10_Security Markets_sol

10_Security Markets_sol - BM 410 HW #10 Part I: Multiple...

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BM 410 HW #10 Part I: Multiple Choice 1) The bid price of a treasury bond is… A) the price at which the dealer in treasury bills is willing to sell the bill A) the price at which the dealer in treasury bills is willing to buy the bill B) Greater than the ask price of the treasury bill expressed in dollar terms C) The price at which the investor can buy the treasury bill D) None of the above. 2) A bond issue that is usually sold to one or a few institutional investors and generally held to maturity is called a B) Private placement A) Seasoned offering B) Tender offering C) Matched deal 3) Specialists on the stock exchanges may do all of the following except. .. A) They make a market in shares of the firms for which they specialize B) They keep the limit order book C) They act as a broker D) They act as a dealer E) None of the above 4) Real estate generally trades in a A) Direct search market C) Brokered market B) Dealer market C) Auction market 5) A tombstone is A) A declaration that a firm is filing for chapter 11 bankruptcy B) A declaration that a firm is filing for chapter 7 bankruptcy C) A declaration of a proxy fight against the board of a firm D) An ad for an IPO 6) Brokerage firms that aid in the placement of larger block orders are called D) Clearing houses A) Block houses B) Private placement houses C) Trading bourses Please do not share these solutions with students who may be taking BusM 410 in the future. 1
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Part II: Free Response 1. Explain the difference between the primary market and the secondary market. Who are the buyers and sellers in each market? Page 56 of text. The primary market is the market for new security issues. In this market the sellers of the securities are firms who want to raise capital, while the buyers are investors. The secondary market is the market for already existing securities. In this market both buyers and sellers are investors. 2. From the perspective of the firm, specify one advantage and two disadvantages of raising capital via a private placement rather than an IPO. Page 58 of text. Advantage: far cheaper because the firm doesn’t have to prepare the extensive and costly registration statements required of a public offering. Disadvantage 1: Because the private placement is not made available to the
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This note was uploaded on 03/17/2011 for the course BUS M 410 taught by Professor Brianboyer during the Fall '10 term at BYU.

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10_Security Markets_sol - BM 410 HW #10 Part I: Multiple...

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