Corporate Finance Multiple Choice Questions

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71. The difference between the public-offer price and the price paid by the underwriter is called
(A) underpricing
(B) spread
(C) commission
(D) margin

72. The underwriters receive their payments in the shape of
(A) underpricing
(B) spread
(C) commission
(D) margin

73. Rights issues are for
(A) managers
(B) directors
(C) existing shareholders
(D) new shareholders

74. The interest rate earned if a financial asset is held until its maturity is called
(A) term structure
(B) spinning
(C) yield
(D) spread

75. The price of a stock is $100, and it could be $95 or $115 the next year. What is the expected return?
(A) 5%
(B) 6%
(C) 7%
(D) 7.5%

76. The price of a stock is $100, and there are 40% chances that it would be $95 and 60% chances that it would be $115 the next year. What is the expected return?
(A) 5%
(B) 6%
(C) 7%
(D) 7.5%

77. A company’s agreement with the underwriter include
(A) spread
(B) greenshoe option
(C) A and B
(D) whiteshoe option

78. The long-run returns of Initial Public Offerings (IPOs) tend to __________ the market.
(A) underperform
(B) accelerate
(C) amplify
(D) none of these

79. Spread is __________ for IPOs.
(A) highest
(B) lowest
(C) average
(D) uncertain

80. The value of a financial derivative depends on the
(A) maturity
(B) duration
(C) forward interest rate
(D) underlying

ANSWERS: CORPORATE FINANCE MULTIPLE CHOICE QUESTIONS
71. B
72. B
73. C
74. C
75. A
76. C
77. C
78. A
79. A
80. D

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