Series 79 – Investment Banking Representative Exam Capital Markets & Underwriting 2

Question 1

What is the purpose of a 'roadshow' in the context of a securities offering?

Accepted Answer

To present the investment opportunity to institutional investors and gauge demand before setting the offering price

Answer

The roadshow is a series of presentations by the issuer and underwriters to institutional investors to generate interest, build the order book, and help determine appropriate pricing.

Question 2

In a debt offering, a 'covenant-lite' loan is characterized by:

Accepted Answer

The absence of maintenance financial covenants that would require the borrower to meet ongoing financial tests

Answer

Covenant-lite loans lack maintenance covenants (e.g., leverage ratio tests), giving borrowers more flexibility but providing less protection to lenders compared to traditional leveraged loans.

Question 3

What does it mean when a bond is issued 'at a discount to par'?

Accepted Answer

The bond is sold for less than its face value, resulting in a yield higher than the stated coupon

Answer

When a bond is issued below par value, investors pay less than the face amount, which increases the effective yield above the coupon rate to compensate for the price difference.

Question 4

Which registration exemption allows companies to raise up to $75 million from both accredited and non-accredited investors under a simplified process?

Accepted Answer

Regulation A+ (Tier 2)

Answer

Regulation A+ Tier 2 allows companies to raise up to $75 million per year from accredited and non-accredited investors through a streamlined 'mini-IPO' process with reduced disclosure requirements.

Question 5

In a syndicated loan, a 'term loan B' (TLB) is typically characterized by:

Accepted Answer

Minimal amortization (1% per year) with a bullet payment at maturity, held primarily by institutional investors

Answer

Term Loan B features minimal annual amortization with a large bullet repayment at maturity and is typically distributed to institutional investors like CLOs and hedge funds.

Series 79 – Investment Banking Representative Exam Practice Test

Series 79 – Investment Banking Representative Exam Practice Test

Series 79 – Investment Banking Representative Exam Capital Markets & Underwriting 2