Free Chartered Life Underwriter (CLU) II Questions and Answers — Questions and Answers
Question 1: What exactly does it imply when investors work together?
- To ensure the interests of the investors are in line with the founder
- For a fixed price of shares
- So that there would be no undermining between investors
- So that there will be a revelation of information between investors in exchange for preferential allocations of shares (Correct answer)
Correct answer: So that there will be a revelation of information between investors in exchange for preferential allocations of shares
When investors work together, all hidden objectives are exposed, and everyone shares the same vision for the business.
Question 2: Which of the following describes book building as a goal?
- To keep a record of the number of shares the founder has
- To induce institutional investors to cooperate (Correct answer)
- To keep a record of the list of investors
- To record how many shares does an investor has
Correct answer: To induce institutional investors to cooperate
Cooperation is necessary since a successful firm can only be built when the investors who fund its construction have the same objectives.
Question 3: What will happen if all IPOs are somewhat oversubscribed?
- The book runner will pull the offer (Correct answer)
- Reduction of investors
- None of the choices
- Shares will be allocated
Correct answer: The book runner will pull the offer
The ratio of total demand to total supply is known as oversubscription.
Question 4: Which factor or factors affect the LBO?
- The return required by the sponsors
- All of the above (Correct answer)
- The terminal value of the target firm
- The debt capacity of the target firm
Correct answer: All of the above
In a LBO, a group of sponsors undertakes an acquisition of a company by burrowing the target’s cash flow.
Question 5: In an LBO, a group of sponsors buys a business by utilizing the cash flow of the target.
- 2515.15 (Correct answer)
- 2551.51
- 2551.51
- 2515.51
Correct answer: 2515.15
The PV would be calculated using the following method if invested funds generate R% yearly and plan to use a fixed amount each year until some horizon designated by T.
Question 6: Which model, using the average of the Vh and Vl, has a genuine value?
- Price range model
- Demand model
- Simple model (Correct answer)
- Fixed model
Correct answer: Simple model
Retail investors often are aware of the price range when an issuer sells 100 shares, and the maximum demand is typically about 70%.
Question 7: Which of the following types of price-setting is the least common?
- Bidding
- Auction (Correct answer)
- Negotiations
- Direct selling
Correct answer: Auction
The following nations now conduct auctions: France, Israel, Taiwan, and the United States.
Free Chartered Life Underwriter (CLU) II Questions and Answers
What exactly does it imply when investors work together?