Series 79 Questions with correct answers
A corporation that elects to pass corporate income and losses to its
shareholders is known as a(n) Correct Answer-S Corporation
Asset Backed Securities could be backed by all of the following
EXCEPT Correct Answer-corporate equipment
In a Direct Participation Program, which of the following types of
compensation paid to brokers are considered underwriter's
compensation? Correct Answer-I. Sales commissions
IV. Continuing fees and trail commissions
When are management presentations typically held within the context of
an M&A process? Correct Answer-At the start of the second round once
bidders have been pared down
All of the following are companies for whom the P/E ratio might be
irrelevant EXCEPT Correct Answer-Highly profitable company
Under Regulation M Rule 101, "actively traded securities" are Correct
Answer-Not subject to a restricted trading period (actively traded
securities, or those with an ADTV value of at least $1 million where the
issuer's common equity securities have a public float value of at least
$150 million)
,Over a period of three weeks, an issuer and underwriters discuss and
negotiate terms of the offering before a registration statement is filed
with the SEC. This period of time is known as the Correct Answer-Pre-
filing period
Brokers Dealer A and Broker Dealer B are co-bookrunners on a debt
offering for XYZ Co, Inc. BD A has a 30% allocation, BD B has a 20%
allocation, and other underwriters share the remainder. During pricing
negotiations between the co-bookrunners and ABC, the deal is expected
to raise between $400 million and $900 million of debt at a rate of UST
+80. The deal ends up being priced at $700 million. ABC is
disappointed that the final pricing was below the top end of the range.
What could the underwriters have done differently to price the deal at
$900 million. Correct Answer-Change the terms of the debt offering
during pricing talks (meaning issue the bonds at a higher interest rate --
this would increase demand more than including more banks in the
underwriting syndicate)
EBIT is often the same as which of the following financial statistics?
Correct Answer-Operating income
Which of the following statements regarding preferred stock are TRUE?
I. Like common, preferred shares generally have voting rights
II. Unlike common, preferred shares generally do not have voting rights
III. Preferred shares typically have greater appreciation potential than
common
IV. Preferred shares typically have less appreciation potential than
common Correct Answer-II and IV
, An underwriter posts a notice on its website that constitutes an offer for
an upcoming deal. Is this offer considered to be a prospectus? Correct
Answer-Yes, because it falls under the definition of "graphic
communication"
Which of the following are sub-investment grade credit ratings?
I. BB+
II. BBB-
III. B1
IV. Baa3 Correct Answer-I and III
NewPublicCo raises capital by selling shares to the public at $58.00 per
share. The spread is equal to 6% of the total proceeds. What would be a
reasonable estimate of the manager's fee for this transaction? Correct
Answer-$0.70 (manager and underwriter fees are usually both 20% of
the gross spread)
A company has 1,200,000 Shares Outstanding, which are trading at
$8.50. Its latest year Sales were $8,500,000 and latest year Net Income
was $950,000. What is the company's P/E ratio? Correct Answer-10.74×
Which of the following is typically addressed in the indemnification
provision of a definitive agreement for a private company seller? Correct
Answer-The seller provides indemnity to the buyer for environmental
liabilities
A corporation that elects to pass corporate income and losses to its
shareholders is known as a(n) Correct Answer-S Corporation
Asset Backed Securities could be backed by all of the following
EXCEPT Correct Answer-corporate equipment
In a Direct Participation Program, which of the following types of
compensation paid to brokers are considered underwriter's
compensation? Correct Answer-I. Sales commissions
IV. Continuing fees and trail commissions
When are management presentations typically held within the context of
an M&A process? Correct Answer-At the start of the second round once
bidders have been pared down
All of the following are companies for whom the P/E ratio might be
irrelevant EXCEPT Correct Answer-Highly profitable company
Under Regulation M Rule 101, "actively traded securities" are Correct
Answer-Not subject to a restricted trading period (actively traded
securities, or those with an ADTV value of at least $1 million where the
issuer's common equity securities have a public float value of at least
$150 million)
,Over a period of three weeks, an issuer and underwriters discuss and
negotiate terms of the offering before a registration statement is filed
with the SEC. This period of time is known as the Correct Answer-Pre-
filing period
Brokers Dealer A and Broker Dealer B are co-bookrunners on a debt
offering for XYZ Co, Inc. BD A has a 30% allocation, BD B has a 20%
allocation, and other underwriters share the remainder. During pricing
negotiations between the co-bookrunners and ABC, the deal is expected
to raise between $400 million and $900 million of debt at a rate of UST
+80. The deal ends up being priced at $700 million. ABC is
disappointed that the final pricing was below the top end of the range.
What could the underwriters have done differently to price the deal at
$900 million. Correct Answer-Change the terms of the debt offering
during pricing talks (meaning issue the bonds at a higher interest rate --
this would increase demand more than including more banks in the
underwriting syndicate)
EBIT is often the same as which of the following financial statistics?
Correct Answer-Operating income
Which of the following statements regarding preferred stock are TRUE?
I. Like common, preferred shares generally have voting rights
II. Unlike common, preferred shares generally do not have voting rights
III. Preferred shares typically have greater appreciation potential than
common
IV. Preferred shares typically have less appreciation potential than
common Correct Answer-II and IV
, An underwriter posts a notice on its website that constitutes an offer for
an upcoming deal. Is this offer considered to be a prospectus? Correct
Answer-Yes, because it falls under the definition of "graphic
communication"
Which of the following are sub-investment grade credit ratings?
I. BB+
II. BBB-
III. B1
IV. Baa3 Correct Answer-I and III
NewPublicCo raises capital by selling shares to the public at $58.00 per
share. The spread is equal to 6% of the total proceeds. What would be a
reasonable estimate of the manager's fee for this transaction? Correct
Answer-$0.70 (manager and underwriter fees are usually both 20% of
the gross spread)
A company has 1,200,000 Shares Outstanding, which are trading at
$8.50. Its latest year Sales were $8,500,000 and latest year Net Income
was $950,000. What is the company's P/E ratio? Correct Answer-10.74×
Which of the following is typically addressed in the indemnification
provision of a definitive agreement for a private company seller? Correct
Answer-The seller provides indemnity to the buyer for environmental
liabilities
