F

Question 1

What are the steps in the IPO process

Answer 1

Steps in IPO process:
1. Select Underwriter

2. Due Diligence & Filings
   a. Red herring document to SEC
3. Pricing
   a. Decide the day before the effective date on price as well as how many shares to sell
4. Selling Procedure
   a. Fixed price to sell to the underwriter.
   b. Book building is the process by which an underwriter attempts to determine the price at which an initial public offering (IPO) will be offered.
   c. Private auction
5. Stabilization & Transition

Question 2

Main investor in derivatives in commodities

Answer 2

hedge funds

Question 3

Main investor in long term bonds

Answer 3

mutual funds

Question 4

Main investor in real estate

Answer 4

SOCIMI

Question 5

Main investor in alternative investments

Answer 5

hedge funds

Question 6

Main investor in PE funds

Answer 6

pension plan

Question 7

Main investor in public stocks

Answer 7

mutual funds

Question 8

Main investor in treasury bills

Answer 8

money market funds

Question 9

Main investor in high grade debt

Answer 9

insurance companies

Question 10

Main investment of: insurance company

Answer 10

traded bonds and stocks

Question 11

Main investment of: hedge fund

Answer 11

any type of asset

Question 12

Main investment of: venture debt

Answer 12

debt of growth companies

Question 13

Main investment of: money market funds

Answer 13

treasury bills & short term debt instruments

Question 14

Main investment of: private equity fund

Answer 14

private companies

Question 15

Main investment of: SOCIMI

Answer 15

real estate

Question 16

Main investment of: pension plans

Answer 16

not private companies

Question 17

What is a CLO

Answer 17

Collateralized Loan Obligation is a bond traded and baked up by a pool of credits from different companies.

Question 18

Modigliani and Miller “hold” means that

Answer 18

financial structure is irrelevant because of the factors that make it irrelevant. This includes symmetry of information, perfect capital markets, no transaction costs, no taxes, no agency costs, etc.

Question 19

_____ refers to the shares outstanding that are in circulation (actively being traded). They do not include treasury stock (held by the company).

Answer 19

Free float

Question 20

________, judging whether the market is over/under valued, is on the average historically

Answer 20

ECY (Excess Cape Yield)

Question 21

_______ is a pool of investors that invest in the financial market, are regulated and run by professional managers.

Answer 21

An institutional investor

Question 22

_______ makes the market value of the company relative to one accounting variable or the dividend.

Answer 22

A multiple

Question 23

Which are taxed less? Capital gains or dividends.

Answer 23

Capital gains are taxed less.

Question 24

What is the clientele effect

Answer 24

shareholders pick companies based on their dividend policy (different institutional investors pay different taxes)

Question 25

what’s a scrip dividend

Answer 25

A scrip dividend is new shares of an issuer’s stock that are issued to shareholders instead of a dividend.

Question 26

_____ is a share where the price is free

Answer 26

Bonus share

Question 27

______ decreases the face value if all shares and increases number of shares

Answer 27

A split

Question 28

New shares linked to specific business line or assets are assigned to existing shareholders

Answer 28

Spinoff

Question 29

Different types of shares linked to different business lines substitute the original shares.

Answer 29

split-ups (spinoff)

Question 30

New shares are issued linked to a business line that is considered more undervalued.

Answer 30

split-offs (spinoff)

Question 31

Issue new shares linked to a business line or specific assets and sell them to the general public

Answer 31

Equity carve-out

Question 32

Formula for PSR white operation

Answer 32

PSR price * Number of PSR’s I sold = New Issue Price * ( (# of PSR’s I Held - Number of PSR’s I sold) / # of PSR’s required for new share )

Amount I sold = Amount I spent

The only unknown is Number of PSR’s I sold.

In white operation it’s always going to involve buying the new issue shares rather than the old.