The Problem Set is provided to you to enable you to practice the concepts outlined in the textbook. Select THREE completed problems from the assignment and post your solutions to those problems. 1. Creating prices for securities and allowing for liquidity are functions of 2. Which of the following best describes the function of an investment banker selling an issue on a “best efforts” basis? 3. From the investment banker’s point of view, the major reason syndicates are formed in the distribution of large issues is for the purpose of 4.  ___________ has two major functions: to handle special orders, such as purchases with a price contingency; and to maintain continuous, liquid, orderly markets 5. The Securities Investor Protection Corporation (SPIC) was established to 6. In order to be listed on an exchange, a firm must meet minimum standards pertaining to the following criteria: 7.  Active trading in markets and competition among securities analysts helps ensure that I. Security prices approach informational efficiency II. Riskier securities are priced to offer higher potential returns III. Investors are unlikely to be able to consistently find under- or over-valued securities 8.  __________ assets generate net income to the economy and __________ assets define allocation of income among investors. 9. Asset allocation refers to the __________. 10.  _____ is an example of an agency problem 11.  _____ is a mechanism to mitigate potential agency problems 12. After much investigation an investor finds that Intel stock is currently under priced. This is an example of 13. Suppose an investor is considering one of two investments which are identical in all respects except for risk. If the investor anticipates a fair return for the risk of the security they invest in they can expect to 14. In a perfectly efficient market the best investment strategy is probably a/an 15. An investor in a T-bill earns interest by 16. Which one of the following is a true statement? 17. An individual who goes short in a futures position 18. Investors will earn lower rates of returns on TIPS than equivalent default risk standard bonds if __________________________. 19. An investor purchases one municipal and one corporate bond that pay rates of return of 6.00% and 7.60% respectively. If the investor is in the 15% tax bracket, his after tax rates of return on the municipal and corporate bonds would be respectively 20. June call and put options on King Books Inc are available with exercise prices of $30, $35 and $40. Among the different exercise prices, the call option with the _____ exercise price and the put option 21. If you thought prices of stock would be rising over the next few months you may wish to 22. Private placements can be advantageous rather than public issue because I. private placements are cheaper to market than public issues II. private placements may still be sold to the general public under SEC Rule 144A III. privately placed securities trade on secondary markets 23. The issue process where investors submit bids for a new issue and the shares in an IPO are allocated to the highest bidders until the entire issue is sold is called a 24. Restrictions on trading involving insider information apply to __________. 25. You purchased 100 shares of ABC common stock on margin at $40 per share. Assume the initial margin is 50% and the maintenance margin is 35%. You will get a margin call if the stock drops below _________.

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