An individual investor with a small portfolio who wishes to purchase 100 shares of each IPO is more likely to receive an allocation of shares when:

If an IPO is underpriced then the:    A.  investors in the IPO are generally unhappy with the underwriters. B.  issue is less likely to sell out. C.  stock price will generally decline on the first day of trading. D.  issuing firm is guaranteed to be successful in the long term. E.  issuing firm receives less money than it probably should have. Refer to section 15.5

39.

Which of the following have been offered as supporting arguments in favor of IPO underpricing? I. Underpricing counteracts the "winner's curse". II. Underpricing rewards institutional investors for sharing their opinions of a stock's market value. III. Underpricing diminishes the underwriting risk of a firm commitment underwriting. IV. Underpricing reduces the probability that investors will sue the underwriters.    A.  I and III only B.  II and IV only C.  I and II only D.  I, II, and III only E.  I, II, III, and IV Refer to section 15.5

40.

Which one of the following is a key goal of the aftermarket period?    A.  collection of largest number of Dutch auction bids as possible B.  best determination of a fair offer price for an upcoming IPO C.  price support for a new issue of securities D.  establishment of a broad-based underwriting syndicate for an upcoming IPO E.  widest distribution of red herrings as possible Refer to section 15.4

41.

Which one of the following statements is correct?    A.  The quiet period commences when a registration statement is filed with the SEC and ends on the day the IPO shares commence trading. B.  Lockup agreements outline how oversubscribed IPO shares will be allocated. C.  Additional IPO shares can be issued in accordance with the lockup agreement. D.  Quiet period restrictions only apply to the issuer of new securities. E.  A TV interview with a firm's CFO could cause a forced delay in the firm's IPO. Refer to section 15.4

42.

An individual investor with a small portfolio who wishes to purchase 100 shares of each IPO is more likely to receive an allocation of shares when:    A.  an IPO is substantially oversubscribed than when it is not. B.  the knowledgeable investors feel the issue is underpriced. C.  an IPO is severely underpriced. D.  an IPO is undersubscribed. E.  he or she has a standing order with the underwriter to purchase shares in every IPO handled by that underwriter. Refer to section 15.5