Series 79: Chapter 3 Practice Questions

Chapter 3 Practice Questions

1. 1. Ruddnucker’s Inc. operates a chain of casual dining establishments. Tired of complying with the onerous reporting requirements for public companies, management decides the company should go private, and Ruddnucker’s accordingly makes a tender offer to its existing shareholders. What schedules must Ruddnucker’s file with the SEC in connection with the contemplated transaction?
2. I. Schedule 14D-9
3. II. Schedule 13E-3
4. III. Schedule TO
5. IV. Schedule SR
6. A. I, III, and IV
7. B. I and II only
8. C. II and III only
9. D. III and IV only
10. 2. A value investor is most likely to purchase a stock with which of the following attributes?
11. A. An unusually low price/earnings ratio
12. B. A history of paying dividends reliably
13. C. The potential for an extremely high rate of growth
14. D. A relatively low price/earnings ratio in light of the potential for growth
15. 3. Which of the following is true when an investor takes a short position in a security?
16. I. The investor may be pursuing a strategy to protect gains in a long position in that security.
17. II. It requires an initial purchase of a fraction of the total number of shares in which the investor takes a short position.
18. III. The investor must buy securities on a specified date to cover the short.
19. IV. The total net profit, if any, equals the decline in the price of the security between the time the shares are sold short and the time the covering purchase is made.
20. A. I, II, III, and IV
21. B. III and IV only
22. C. I only
23. D. III only
24. 4. Ann “Indy” Vijalin-Vestor has an online brokerage account. Ann is pursuing a specific investment strategy that involves buying stock in companies whose share prices have dropped precipitously following bad publicity. Of the following investment strategies, Ann is most likely to be following a(n):
25. A.&