FINC314 Midterm - Sample Exam #1 Multiple Choice (32...

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Sample Exam #1 Multiple Choice (32 points) Choose the best answer for each of the following questions. The questions are worth 4 points each. 1. Which of the following is NOT a feature of the IPO market? a) Historically, IPOs are cheaper than debt offerings. b) Most IPOs perform poorly in the long run. c) The largest IPOs are offered on a “firm commitment” basis. a) IPOs may be underpriced to reduce the underwriting risk. 2. Before the late 1990s, The average amount of underpricing for initial public offerings in the U.S. was: a) Approximately 12 to 15% b) Approximately 43 to 45% c) Almost always 7% d) Smaller than the amount of underpricing for seasoned equity offerings in the U.S. 3. Currently, the Federal Reserve requires the initial margin in an account to be ________________. a) 100% or less b) 50% or greater c) 0% d) at least $500 4. Which of the following securities can be purchased on margin? a) Shares of common equity b) Shares of exchange traded funds (ETFs) c) Shares of an open-ended mutual fund d) Both a) and b) e) Both a) and c) 5. Which of the following is a money market security? a) Corporate Bonds b) 10 year Treasury Bills c) Commercial Paper d) Both a) and b) e) Both b) and c)
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6. Typically, expense ratios of actively managed mutual funds are ________________ expense ratios of index mutual funds. a) less than b) greater than c) equal to 7. Which of the following is NOT a trend observed in U.S. stock markets during the past decade? a) Nasdaq’s share of trading volume relative to the NYSE has increased b) The number of IPOs listing directly on the New York Stock Exchange has decreased c) ECNs have captured an ever-increasing share of Nasdaq trading d) Indirect share ownership through institutions such as mutual funds has increased 8. Which of the following is typically a hidden expense when investing in mutual funds? a) 12b-1 charges b) Front end fees c) Back end fees d) Underpricing Short Problems (44 points) Answer each of the questions below completely. Show all your work. 9. (6 points) You are considering an investment in a closed-end fund traded on the New
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This note was uploaded on 11/02/2010 for the course FINC 314 taught by Professor Silver during the Spring '08 term at University of Delaware.

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FINC314 Midterm - Sample Exam #1 Multiple Choice (32...

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