1.Some investors believe that the decision by management to issue equity as opposed to issuing debt is a signal that: Select one:

A. the stock is currently undervalued. B. the stock is currently overvalued. C. the firm will avoid dilution of stock value. D. a shelf registration of securities will occur.

2.The "winner's curse" is a reminder that:

Select one:

A. successful bidders may often overpay for an object.

B. underwriters charge excessive fees.

C. stocks are much riskier than bonds.

D. underpricing an issue is a cost to existing owners.

3.What percentage of direct expense is required to market stock if the issuer incurs $1 million in other expenses to sell 3 million shares at $40 each to an underwriter and the underwriter sells the shares at $43 each?

Select one:

A. 6.98%

B. 7.19%

C. 7.75%

D. 8.33%

4.Which one of the following is not an advantage of shelf registration?

Select one:

A. The issuing firm can avoid competition from underwriters.

B. Securities can be issued with short notice.

C. Securities can be issued in small amounts without excessive costs.

D. The firm can take advantage of market conditions.