F03 Solution

F03 Solution - 1FINANCE 401 - RYERSON UNIVERSITY Final Exam...

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1 FINANCE 401 - RYERSON UNIVERSITY Final Exam – Thursday, December 4, 2003 SOLUTION - All Sections Time allowed: 2.5 hours Aids allowed: 1 Cheat sheet, double sided, 8’1/2” by 11’ Answer all multiple choice questions on the marksense sheet, The exam is out of 100 Answer all non-multiple choice questions in the space provided State any assumptions made on the non-multiple choice questions Please write or print clearly on the non-multiple choice questions All multiple choice questions are worth 2 marks each. 1. If an underwriter purchases an entire issue from an issuer, guaranteeing the success of the offering from the issuer’s standpoint, and if the underwriter then goes and sells the issue to investors, the process involves a: a) Firm commitment b) Best efforts c) Letter of Intent d) Out clause 2. Which of the following is true? a) Private placements are only for equity, not for debt b) Private placements involve private firms issuing securities c) Private placements involve the issuing of securities to selected firms and individuals rather than to the public at large d) Private placements are always placed by the issuer, not by an underwriter 3. Which of the following is NOT an required part of a prospectus? a) A set of financial statements, including the auditor’s report b) The estimated amount to be raised c) A statement as to how the proceeds from the underwriting are to be used d) A statement of expected returns in the future 4. A retractable bond is: a) A bond that investors can change into shares at a particular time b) A bond that investors can cash in for the full face value at some time prior to the stated maturity of the debt
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c) A bond that the issuer can repurchase from the investor at some stated price prior to the stated maturity of the debt d) A bond that the issuer can change into shares at a particular time 5. In which of the following circumstances might a firm decide to ‘call’ its debt? a) When interest rates are higher than the coupon rate on the debt b) When interest rates are lower than the coupon rate on the debt c) When the firm needs more funds than it currently has available d) When interest rates are equal to the coupon rate on the debt 6. Preferred shares are sometimes “cumulative”. This means that: a) Preferred shareholders have voting rights b) Preferred shareholders do not have voting rights c) Preferred shareholders must receive all the dividends owing to them (past and present) prior to common shareholders receiving any dividends whatsoever d) Preferred shareholders receive current dividends prior to any dividends being paid out to common shareholders but any unpaid preferred dividends declared in past periods do not accrue to preferred shareholders 7. Which of the following securities is NOT rated for the risk of default by independent rating agencies? a)
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This note was uploaded on 09/26/2011 for the course FIN 401 taught by Professor Stevejoyce during the Fall '08 term at Ryerson.

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F03 Solution - 1FINANCE 401 - RYERSON UNIVERSITY Final Exam...

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