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Chapter 11—Raising Long-Term Financing

MULTIPLE CHOICE

1. Which law mandated the separation of investment and commercial banking? a. | Gramm-Leach-Bliley Act | b. | McFadden Act | c. | Glass-Steagall Act | d. | none of the above |

ANS: C PTS: 1 DIF: E REF: 11.1 The Basic Choices in Long-Term Financing NAT: Reflective thinking LOC: acquire knowledge of financial markets and interest rates

2. A security offering that raises capital for firms is called a(n) a. | primary security offering | b. | secondary security offering | c. | securitization | d. | all of the above |

ANS: A PTS: 1 DIF: E REF: 11.1 The Basic Choices in Long-Term Financing NAT: Reflective thinking LOC: acquire knowledge of financial markets and interest rates

3. A bond sold by foreign corporations to U.S. investors is called a(n) a. | Eurobond | b. | foreign bond | c. | Yankee bond | d. | none of the above |

ANS: C PTS: 1 DIF: E REF: 11.1 The Basic Choices in Long-Term Financing NAT: Reflective thinking LOC: understand stocks and bonds

4. A bank that helps firms to acquire external capital is called a a. | commercial bank | b. | savings bank | c. | investment bank | d. | credit union |

ANS: C PTS: 1 DIF: E REF: 11.2 Investment Banking and the Public Sale of Securities NAT: Reflective thinking LOC: acquire knowledge of financial markets and interest rates

5. Which of the following is not considered an advantage of going public? a. | new capital for the company | b. | listed stock for use as compensation | c. | stock price emphasis | d. | personal wealth and liquidity |

ANS: C PTS: 1 DIF: M REF: 11.3 The U.S. Market for IPOs NAT:

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