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FIN 307 > Exam 1 - Chapter 3 - [Slides] > Flashcards

Exam 1 - Chapter 3 - [Slides] Flashcards

1
Q

Primary market

A

Primary market is where the new issues are traded

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2
Q

Seasoned offering

A

New shares with having new shares

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3
Q

What is a file called if its approved by the SEC

A

Prospectus

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4
Q

What is a file called when it’s not approved by the SEC

A

Red herring

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5
Q

Standby underwriting

A

Issues are shared to the stockholders first since they have preemptive rights and then to the investment bankers

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6
Q

Shelf Registration

A

SEC Rule 415: Allows firms to register securities and gradually sell them to the public for two years

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7
Q

Private placements

A

Firm uses underwriter to sell securities to a small group of institutional or wealth investors

  • cheaper than public offerings
  • private placements not traded in secondary markets
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8
Q

What is flotation cost?

A
  • look up he didnt talk about it
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9
Q

Specialist

A

Created a market by buying the highest bid and ask price
(Look up)
( more in the book notecards regarding this definition)

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10
Q

Do you buy at bid or ask price?

A

Ask price

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11
Q

What are the 2 ways to place an order

A
  1. Market order

2. Price-contingent order

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12
Q

What is a market order

A

Executed immediately at the current market price

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13
Q

What is a price-contingent order?

A

Limit, stop loss order

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14
Q

Stop loss order

A

The buyer has to buy

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15
Q

What is the largest over the counter

A

NASDAQ

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16
Q

‘What is the largest exchange in the world

A

New York stock exchange

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17
Q

Can large orders be negotiated through brokers and dealers

A

Yes

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18
Q

______: Electronic order-routing system: Skip Broker

A

SuperDot

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19
Q

______: fully automated execution for small orders: Skip specialist
≈

A

DirectPlus

20
Q

_______: Handle large orders and maintain orderly trading

A

Specialist

21
Q

What did the New York Stock Exchange used to be?

A

Auction

22
Q

What did the NASDAQ used to be?

A

Dealer market with a price quotation system

23
Q

What does ECN stand for

A

Electronic Communication Network

24
Q

What is ECN

A

Private computer networks that directly link buyers with sellers for automated order execution

25
Q

Over the counter

A

There is no physical location.

It is online

26
Q

Is ECN over the counter or an exchange?

A

Over-the-counter

27
Q

What are the 2 secondary market

A
  1. Exchange

2. Over the counter

28
Q

Bond trading

Where is it taking place?

A

Most bond trading takes place in the OTC market among bond dealers

29
Q

Market for many bond issues is “___”

A

Thin

30
Q

What is expanding its bond-trading system

A

NYSE

31
Q

Which is the largest centralized bond market of any U.S exchange

A

NYSE

32
Q

What are the two trading cost

A
  1. Brokerage commission

2. Spread

33
Q

What is Brokerage Commission

A

Fee paid to broker for making the transaction

34
Q

Brokerage Commission

What type cost is it?

A

Explicit cost of trading

35
Q

What is Spread:

A

Difference between the bid and asked price

36
Q

What type of cost is Spread

A

Implicit cost

37
Q

What are the 2 types of Brokerage Commission

A
  1. Full Service
    - all types of information
  2. Discount brokerage
    - they will do what you ask
38
Q

Which one is cheaper
A. Full Service
B. Discount Brokerage

A

B. Discount brokerage

39
Q

Buying on margin means what?

A

Borrowing money and buying stock

40
Q

Buying on Margin

- Who do you buy borrow a loan to buy a stock?

A

A broker

41
Q

Buying on Margin

- What does the margin refer to

A

Margin refers to the percentage or amount contributed by the investor

42
Q

What is the initial margin %

A

50%

43
Q

Buying on Margin

- Maintenance margin

A

Less than 50%

44
Q

Short Sales

A
  1. Borrow stock through a dealer
  2. Sell it and deposit proceeds and margin in an account
  3. Closing out the position: buyer the stock and return to the party fro me which it was borrowed
45
Q

Insider trading

A

Office, directors, major stockholders must report all transaction in firm’s stock

46
Q

Jaffa study:

A

Inside buyers>inside sellers = Stock does well

Inside sellers>inside buyers = stock does poorly

47
Q

True or false: Insiders do exploit their knowledge

A

True

FIN 307 (26 decks)

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