Question 1

The largest source of funding for securities firms and investment banks as an industry is repurchase agreements.

Accepted Answer

A) True 
 B)False

Question 2

If the investment bank sells 4.5 million shares for $29 per share, how much money does NetChoice, Inc.receive?

Accepted Answer

A) $145,000,000. 
B) $130,500,000. 
C) $143,125,000. 
D) $128,812,500. 
E) $115,762,500. [Refer to: 4-122] 
A) $145,000,000. 
B) $130,500,000. 
C) $143,125,000. 
D) $128,812,500. 
E) $115,762,500. [Refer to: 4-122]

Question 3

The number of investment banks and securities firms expanded rapidly from 1980 to October 1987.

Accepted Answer

A) True 
 B)False

Question 4

If the investment bank were able to sell all 5 million shares for $35, how much money would NetChoice, Inc.receive?

Accepted Answer

A) $195,675,000. 
B) $187,500,000. 
C) $130,250,000. 
D) $175,000,000. 
E) $173,125,000. [Refer to: 4-122] 
A) $195,675,000. 
B) $187,500,000. 
C) $130,250,000. 
D) $175,000,000. 
E) $173,125,000. [Refer to: 4-122]

Question 5

In pure arbitrage, a trader would sell an asset in one market at one price while buying the same asset in another market at a higher price.

Accepted Answer

A) True 
 B)False

Question 6

If the investment bank can sell the shares for $9.75 per share, what is the profit (loss) to the investment banker?

Accepted Answer

A) Profit of $1,000,000. 
B) Loss of $7,500,000. 
C) Profit of $7,000,000. 
D) Loss of $7,000,000. 
E) Loss of $1,000,000. 
A) Profit of $1,000,000. 
B) Loss of $7,500,000. 
C) Profit of $7,000,000. 
D) Loss of $7,000,000. 
E) Loss of $1,000,000.

Question 7

Competition from internet-based and electronic exchanges has led to a decrease in profits of market making.

Accepted Answer

A) True 
 B)False

Question 8

Program trading involves

Accepted Answer

A) online trading services provided to customers by electronic trading securities firms. 
B) computer-driven buying or selling of baskets of 15 or more stocks by institutional traders. 
C) purchase and sale of assets that are potentially but not necessarily equivalent. 
D) buying blocks of securities in anticipation of some information release. 
E) providing a platform for customers to trade without the use of a broker. 
A) online trading services provided to customers by electronic trading securities firms. 
B) computer-driven buying or selling of baskets of 15 or more stocks by institutional traders. 
C) purchase and sale of assets that are potentially but not necessarily equivalent. 
D) buying blocks of securities in anticipation of some information release. 
E) providing a platform for customers to trade without the use of a broker.

Question 9

Cash management accounts did not exist before 1999.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is true about reverse repurchase agreements?

Accepted Answer

A) They are securities purchased under agreements to resell. 
B) They account for less than 5 percent of assets of broker-dealers. 
C) They amount to 40.8 percent of total liabilities and equity of broker-dealers. 
D) They are treated as liabilities. 
E) They are securities temporarily lent in exchange for cash received. 
A) They are securities purchased under agreements to resell. 
B) They account for less than 5 percent of assets of broker-dealers. 
C) They amount to 40.8 percent of total liabilities and equity of broker-dealers. 
D) They are treated as liabilities. 
E) They are securities temporarily lent in exchange for cash received.

Question 11

What is the profit to the investment banker if all 5 million shares were sold for $35 per share?

Accepted Answer

A) Profit of $1,275,000. 
B) Loss of $1,875,000. 
C) Profit of $1,875,000. 
D) Loss of $3,125,000. 
E) Profit of $3,125,500. [Refer to: 4-122] 
A) Profit of $1,275,000. 
B) Loss of $1,875,000. 
C) Profit of $1,875,000. 
D) Loss of $3,125,000. 
E) Profit of $3,125,500. [Refer to: 4-122]

Question 12

Market makers in an NYSE stock are obligated to buy shares from sellers even when the market for the stock is declining.

Accepted Answer

A) True 
 B)False

Question 13

The Securities Investor Protection Corporation (SIPC) protects investors against losses of up to ____ on securities firm failures.

Accepted Answer

A) $100,000 
B) $200,000 
C) $500,000 
D) $1,000,000 
E) $25,000,000 
A) $100,000 
B) $200,000 
C) $500,000 
D) $1,000,000 
E) $25,000,000

Question 14

The concentration of business among the largest firms in the securities firm/investment banking business has increased significantly since the stock market crash of 1987.

Accepted Answer

A) True 
 B)False

Question 15

Investment banks engage in activities such as advising on mergers, acquisitions, and corporate restructuring.

