Series 79: Chapter 7 Practice Questions

Chapter 7 Practice Questions

1. 1. The lead manager in a public offering typically assists with a “road show” for the offering in each of the following ways except:
2. A. Supplying an analyst to answer investor questions during the road show
3. B. Helping the issuer create road show presentations
4. C. Scheduling road show presentations with interested investors
5. D. Helping make sure road show presentations contain required disclosures
6. 2. In an underwriting context, the “green shoe” option is best described as:
7. A. An option giving the lead manager a future credit for the difference between the public offering price and the price at which the issuer sells the shares to the lead manager
8. B. An option allowing the issuer to cancel the offering if the proposed public offering price is more than 5% below a specified amount
9. C. An option granted to institutional investors to purchase up to 10% more than the requested allotment of an IPO
10. D. An option allowing underwriters to purchase more shares than the amount listed in the prospectus
11. 3. Freeman & Co. is the managing underwriter in a follow-on offering by It’s the Yeast You Can Do Inc., a U-bake bread company. Freeman & Co. observes with dismay that the offering is not as popular as anticipated. It prepares to make a stabilizing bid to prevent a decline in the price of ITYYCD’s stock. Which of the following is not true?
12. A. The bid may not exceed the offering price.
13. B. The bid must be made in the principal market for ITYYCD’s shares.
14. C. No bid may be made unless the possibility of a stabilizing bid was disclosed in advance to purchasers.
15. D. Freeman & Co. must grant priority to any independent bid at the same price.
16. 4. Nosup Foryu is the sole managing underwriter of an IPO of FlavorGrope Inc., a processed food company. FlavorGrope issues 20 million shares at $22 per share. Nosup For