Which of the following statements is NOT true? About half of all corporate debt is sold through the private placement market. Private placement occurs
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- Which of the following statements is NOT true of PIPE transactions? In a PIPE transaction, investors purchase securities (equity or debt) directly from a publicly traded company in a private placement. PIPE transaction gives issuers faster access to capital. The securities are virtually always sold to the investors at a discount to the price at which they would sell in the public markets. PIPE transactions are registered with the SEC.Which of the following statements is CORRECT? A. Capital market instruments include both mortgages and U.S. Treasury bonds. B. An example of a primary market transaction would be your uncle transferring 100 shares of Wal-Mart stock to you as a birthday gift. C. The NYSE does not exist as a physical location. Rather it represents a loose collection of dealers who trade stock electronically. D. While the two frequently perform similar functions, investment banks generally specialize in lending money, whereas commercial banks generally help companies raise large blocks of capital from investors.If an investment bank offers both underwriting/distribution functions and investment advisory or management functions, which situation would be acceptable under U.S. Securities and Exchange regulations and ethics guidelines with regard to material non-public information (MNPI)? Allowing MNPI acquired in the sell side of the business to influence the recommendations made by the buy side of the business. Trading of personal securities based on MNPI available only to the buy side of the business and not to the sell side due to a "wall." "Bringing someone over the wall" to provide value to underwriting, who does not comment on MNPI until it has been made public. Acquiring MNPI in the buy side of the business and disseminating it to the sell side of the business.
- Which of the following statements is NOT true? A. Debt contracts tend to impose more restrictions on the actions of the borrower than the lender B. Larger corporations have easier access to the securities market C. The financial sector is one of the least regulated industries in the US economy D. Collateral is used to secure debt contractsYou are working for a mid-sized company that is looking to estimate its cost of debt. The company has never had an issuance in the bond market. What would be the best proxy to estimate its cost of debt? A. Cost of its bank debt B. Cost of its equity C. Cost of debt from companies of a similar market capitalization D. Cost of debt in the corporate bond marketOne of the below does not belong to Commercial Banks Their stocks are only publicly traded It takes the biggest portion among financial intermediaries They serve both to retail and corporate customers They are the main providers of credit
- Which of the following is CORRECT? a. One advantage of operating a business as a corppration is that stockholders can deduct their pro rata share of the taxes the firm pays, thereby eliminating the double taxation investors would face in partnership. b. Because bankruptcy requires that corporate bondholders be paid in full before stockholders receive anything, bondholders generally prefer to see corporate managers invest in high risk high return project rather than low risk low return. c. Since bondholders receive fixed payments, they do not share in the gains if risky projects turn out to be highly successful. However they do share in the losses if risky projects fail and drive the firm into bankruptcy. Therefore, bondholders generally prefer to see corporate managers invest in low risk low return projects rather than high risk high return project. d. One drawback of forming a corporation is that you lose the limited liability that you would otherwise receive as a proprietor. e.…Until the 1970s, almost all investment banking firms were private partnerships, generally with a limited capital base. When underwriting large securities offerings, these partnerships almost always formed underwriting syndicates, in order to meet regulatory capital requirements, distribute the securities, and share risk. Many investment banking firms had “relationships” with corporations. In the 1970s, the investment banking industry began to change to a more “transactional” form, where corporations use different investment bankers for different services, on an as-needed basis. Investment banking firms have grown in size and scope, largely through mergers, and most of the larger firms have converted to publicly traded stock companies. Requirement: Assuming as an Investment Banker a). Discuss why the company needs to raise capital – should they raise debt or equity, and what’s the best way to do it? Shedding light on the several aspects, ALSO DISCUSS why firms go public, mechanism…Which of the following statements correctly describes the nature of direct financing as discussed in lectures? Group of answer choices A. More than one of the other answers is correct B. It is the source of financing whenever an investor purchases shares that are listed on the Australian Securities Exchange. C. None of the other answers is correct D. May involve an individual investor buying shares in a company when a company goes public via an initial public offering. E. It relies upon an intermediary to facilitate the flow of funds from surplus to deficit units, unlike indirect financing I answered D, is it correct?
- Matilda has recently been appointed as an analyst within the Waltzing Investment Co. Part of her role is to advise fund managers on the fixed income portion of their portfolio. a. One of Matilda’s colleagues suggests that analyzing the bonds issued by foreign governments is more complex than for the bonds issued by domestic corporate bonds. The colleague states that this difficulty is a result of the intangible and non-quantitative elements involved in analyzing the foreign bonds. Discuss whether you agree with this argument.The SEC attempts to protect investors who are purchasing newly issued securities by making sure that the information put out by a company and its investment banks is correct and is not misleading. However, the SEC does not providean opinion about the real value of the securities; hence, an investor might paytoo much for some new stock and consequently lose heavily. Do you think theSEC should, as a part of every new stock or bond offering, render an opinion toinvestors on the proper value of the securities being offered? Explain.Which of the following is a disadvantage of a company going public? Going public mandates compliance with ongoing SEC disclosure requirements. The amount of equity capital that can be raised in the public equity markets is typically less than the amount that can be raised through private sources. A company can raise equity capital only once by going public. There are millions of investors in public stock markets, and it is not easier for firms to reach these investors through public markets.