Question 1

The price of newly issued stock should be ____ the market price of the firm's outstanding stock.

Accepted Answer

A) about the same as 
B) much more than 
C) much less than 
D) either much more than or much less than, depending on the amount of stock issued 
A) about the same as 
B) much more than 
C) much less than 
D) either much more than or much less than, depending on the amount of stock issued

Question 2

Securities firms commonly engage in all of the following EXCEPT

Accepted Answer

A) proprietary trading. 
B) underwriting stock. 
C) operating mutual funds. 
D) providing brokerage services. 
E) operating credit unions. 
A) proprietary trading. 
B) underwriting stock. 
C) operating mutual funds. 
D) providing brokerage services. 
E) operating credit unions.

Question 3

One reason for the financial problems of securities firms during the credit crisis was that they used a high degree of financial leverage.

Accepted Answer

A) True 
 B)False

Question 4

A bridge loan provided by a securities firm would most likely be made to

Accepted Answer

A) an acquirer that needs temporary financing to complete a merger. 
B) a commercial bank in the federal funds market. 
C) a mutual fund that needs to cover share redemptions. 
D) an institutional investor that has received a margin call and needs to add cash to its margin account. 
A) an acquirer that needs temporary financing to complete a merger. 
B) a commercial bank in the federal funds market. 
C) a mutual fund that needs to cover share redemptions. 
D) an institutional investor that has received a margin call and needs to add cash to its margin account.

Question 5

Which of the following is NOT a function that a securities firm commonly performs when facilitating a secondary stock offering?

Accepted Answer

A) origination 
B) underwriting the stock 
C) distribution of the stock 
D) purchasing at least 20 percent of the offering 
A) origination 
B) underwriting the stock 
C) distribution of the stock 
D) purchasing at least 20 percent of the offering

Question 6

One of the main functions of securities firms is helping corporations and governments raise funds.

Accepted Answer

A) True 
 B)False

Question 7

The value of a securities firm is typically ____ related to interest rate movements.

Accepted Answer

A) Positively 
B) Not 
C) Inversely 
D) either  Positively or Inversely , depending on the direction of the interest rate movements. 
A) Positively 
B) Not 
C) Inversely 
D) either  Positively or Inversely , depending on the direction of the interest rate movements.

Question 8

When securities firms facilitate an IPO, they attempt to price the stock

Accepted Answer

A) at a level that will enable institutional investors who invest in the IPO to earn reasonable returns. 
B) high enough to satisfy the issuing firm. 
C) at a level that will enable the securities firms to place the entire issue. 
D) All of these are correct. 
A) at a level that will enable institutional investors who invest in the IPO to earn reasonable returns. 
B) high enough to satisfy the issuing firm. 
C) at a level that will enable the securities firms to place the entire issue. 
D) All of these are correct.

Question 9

The Financial Reform Act created the Financial Stability Oversight Council, which is responsible for identifying risks to financial stability in the United States.

Accepted Answer

A) True 
 B)False

Question 10

When securities firms facilitate initial public offerings (IPOs), they attempt to price the stock high enough to satisfy the issuing firm.

Accepted Answer

A) True 
 B)False

Question 11

The Securities and Exchange Commission's approval of a registration statement guarantees the quality and safety of the securities to be issued.

Accepted Answer

A) True 
 B)False

Question 12

The ____ is NOT involved in the regulation of the securities industry.

Accepted Answer

A) Deposit Insurance Fund 
B) Financial Industry Regulatory Authority 
C) Securities and Exchange Commission 
D) Federal Reserve Board 
E) All of these are involved in the regulation of the securities industry. 
A) Deposit Insurance Fund 
B) Financial Industry Regulatory Authority 
C) Securities and Exchange Commission 
D) Federal Reserve Board 
E) All of these are involved in the regulation of the securities industry.

Question 13

Which of the following is NOT an example of a securities firm that experienced financial problems as a result of taking on excessive risk when engaging in proprietary trading?

Accepted Answer

A) Washington Mutual 
B) Société Générale 
C) Bear Stearns 
D) Barings Bank 
A) Washington Mutual 
B) Société Générale 
C) Bear Stearns 
D) Barings Bank

Question 14

The Federal Reserve intervened to help securities firms during the credit crisis in order to reduce the potential adverse effects of systemic risk.

