Question 1

Which one of the following securities firms' activities is normally the most risky?

Accepted Answer

A) Best efforts offering 
B) Private placement 
C) Firm commitment offering 
D) Pure arbitrage 
E) Program trading 
A) Best efforts offering 
B) Private placement 
C) Firm commitment offering 
D) Pure arbitrage 
E) Program trading

Question 2

The _________________ insures losses of funds deposited with securities firms in the event of failure of a securities firm.

Accepted Answer

A) SEC 
B) NASD 
C) SIA 
D) SIPC 
E) FDIC 
A) SEC 
B) NASD 
C) SIA 
D) SIPC 
E) FDIC

Question 3

In 2012,the greatest dollar volume of U.S. corporate underwriting occurred for which type of security?

Accepted Answer

A) Straight corporate debt 
B) Asset-backed debt 
C) Common stock 
D) Preferred stock 
E) Convertible debt 
A) Straight corporate debt 
B) Asset-backed debt 
C) Common stock 
D) Preferred stock 
E) Convertible debt

Question 4

Why is capital a more important measure of the size of a securities firm than the amount of assets?
 What other measures would be useful,given the diversity of this industry?

Accepted Answer

The size of investment banking and secur

Question 5

Classify the following trading activities as either a position trade,a pure arbitrage trade,or a risk arbitrage trade.
I. Buy Intel at $120 and hold it for six months in hopes of a price rise.
II. Buy GE on the NYSE and immediately sell it at a higher price on the Pacific Exchange.
III. Short sell Dell in anticipation of a poor quarterly earnings report.

Accepted Answer

I. Position trade; I

Question 6

You buy euros in New York from Deutsche Bank and simultaneously sell them in London to Barclays for a gain. This is an example of

Accepted Answer

A) position trading. 
B) program trading. 
C) risk arbitrage. 
D) pure arbitrage. 
E) hedging. 
A) position trading. 
B) program trading. 
C) risk arbitrage. 
D) pure arbitrage. 
E) hedging.

Question 7

An example of a national full-line investment banker that specializes in corporate finance is Goldman Sachs.

Accepted Answer

A) True 
 B)False

Question 8

As a result of the alleged conflicts of interest between analysts and underwriting,which of the following changes were implemented?
I. Analysts cannot participate in nor attend certain presentations to potential investors conducted by investment bankers associated with underwriting an issue.
II. Analyst compensation can no longer be tied to the amount of underwriting business a firm generates.
III. Securities firms must divest stock research divisions to ensure independence from their investment banking business.

Accepted Answer

A) I only 
B) I and II only 
C) I and III only 
D) II and III only 
E) I,II,and III 
A) I only 
B) I and II only 
C) I and III only 
D) II and III only 
E) I,II,and III

Question 9

The largest asset on the typical securities firms' balance sheet in 2012 was

Accepted Answer

A) securities purchased under agreements to resell. 
B) long positions in securities and commodities. 
C) reverse repurchase agreements. 
D) repurchase agreements. 
E) cash. 
A) securities purchased under agreements to resell. 
B) long positions in securities and commodities. 
C) reverse repurchase agreements. 
D) repurchase agreements. 
E) cash.

Question 10

Profitability at investment banking firms has been very stable each year since 2001.

Accepted Answer

A) True 
 B)False

Question 11

In 2013,the top five underwriters engaged in about _____________ of total U.S. underwriting volume.

Accepted Answer

A) 15 percent 
B) 22 percent 
C) 33 percent 
D) 44 percent 
E) 56 percent 
A) 15 percent 
B) 22 percent 
C) 33 percent 
D) 44 percent 
E) 56 percent

Question 12

Investment firms that pool money from individuals and/or institutions and invest equity funds in start-up firms are called

Accepted Answer

A) top-tier bankers. 
B) Section 20 affiliates. 
C) venture capital firms. 
D) ECNs. 
E) discount brokerage houses. 
A) top-tier bankers. 
B) Section 20 affiliates. 
C) venture capital firms. 
D) ECNs. 
E) discount brokerage houses.

Question 13

In a best efforts offering,the investment banker acts as an agent for the issuer rather than as a principal.

Accepted Answer

A) True 
 B)False

Question 14

An unregistered issue sold to a few large institutional buyers is an example of a(n)

Accepted Answer

A) best efforts offering. 
B) fully underwritten public offering. 
C) shelf offering. 
D) private placement. 
E) SEC Rule 415 offering. 
A) best efforts offering. 
B) fully underwritten public offering. 
C) shelf offering. 
D) private placement. 
E) SEC Rule 415 offering.

