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Series 79 > Trending Topics > Flashcards

Trending Topics Flashcards

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Series 79 Top-Off Exam flashcards
1
Q

What is the term for allows the issuer to redeem the bond prior to its maturity

A

Call feature

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2
Q

What is happening to interest rates if an issuer is likely to call bonds?

A

Interest rates are declining

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3
Q

What principal value do bondholders receive when bonds are called?

A

Par or a premium to par

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4
Q

What interest rate is used for variable rate investment to determine the interest rate?

A

LIBOR

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5
Q

For short-term, fixed rate securities, what rate is used as the benchmark for interest rates?

A

T-Bills

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6
Q

For longer term, fixed rate securities, what rate is used as the benchmark for interest rates?

A

T-Notes or T-Bonds

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7
Q

If an issuer is struggling to sell its debt securities due to a lack of investor demand, what incentive could it offer investors to increase demand?

A

Increase the spread above comparable treasury securities (basically increase the interest rate)

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8
Q

What type of bond has the greatest duration / interest rate risk?

A

Longer term bonds with lower coupon rates

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9
Q

Does a T-Bill pay interest?

A

No, it is essentially a zero coupon bond

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10
Q

For a T-Bill, which is higher- Bond Equivalent Yield (BEY) or discount yield?

A

Bond Equivalent Yield

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11
Q

If an issuer is anticipating a declining interest rate environment, and wants to borrow funds for a longer period, what type of bonds should it issue?

A

Variable / floating rate

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12
Q

What is the longest maturity for a Promissory Note?

A

270 days (9 months)

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13
Q

Does the SEC typically consider a Promissory Note a security?

A

No

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14
Q

What term describes the process by which an underwriter sets aside shares for institutional clients and allows all member firms to compete for orders?

A

Jump Ball

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15
Q

What term describes the amount of shares that an underwriter is allotted for placement to its own clients?

A

Free Retention

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16
Q

The lead underwriter is also referred to as:

A

Book-running manager

17
Q

The book-running lead manager must provide reports on indications of interest and final allocations to the issuer’s ________ (if not, then to its _____):

A

pricing committee; board of directors

18
Q

The Agreement Among Underwriters (AAU) between the book-running lead manager and the other syndicate members must require that any shares trading at a premium to the public offering price which are returned by the purchaser of a syndicate member after secondary market trading:

A

1) be used to offset the existing syndicate short position

or

2) If not syndicate short position exists, the member must either:

  • Offer returned shares at the public offering price to unfilled customers’ orders pursuant to a random
    allocation methodology, or
  • Sell returned shares on the secondary market and donate profits from the sale to an unaffiliated charitable organization with the condition that the donation be treated as an anonymous donation
19
Q

Is a fairness opinion required by law?

A

No

20
Q

Does a fairness opinion exempt the board of directors from its fiduciary duty to shareholders?

A

No

21
Q

T/F: The creator of a fairness opinion must disclose whether additional compensation is contingent on the close of the transaction

A

True

22
Q

Is the fee amount contingent on closing a transaction that is indicated in a fairness opinion required to be disclosed?

A

No, only that a fee exists

23
Q

T/F: A fairness opinion addresses the tax implications of a transaction?

A

False

24
Q

T/F: A fairness opinion written for the target’s Board of Directors is previewed or approved by the acquiror or its advisor

A

False

25
Q

Is the creator of a fairness opinion liable for the accuracy of non-verified information that it’s been provided?

A

No, but it must disclose that the information was not verified

26
Q

What is the formula for Economic Value Added (EVA)

A

Accounting Profit - Opportunity Costs

27
Q

What is a common measure of EVA?

A

[EBIT x (1-t)] - [WACC x Investment Capital]

28
Q

Regarding Return on Invested Capital and WACC, when is an investment or project deemed to have an economic profit?

A

When ROIC is greater than WACC

Series 79 (15 decks)

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