Capital Markets & Underwriting Flashcards
6 cards from real Series 79 – Investment Banking Representative Exam practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Capital Markets & Underwriting flashcards as text
What is the purpose of a 'roadshow' in the context of a securities offering?
Answer: To present the investment opportunity to institutional investors and gauge demand before setting the offering price
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.
In a debt offering, a 'covenant-lite' loan is characterized by:
Answer: The absence of maintenance financial covenants that would require the borrower to meet ongoing financial tests
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.
What does it mean when a bond is issued 'at a discount to par'?
Answer: The bond is sold for less than its face value, resulting in a yield higher than the stated coupon
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.
Which registration exemption allows companies to raise up to $75 million from both accredited and non-accredited investors under a simplified process?
Answer: Regulation A+ (Tier 2)
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.
In a syndicated loan, a 'term loan B' (TLB) is typically characterized by:
Answer: Minimal amortization (1% per year) with a bullet payment at maturity, held primarily by institutional investors
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.
When underwriters 'stabilize' an offering, they are permitted under Regulation M to:
Answer: Buy shares in the open market at or below the offering price to prevent the stock from falling below the IPO price
Regulation M permits underwriters to engage in stabilizing bids by purchasing shares at or below the offering price in the open market to support the stock after an IPO.
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