Chapter 3 Flashcards

1
Q

What is the primary role of investment bankers?

A

They are often hired for the sale of securities into primary markets.

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2
Q

What happens following an IPO if a buyer no longer wishes to hold a security?

A

It is sold in a secondary market.

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3
Q

If you companies such as Microsoft wishes to officers to the public how they go about doing so?

A

They will utilize a seasoned equity offering

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4
Q

What explicit costs arise from the purchase or sale of securities?

A

Taxes, brokerage fees, and bid ask spread

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5
Q

What are the different types of market available?

A

Direct search, auction, dealer, broker.

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6
Q

What are the goals of financial markets?

A

I.) Provide liquidity
II.) Create a low cost investment method
III.) Minimize time to trade
IV.) Create price continuity
V.) Bring together buyers and sellers
VI.) Set and update financial asset prices
VII.) Reduce information costs

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7
Q

What is rule 415?

A

Also known as shelf registration, rule 415 allows for company’s in good standing to gradually release shares with 24 hour notice. Therefore reducing time to market and costs.

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8
Q

When were fix commissions eliminated

A

1975

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9
Q

What was the NASDAQ scandal in 1994?

A

Due to the quotation system, they were inflating the bid ask spread in order to pocket a larger difference

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