Free SERIES 7 Exam Braindumps (page: 39)

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An excerpt from a recent tombstone ad reveals bonds offered publicly at 101. Why were they priced at a premium?

  1. to enable investors to establish a tax loss when the bonds are redeemed at maturity
  2. to reflect prevailing credit ratings and market conditions for the issuer
  3. to provide the issuer with a larger deduction from pre-tax earnings for higher than usual interest payments
  4. to comply with SEC rules mandating such pricing for debt issues maturing in the year 2000 and thereafter

Answer(s): B

Explanation:

to reflect prevailing credit ratings and market conditions for the issuer. Premiums or discounts are used in bond offerings to bring the yield in line with current market conditions.



Securities may be sold under SEC rule 144 provided that the following conditions are met:

  1. the company files regular financial data with the SEC
  2. they are sold in agency transactions only
  3. they are sold in principal transactions only
  4. both A and B

Answer(s): A

Explanation:

the company files regular financial data with the SEC. Rule 144 transactions may use either agency or principal methods.



The agreement between the members of a syndicate and the manager is known as the:

  1. agreement among underwriters
  2. underwriting agreement
  3. standby agreement
  4. selling agreement

Answer(s): A

Explanation:

agreement among underwriters. This agreement authorizes the manager to handle the offering. The final contract between the manager and the issuer is the “underwriting agreement”.



A new stock offering by Bubba Corporation provides details that state between 1,000,000 and 1,500,000 shares will be sold depending upon market conditions. This offering is a:

  1. best efforts
  2. standby
  3. mini-max
  4. market potential

Answer(s): C

Explanation:

mini-max. These offerings state the minimum and maximum number of shares offered.






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