Markets Ch 16 HW

on final exam

T/F The process of creating a secondary market for securities or contracts is termed brokerage.

False

T/F In a best efforts offering, the investment banker acts as an agent for the issuer rather than as a principal.

True

T/F An example of a pure arbitrage strategy is to simultaneously buy and sell the same security in two different markets at different prices.

True

T/F If you buy 100 shares of IBM stock in anticipation that earnings will increase by more than anticipated, you are engaging in what is termed a risky arbitrage.

True

T/F The Securities Investor Protection Corporation protects investors against losses due to unfavorable market moves of up to $500,000.

False

T/F FINRA is a government agency that has a mandate to protect America’s investors by making sure the securities industry operates fairly and honestly.

False

A best efforts offering is one in which

the investment banker acts only as a distribution agent.

If an underwriter overestimates the demand for a firm's securities in a firm commitment offering, the underwriter

has no recourse against the firm and will suffer a loss.

Which one of the following statements about venture capitalists is not correct?

Venture capitalists are passive investors.

Security dealers who will buy or sell securities at any time in the market are called

market makers.