Accepted Answer

A) True 
 B)False

Question 16

According to SEC Rule 415,

Accepted Answer

A) larger corporations can register their new issues with the SEC up to two years in advance. 
B) firms should disclose soft dollar arrangements to their clients. 
C) large investors are allowed to begin trading privately placed securities among themselves. 
D) firms are required to maintain records of the information used to verify the identity of a person opening an account. 
E) publicly held companies must disclose all material information that might affect investment decisions to all investors at the same time. 
A) larger corporations can register their new issues with the SEC up to two years in advance. 
B) firms should disclose soft dollar arrangements to their clients. 
C) large investors are allowed to begin trading privately placed securities among themselves. 
D) firms are required to maintain records of the information used to verify the identity of a person opening an account. 
E) publicly held companies must disclose all material information that might affect investment decisions to all investors at the same time.

Question 17

Venture capital firms assess two major issues when deciding to invest in a company.Which of the following indicates these issues?

Accepted Answer

A) Company management and other funding secured by the company. 
B) A proven company track record and the risk-return tradeoff of an investment. 
C) Potential for a high return on investment and an easy exit strategy. 
D) Funding requested and company financial statements. 
E) Company's potential to generate profits and the funds available to the venture capital company. 
A) Company management and other funding secured by the company. 
B) A proven company track record and the risk-return tradeoff of an investment. 
C) Potential for a high return on investment and an easy exit strategy. 
D) Funding requested and company financial statements. 
E) Company's potential to generate profits and the funds available to the venture capital company.

Question 18

Securities trading and underwriting is a profit generating activity that requires FIs to hold an inventory of securities they trade.

Accepted Answer

A) True 
 B)False

Question 19

How much money does Rochester Industries receive?

Accepted Answer

A) $15,000,000. 
B) $84,000,000. 
C) $76,200,000. 
D) $82,200,000. 
E) $110,000,000. [Refer to: 4-112] 
A) $15,000,000. 
B) $84,000,000. 
C) $76,200,000. 
D) $82,200,000. 
E) $110,000,000. [Refer to: 4-112]

Question 20

Which of the following is true of private placement of securities?

Accepted Answer

A) Securities are placed with few large institutional investors. 
B) Securities of private firms are sold to the investing public at lower prices. 
C) The securities must be registered with the SEC. 
D) Public trading in these securities is not allowed. 
E) Subject to more stringent disclosure and informational requirements than those imposed by the SEC on publicly registered issues. 
A) Securities are placed with few large institutional investors. 
B) Securities of private firms are sold to the investing public at lower prices. 
C) The securities must be registered with the SEC. 
D) Public trading in these securities is not allowed. 
E) Subject to more stringent disclosure and informational requirements than those imposed by the SEC on publicly registered issues.

Exam 4: Financial Services: Securities Brokerage and Investment Banking

The largest source of funding for securities firms and investment banks as an industry is repurchase agreements.

If the investment bank sells 4.5 million shares for $29 per share, how much money does NetChoice, Inc.receive?

The number of investment banks and securities firms expanded rapidly from 1980 to October 1987.

If the investment bank were able to sell all 5 million shares for $35, how much money would NetChoice, Inc.receive?

In pure arbitrage, a trader would sell an asset in one market at one price while buying the same asset in another market at a higher price.

If the investment bank can sell the shares for $9.75 per share, what is the profit (loss) to the investment banker?

Competition from internet-based and electronic exchanges has led to a decrease in profits of market making.

Program trading involves

Cash management accounts did not exist before 1999.

Which of the following is true about reverse repurchase agreements?

What is the profit to the investment banker if all 5 million shares were sold for $35 per share?

Market makers in an NYSE stock are obligated to buy shares from sellers even when the market for the stock is declining.

The Securities Investor Protection Corporation (SIPC) protects investors against losses of up to ____ on securities firm failures.

The concentration of business among the largest firms in the securities firm/investment banking business has increased significantly since the stock market crash of 1987.

Investment banks engage in activities such as advising on mergers, acquisitions, and corporate restructuring.

According to SEC Rule 415,

Venture capital firms assess two major issues when deciding to invest in a company.Which of the following indicates these issues?

Securities trading and underwriting is a profit generating activity that requires FIs to hold an inventory of securities they trade.

How much money does Rochester Industries receive?

Which of the following is true of private placement of securities?

Why Are Financial Institutions Special

Financial Services: Depository Institutions

Financial Services: Finance Companies

Financial Services: Mutual Funds and Hedge Funds

Financial Services: Insurance

Risks of Financial Institutions

Interest Rate Risk I

Interest Rate Risk II

Credit Risk: Individual Loan Risk

Credit Risk: Loan Portfolio and Concentration Risk

Liquidity Risk

Foreign Exchange Risk

Sovereign Risk

Market Risk

Off-Balance-Sheet Risk

Technology and Other Operational Risks

Fintech Risks

Liability and Liquidity Management

Deposit Insurance and Other Liability Guarantees

Capital Adequacy

Product and Geographic Expansion

Futures and Forwards

Options, Caps, Floors, and Collars

Swaps

Loan Sales

Securitization

Filters