Questions

1. Salza Corp. is a public corporation plans to issue/sell new shares in order to finance new project. The company is currently evaluating a proposal of signing a contract with an investment bank to act as an underwriter to handle and facilitate the issuing process. The company prefers to guarantee the sale of the total number of issued shares to collect the needed amount of money.

a. What type of financial institution can act as an underwriter?

b. What type of share offering will take place? IPO of seasoned offering?

c. Should the underwriter act as a distribution agent or as a principal in this case?

2. Assume that the financial analysts in Tokyo Stock Exchange (the stock market in Japan) claim that the current market stock prices reflect all past and current public and private information. According to the Efficient Market Hypothesis, which one of the following best describes Johannesburg Stock Exchange?

a. It represents a weak form market efficiency.

b. It represents a semi-strong form of market efficiency.

c. It represents a strong form of market efficiency.

d. A and B.

e. None of the above.

3. Explain the main characteristics of preferred stocks.