Accepted Answer

A) True 
 B)False

Question 15

Securities firms that converted to bank holding companies during the credit crisis

Accepted Answer

A) gained more flexibility to obtain financing from the Federal Reserve. 
B) had to give up their traditional securities function of underwriting. 
C) came under greater regulatory oversight by the Securities Investor Protection Corporation. 
D) were prohibited from investing in or selling mortgage-backed securities. 
A) gained more flexibility to obtain financing from the Federal Reserve. 
B) had to give up their traditional securities function of underwriting. 
C) came under greater regulatory oversight by the Securities Investor Protection Corporation. 
D) were prohibited from investing in or selling mortgage-backed securities.

Question 16

During the credit crisis, some large securities firms were either acquired by commercial banks or converted into bank holding companies.

Accepted Answer

A) True 
 B)False

Question 17

____ is NOT a service that a securities firm provides in placing bonds.

Accepted Answer

A) Divestiture 
B) Underwriting 
C) Distribution 
D) Advising 
E) All of these are services that securities firms provide in placing bonds 
A) Divestiture 
B) Underwriting 
C) Distribution 
D) Advising 
E) All of these are services that securities firms provide in placing bonds

Question 18

Research indicates that securities firms tend to

Accepted Answer

A) overprice IPOs. 
B) underprice IPOs. 
C) price IPOs correctly. 
D) None of these are correct. 
A) overprice IPOs. 
B) underprice IPOs. 
C) price IPOs correctly. 
D) None of these are correct.

Question 19

During the credit crisis, many commercial banks were forced to convert to securities firms.

Accepted Answer

A) True 
 B)False

Question 20

As a result of the Financial Services Modernization Act

Accepted Answer

A) securities firms had to search for loopholes to expand into other types of financial services. 
B) firms that formed a special finance holding company were regulated by the SEC. 
C) banking, securities activities, and insurance services could be consolidated in a single financial institution. 
D) securities firms were prohibited from expanding into other types of financial services. 
A) securities firms had to search for loopholes to expand into other types of financial services. 
B) firms that formed a special finance holding company were regulated by the SEC. 
C) banking, securities activities, and insurance services could be consolidated in a single financial institution. 
D) securities firms were prohibited from expanding into other types of financial services.

Exam 24: Securities Operations

The price of newly issued stock should be ____ the market price of the firm's outstanding stock.

Securities firms commonly engage in all of the following EXCEPT

One reason for the financial problems of securities firms during the credit crisis was that they used a high degree of financial leverage.

A bridge loan provided by a securities firm would most likely be made to

Which of the following is NOT a function that a securities firm commonly performs when facilitating a secondary stock offering?

One of the main functions of securities firms is helping corporations and governments raise funds.

The value of a securities firm is typically ____ related to interest rate movements.

When securities firms facilitate an IPO, they attempt to price the stock

The Financial Reform Act created the Financial Stability Oversight Council, which is responsible for identifying risks to financial stability in the United States.

When securities firms facilitate initial public offerings (IPOs), they attempt to price the stock high enough to satisfy the issuing firm.

The Securities and Exchange Commission's approval of a registration statement guarantees the quality and safety of the securities to be issued.

The ____ is NOT involved in the regulation of the securities industry.

Which of the following is NOT an example of a securities firm that experienced financial problems as a result of taking on excessive risk when engaging in proprietary trading?

The Federal Reserve intervened to help securities firms during the credit crisis in order to reduce the potential adverse effects of systemic risk.

Securities firms that converted to bank holding companies during the credit crisis

During the credit crisis, some large securities firms were either acquired by commercial banks or converted into bank holding companies.

____ is NOT a service that a securities firm provides in placing bonds.

Research indicates that securities firms tend to

During the credit crisis, many commercial banks were forced to convert to securities firms.

As a result of the Financial Services Modernization Act

Role of Financial Markets and Institutions

Determination of Interest Rates

Structure of Interest Rates

Functions of the Fed

Monetary Policy

Money Markets

Bond Markets

Bond Valuation and Risk

Mortgage Markets

Stock Offerings and Investor Monitoring

Stock Valuation and Risk

Market Microstructure and Strategies

Financial Futures Markets

Options Markets

Swap Markets

Foreign Exchange Derivative Markets

Commercial Bank Operations

Bank Regulation

Bank Management

Bank Performance

Thrift Operations

Finance Company Operations

Mutual Fund Operations

Insurance and Pension Fund Operations

Pension Fund Operations

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