FIN367 S08Test1B

FIN367 S08Test1B - FIN 367 Spring 2008 Test 1 Basic...

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Unformatted text preview: FIN 367: Spring 2008 Test # 1: Basic Concepts February 4, 2008 NAME: SECTION: Time allowed: 1 hour, 15 minutes. Maximum possible score: 100. NOTE: • If I cannot understand your calculations, I will not be able to give you full credit even if your final answer is correct. You cannot say “these calculations are obvious.” • If a problem is missing some key information that you think is necessary to solve the problem, please ask me to clarify the question or state your confusions clearly. Alternatively, please make appropriate assumptions, state them clearly and proceed. No credit will be awarded if you fail to state your confusions or assumptions explicitly even if the question is wrong . • Partial credits may be awarded if you show your calculations or provide arguments to support your answers. 1 I Multiple Choice and Very Short Questions (25 points, 15 minutes) 1. (2 points) Assume that a company announces an unexpectedly large cash dividend to its share-holders. In an efficient market without information leakage, one would expect: (a) An abnormal price change at the announcement. (b) An abnormal price change before the announcement. (c) An abnormal price change after the announcement. (d) No abnormal price change before or after the announcement. 2. (2 points) If a spet sets a wide bid-ask spread, he/she would participate in ———- trades and would earn ———- profits. (a) very few, low (b) all, high (c) none of the, zero (d) None of the above. 3. (2 points) Which of the following is not a characteristic of closed-end mutual funds? (a) The number of shares outstanding can change from day to day. (b) Bought and sold on a secondary market such as the NYSE. (c) Generally trade at a discount from Net Asset Value. (d) All of the above are characteristics of closed-end funds. 4. (2 points) An Initial Public Offering (IPO) in which the underwriter tries to sell as many shares as possible for the issuing firm and does not take any risk of selling the shares is referred to as: (a) A firm commitment underwriting (b) A competitive bid underwriting (c) A best efforts underwriting (d) A negotiated bid underwriting 2 5.5....
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This note was uploaded on 03/30/2010 for the course CH 369 taught by Professor Kbrowning during the Spring '07 term at University of Texas.

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FIN367 S08Test1B - FIN 367 Spring 2008 Test 1 Basic...

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