Question

1. The total market capitalization of a publicly traded company is calculated as:

1. Number of shareholders * stock price
2. Dividends per share * stock price
3. Stock price * earnings per share
4. Outstanding shares * stock price

2. The primary source of funds for a commercial bank is:

1. Loans from other banks
2. Sale of common stock
3. Deposits from customers
4. None of the above

3. A firm will look to sell shares at a secondary offering:

1. at the offer price of the IPO
2. below the prevailing market price
3. above the prevailing market price
4. at the prevailing market price

4. Which of the following is not considered an investment professional on the management team of a mutual fund?

1. security analyst
2. broker
3. security trader
4. portfolio manager

5. Which of the following would not be considered a key benefit to the average consumer of investing in a mutual fund?

1. brokerage services
2. ease of entry – low investment amounts
3. expert management
4. diversification

6. A company is reinvesting their current profits back into their business to expand their business operations in an effort to boost future revenues. The publicly traded stock of this company would best be described as which of the following?

1. growth stock
2. treasury stock
3. value stock
4. balanced stock

7. Which of the following would be considered a depository institution?

1. mutual fund
2. full-service brokerage firm
3. commercial bank
4. discount brokerage firm

8. Which of the following is not a service an investment banking firm would provide during an IPO?

1. distribution
2. advising
3. asset management
4. origination

9. McDonald’s stock is currently trading at $196 a share. You call your broker and tell her that you would like to buy shares of McDonald’s when the price falls to $190 a share. This is what type of order?

1. limit order
2. spot order
3. happy meal order
4. market order

10.       During the IPO process of a company issuing common stock for the first time to fund their expansion, what is the process that has the company management and the securities firm traveling to meet with institutional investors to gauge their interest in buying the stock known as?

A.) Due Diligence

B.) Asset Raising

C.) Road Show

D.) Sales Calls

Answer 1

1. Outstanding shares * stock price
(This is the formula for calvulating total market capitalization.)

2. Deposits from customers
(Customer deposits are the primary source of funds.)

3. at the prevailing market price
(Shares at secondary offering are sold at the going market price.)

4. broker
(A broker is not an investment professional.)

(Note: As HOMEWORKLIB's policy, 4 MCQs are to be answered at a time.)