Series 79 || with 100% Errorless Solutions.
For book-building purposes, which SEC forms are used to track transactions by corporate
insiders? correct answers Form 3, 4 and 5 track insider stock purchases and sales activities. They
help identify an issuer's current shareholders who are insiders, for book-building purposes
Any branch office that supervises 1 or more branch locations must be inspected for compliance
at least every correct answers 1 year; each member firm must inspect at least annually ever
branch office that supervises 1 or more non-branch locations
After the effective date of a registration, an underwriter sends a prospective investor a one-page
flyer summarizing the terms of an offering. Two days earlier, the underwriter sent the same
investor a full final prospectus. Which of the following is TRUE regarding the flyer? correct
answers Any communication sent after a registration's effective date is not considered a
prospectus if it is accompanied or preceded by a prospectus. This is why it is important to
document prospectus receipt, including the date of delivery.
A convertible bond has a conversion ratio of 50. If the bond is currently trading at 90. What is
the parity price of the common stock? correct answers The parity price of the common when the
bond is trading at 90 is $ conversion ratio = parity price of $18. Another way to look at
this is that the price of the bond is currently 10% below par, so the parity price of the common is
10% below the conversion price of $20. The conversion price is par value/conversion ratio.
Which of the following factors affect a debt obligation's coupon? correct answers I. Ratings
II. Maturity
III. Covenants
IV. Security
Who is required to sign-off on the final registration statement, after any deficiencies have been
addressed?
I. Corporate officers of the issuer
II. Underwriters
III.The state securities commission in the issuer's jurisdiction. correct answers For securities
registration, the final sign-off is required of corporate officers of the issuer and underwriters.
All of the following are provisions of Rule 147 EXCEPT correct answers A) the securities can be
offered only to people that are residents of the state
B) the issuer is considered to be doing business within the state if it derived 80% of its gross
revenues from business in that state
C) buyers must hold the securities for at least 12 months before selling them to investors outside
the state
D) the issuers' principal office must be located within the state
,C. Rule 147 addresses intrastate offerings. An issuer is eligible to distribute securities under Rule
147 if its principal office is in the state and it derives at least 80% of its gross revenues from
business in that state, 80% of the assets are located in the state orif it uses 80% of the proceeds of
the sale of securities in the state. Securities under Rule 147 can be offered only to residents of the
state who must hold the securities for 6 months before they can be sold to non-state residents.
Median Calc for 6.3, 6.3, 7.5, 8 correct answers Median EV/EBITDA = (6.3 + 7.5)/2 = 6.9
In an initial public offering (IPO), an underwriter may offer securities for sale, and complete
transactions, during which period of time? correct answers Post-effective period
An investor owns a 6% coupon bond with $1,000 par value. At maturity, the investor will
receive correct answers $1,030 --- assume payment is semi annual
What are potential concerns over using Precedent Transactions to value a company?
I. Existence of sufficient number of comparable transactions
II. Lack of market basis
III. Time period when comparable transactions took place
IV. Reliance on use of IBES consensus estimates correct answers I and III
Quick Ratio correct answers Quick Ratio = (Current Assets - Inventory)/Current Liabilities
The Suitability Rule covers what types of actions that may be taken by a participant in a
securities offering? correct answers The Suitability Rule covers recommendations to a customer
for the purchase, sale or exchange of any security.
The index that is intended to measure the performance of the entire U.S. stock market by
incorporating all U.S. headquartered equity securities is the correct answers The Wilshire 5000
Total Market Index measures the performance of all U.S. headquartered equity securities with
readily available price data.
Cost of equity correct answers The company's cost of equity is the risk-free rate plus the
company's levered beta times the market risk premium (11.9% = 2.9% + 1.56 × 5.8%). The
unlevered beta and the tax rate are not required.
In which two of the following public company sale scenarios might a final bid with a superior
price be turned down in favor of a lower bid?
I. Financing conditionality
II. Higher bidder is not publicly traded
III.Break-up fee is below market
IV.Regulatory hurdles correct answers I and IV
, If a company's accounts receivable are 10% of its cost of goods sold, and its accounts payable are
15% of its cost of goods sold, then what is its days payable outstanding (DPO) ratio? correct
answers The formula for DPO = Accounts Payable (A/P) / cost of goods sold (COGS) x 365. If
A/P is 15% of COGS, then 15% X 365 = 55 days.
Joe is a registered rep currently employed by MidWest Broker-Dealer, a St. Louis based firm.
Joe likes to leave downtown and drive through the rural fields of the midwest on the weekends.
He so enjoys the open plains that he chats with his 12 closest family members to borrow
$200,000 and open his very own farm. Which of the following is true regarding this action?
correct answers Outside business activity requires the firm to be notified of the full details of the
activity. It does not, however, require permission from the firm. Borrowing money from family
members does not require permission from a broker dealer.
Tom and Betty are a married couple with combined net worth $1.2 million in and $200,000 in
steady annual income. They want to invest in a private limited partnership. Which of the
following is TRUE about their status, under the SEC's Regulation D? correct answers Regulation
D defines "accredited investors" as individuals with a net worth of at least $1 million at the time
of purchase; or individuals with single income of more than $200,000 or joint income (with a
spouse) of more than $300,000, in each of the two most recent years. The individual may meet
either the asset or income test. In this case, the asset test is met, but not the income test.
An issuer tender offer expires after the required 20-day period, with very few holders agreeing to
accept the offer. The disappointed issuer chooses to keep the offer open an additional 15 days,
but does not accept payment for any of the shares tendered. May the offer be withdrawn? correct
answers An issuer tender offer may continue for the required offer period of 20 business days,
plus up to a 40-day extension. The offer may be withdrawn by the issuer at any time during this
period, provided payment has not been accepted for shares tendered.
An investor owns a 9% coupon bond with par value of $1,000. The bond can be called after 5
years for a call premium of 104.5. Assuming the bond is called away at the earliest possible date,
how much money will the investor receive upon redemption? correct answers When a bond is
called away, an investor receives the call premium (104.5 percent of par, or $1,045) plus the final
semi-annual coupon payment: 9% x $1,000 par / 2 = $45. Therefore, $1,045 call premium + $45
interest = $1,090
At what point are buyers typically granted access to the data room? correct answers 'At the start
of the 2nd round of the process'
The second round of the auction centers on facilitating the prospective buyers' ability to conduct
detailed due diligence and analysis so they can submit strong, final (and ideally) binding bids by
the set due date. The second round typically starts with the management presentation, often held
in conjunction with site visits.
Buyers are typically afforded access to a populated data room either just before or after the
management presentation, which enables them to conduct deep analysis of detailed information
