Chapter 16 investment companies

Question 1

first time debt and equity issues occur through

Answer 1

Initial Public Offerings (IPOs)

Question 2

is a securities issue that is placed with one or a few large institutional investors

Answer 2

Private Placement

Question 3

IBs act only as an agent

Answer 3

Best effort underwriting

Question 4

IBs act as principals

Answer 4

Firm Commitment Underwriting

Question 5

is a professionally managed pool of money used to finance new (i.e., start-up) and often high-risk firms

Answer 5

Venture Capital

Question 6

involves relatively long-term positions in assets

Answer 6

Position Trading

Question 7

involves attempts to profit from price discrepancies

Answer 7

Pure Arbitrage

Question 8

involves attempts to profit by forecasting information releases

Answer 8

Risk Arbitrage

Question 9

is the simultaneous buying and selling of at least 15 different stocks valued at $1 million or more

Answer 9

Program Trading

Question 10

created an independent auditing oversight board under the SEC
increased penalties for corporate wrongdoers
forced faster and more extensive financial disclosure
created avenues of recourse for aggrieved shareholders

Answer 10

Sarbanes Oxley (Sox) act of 2002