Question 1

Which of the following is not a service that is commonly performed by a securities firm?

Accepted Answer

A)  setting regulatory rules for stock exchanges 
B)  origination 
C)  underwriting 
D)  distribution 
A)  setting regulatory rules for stock exchanges 
B)  origination 
C)  underwriting 
D)  distribution

Question 2

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 3

Competitive bidding by securities firms for underwriting the issue of new bonds is primarily used for

Accepted Answer

A)  federal government bonds. 
B)  bonds issued by banks. 
C)  public utility bonds. 
D)  bonds issued by nonbanking financial institution. 
A)  federal government bonds. 
B)  bonds issued by banks. 
C)  public utility bonds. 
D)  bonds issued by nonbanking financial institution.

Question 4

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 5

The ____ can liquidate failing brokerage firms.

Accepted Answer

A)  Securities and Exchange Commission 
B)  Financial Industry Regulatory Authority 
C)  Federal Reserve Board 
D)  Securities Investor Protection Corporation 
A)  Securities and Exchange Commission 
B)  Financial Industry Regulatory Authority 
C)  Federal Reserve Board 
D)  Securities Investor Protection Corporation

Question 6

Research indicates that securities firms tend to

Accepted Answer

A)  overprice IPOs. 
B)  underprice IPOs. 
C)  price IPOs correctly. 
D)  none of the above 
A)  overprice IPOs. 
B)  underprice IPOs. 
C)  price IPOs correctly. 
D)  none of the above

Question 7

Securities firms serve as an intermediary for each of the following, except

Accepted Answer

A)  stock offerings. 
B)  debt offerings. 
C)  IPOs. 
D)  They serve as intermediary for all of the above. 
A)  stock offerings. 
B)  debt offerings. 
C)  IPOs. 
D)  They serve as intermediary for all of the above.

Question 8

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 9

Flotation costs as a percentage of the value of securities issued are ____ for ____ issues.

Accepted Answer

A)  lower; small 
B)  lower; large 
C)  higher; large 
D)  A and C 
A)  lower; small 
B)  lower; large 
C)  higher; large 
D)  A and C

Question 10

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 11

The ____ offers insurance on cash and securities deposited at brokerage firms.

Accepted Answer

A)  Federal Reserve 
B)  New York Stock Exchange 
C)  Securities Investor Protection Corporation (SIP
C)  
D)  Securities and Exchange Commission (SE
C)  
A)  Federal Reserve 
B)  New York Stock Exchange 
C)  Securities Investor Protection Corporation (SIP
C)  
D)  Securities and Exchange Commission (SE
C)

Question 12

____ are not included in flotation costs

Accepted Answer

A)  Issue costs 
B)  Fees paid to the underwriters 
C)  Taxes paid on income earned from the stock offering 
D)  Registration expenses 
A)  Issue costs 
B)  Fees paid to the underwriters 
C)  Taxes paid on income earned from the stock offering 
D)  Registration expenses

Question 13

Which of the following is not an SEC rule?

Accepted Answer

A)  Analysts at a securities firm underwriting an IPO cannot promote the new stock for the first 40 days after the IPO. 
B)  An analyst's compensation should be directly aligned with the amount of business that the analyst brings to the securities firm. 
C)  Analysts cannot be supervised by the investment banking department within the securities firm. 
D)  When rating a security, an analyst must divulge any recent investment banking business provided by the analyst's securities firm to the firm that issued the security. 
A)  Analysts at a securities firm underwriting an IPO cannot promote the new stock for the first 40 days after the IPO. 
B)  An analyst's compensation should be directly aligned with the amount of business that the analyst brings to the securities firm. 
C)  Analysts cannot be supervised by the investment banking department within the securities firm. 
D)  When rating a security, an analyst must divulge any recent investment banking business provided by the analyst's securities firm to the firm that issued the security.

Question 14

Which of the following is not a way that a securities firm might advise a corporation to restructure its operations?

Accepted Answer

A)  a stock pass-through 
B)  a spin-off of a unit 
C)  a carve-out 
D)  divestiture 
A)  a stock pass-through 
B)  a spin-off of a unit 
C)  a carve-out 
D)  divestiture

Question 15

The SEC's Regulation Fair Disclosure (FD):

Accepted Answer

A)  requires firms to disclose any significant information to the SEC before making public announcements. 
B)  requires firms to disclose any significant information to the Federal Reserve before releasing it to the public. 
C)  requires firms to disclose any significant information simultaneously to all market participants. 
D)  prohibits insiders at firms from trading on significant inside information. 
A)  requires firms to disclose any significant information to the SEC before making public announcements. 
B)  requires firms to disclose any significant information to the Federal Reserve before releasing it to the public. 
C)  requires firms to disclose any significant information simultaneously to all market participants. 
D)  prohibits insiders at firms from trading on significant inside information.

Question 16

Securities firms engage in proprietary trading, which means that they serve as an intermediary by trading shares of stock requested by proprietorships.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

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

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

Asset stripping refers to

Accepted Answer

A)  acquiring shares in a firm and then causing the firm to repurchase the shares at a premium to prevent a takeover. 
B)  financing provided by securities firms to help support an acquisition. 
C)  investing in the shares of a firm that is expected to experience a leveraged buyout (LBO). 
D)  selling off individual divisions of an acquired firm that are not compatible with the acquirer's business. 
A)  acquiring shares in a firm and then causing the firm to repurchase the shares at a premium to prevent a takeover. 
B)  financing provided by securities firms to help support an acquisition. 
C)  investing in the shares of a firm that is expected to experience a leveraged buyout (LBO). 
D)  selling off individual divisions of an acquired firm that are not compatible with the acquirer's business.

Question 20

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

Exam 24: Securities Operations

Which of the following is not a service that is commonly performed by a securities firm?

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

Competitive bidding by securities firms for underwriting the issue of new bonds is primarily used for

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

The ____ can liquidate failing brokerage firms.

Research indicates that securities firms tend to

Securities firms serve as an intermediary for each of the following, except

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

Flotation costs as a percentage of the value of securities issued are ____ for ____ issues.

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

The ____ offers insurance on cash and securities deposited at brokerage firms.

____ are not included in flotation costs

Which of the following is not an SEC rule?

Which of the following is not a way that a securities firm might advise a corporation to restructure its operations?

The SEC's Regulation Fair Disclosure (FD):

Securities firms engage in proprietary trading, which means that they serve as an intermediary by trading shares of stock requested by proprietorships.

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

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

Asset stripping refers to

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?

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 Operations

Pension Fund Operations

Filters

Flotation costs as a percentage of the value of securities issued are for issues.