised capital through an offering of equity securities. Which component of the balance sheet has changed as a result? A)Current assets B)Fixed assets C)Long-term liabilities D)Current liabilities

A)Current assets When equity securities are issued, cash (a current asset) and net worth increases. Fixed assets and liabilities remain unchanged as a result of the offering. LO 9.d

A prospectus must be delivered to customers following a transaction in all of the following except A)ETFs. B)mutual funds. C)unit investment trust. D)follow-on offering of common stock by a public reporting company.

A)ETFs. ETFs make final and summary prospectuses available, for example on a website, for viewing or downloading but there is no requirement to send one to those who trade the exchange-traded fund. Publicly traded closed-end funds are not obligated to deliver a prospectus when traded in the secondary market place. LO 5.j

Isaac James has some call options in his account that he would like to exercise. He wants to know when the resulting purchase of the stock would settle. You would tell him A)trade date plus 2 business days. B)trade date plus 3 business days. C)trade date plus 1 business day. D)trade date.

A)trade date plus 2 business days. When purchasing or selling an option, the settlement is the next business day. When an option is exercised the resulting stock transaction is 2 business days following exercise. LO 1.i

A fund's expense ratio is expressed as which of the following? A)A dollar amount based on annual costs B)A percentage of the fund's total assets C)A percentage of the fund's net assets D)A dollar amount based on monthly costs

C)A percentage of the fund's net assets A fund's expenses are expressed as a percentage of net assets. LO 4.c

Who benefits most from a defined benefit plan? A)Employees with more years until retirement B)Younger employees C)Older employees D)All benefit the same

C)Older employees Because the older employee has fewer years left to work, the contribution made by the company will be higher. LO 6.f

Regarding preferred stock, all of the following are true except A)the right to vote on corporate issues is not available for preferred shareholders. B)preferred shareholders have no preemptive rights that precede the preemptive rights of common shareholders. C)a corporation issuing common shares must issue at least one class of preferred shares. D)preferred shareholders are paid before common shareholders in the event of a corporate bankruptcy.

C)a corporation issuing common shares must issue at least one class of preferred shares. No corporation is required to issue any class of preferred stock. Preferred shareholders have no voting rights or preemptive rights but are paid before common shareholders in the event of a corporate dissolution. LO 2.d

The primary use for a revocable living trust is to A)prevent the grantor from liquidating his estate prior to death. B)avoid tax consequences for the grantor. C)use as a substitute for a will. D)limit the grantor access to items in the estate.

C)use as a substitute for a will. While the grantor is alive he has full control of the trust. It is mainly used in place of a will. LO 6.c