Question 15

The process of creating a secondary market for securities or contracts is termed brokerage.

Accepted Answer

A) True 
 B)False

Question 16

The major result of the NSMIA was to

Accepted Answer

A) reduce state regulatory powers over securities firms. 
B) establish the SIPC. 
C) create the NASD. 
D) all of the options 
E) none of the options 
A) reduce state regulatory powers over securities firms. 
B) establish the SIPC. 
C) create the NASD. 
D) all of the options 
E) none of the options

Question 17

A best efforts offering is one in which

Accepted Answer

A) the underwriter bears the risk of an unsuccessful offering. 
B) the bid-ask spread is exceptionally high,but the investment banker does his best to sell the issue anyway. 
C) the investment banker acts as a principal for the issuer. 
D) the investment banker acts only as a distribution agent. 
E) the issue can only be privately placed. 
A) the underwriter bears the risk of an unsuccessful offering. 
B) the bid-ask spread is exceptionally high,but the investment banker does his best to sell the issue anyway. 
C) the investment banker acts as a principal for the issuer. 
D) the investment banker acts only as a distribution agent. 
E) the issue can only be privately placed.

Question 18

Diversified full-line securities firms engage in all but which one of the following?

Accepted Answer

A) Trading and brokerage of existing securities 
B) Corporate restructuring and advice 
C) Issuing new securities 
D) Raising money via insured deposits 
A) Trading and brokerage of existing securities 
B) Corporate restructuring and advice 
C) Issuing new securities 
D) Raising money via insured deposits

Question 19

An example of a pure arbitrage strategy is to simultaneously buy and sell the same security in two different markets at different prices.

Accepted Answer

A) True 
 B)False

Question 20

In July 2002,the U.S. Congress passed the Sarbanes-Oxley bill. Among other things,this bill
I. created an independent auditing oversight board run by the SEC.
II. increased penalties for corporate wrongdoers.
III. eliminated the use of stock options for executive compensation.

Accepted Answer

A) I only 
B) I and II only 
C) I and III only 
D) II and III only 
E) I,II,and III 
A) I only 
B) I and II only 
C) I and III only 
D) II and III only 
E) I,II,and III

Exam 16: Securities Firms and Investment Banks

Which one of the following securities firms' activities is normally the most risky?

The _________________ insures losses of funds deposited with securities firms in the event of failure of a securities firm.

In 2012,the greatest dollar volume of U.S. corporate underwriting occurred for which type of security?

Why is capital a more important measure of the size of a securities firm than the amount of assets? What other measures would be useful,given the diversity of this industry?

You buy euros in New York from Deutsche Bank and simultaneously sell them in London to Barclays for a gain. This is an example of

An example of a national full-line investment banker that specializes in corporate finance is Goldman Sachs.

The largest asset on the typical securities firms' balance sheet in 2012 was

Profitability at investment banking firms has been very stable each year since 2001.

In 2013,the top five underwriters engaged in about _____________ of total U.S. underwriting volume.

Investment firms that pool money from individuals and/or institutions and invest equity funds in start-up firms are called

In a best efforts offering,the investment banker acts as an agent for the issuer rather than as a principal.

An unregistered issue sold to a few large institutional buyers is an example of a(n)

The process of creating a secondary market for securities or contracts is termed brokerage.

The major result of the NSMIA was to

A best efforts offering is one in which

Diversified full-line securities firms engage in all but which one of the following?

An example of a pure arbitrage strategy is to simultaneously buy and sell the same security in two different markets at different prices.

In July 2002,the U.S. Congress passed the Sarbanes-Oxley bill. Among other things,this bill I. created an independent auditing oversight board run by the SEC. II. increased penalties for corporate wrongdoers. III. eliminated the use of stock options for executive compensation.

Introduction

Determinants of Interest Rates

Interest Rates and Security Valuation

The Federal Reserve System, Monetary Policy, and Interest Rates

Money Markets

Bond Markets

Mortgage Markets

Stock Markets

Foreign Exchange Markets

Derivative Securities Markets

Commercial Banks: Industry Overview

Commercial Banks Financial Statements and Analysis

Regulation of Commercial Banks

Other Lending Institutions: Savings Institutions, Credit Unions, and Finance Companies

Insurance Companies

Investment Companies

Pension Funds

Types of Risks Incurred by Financial Institutions

Managing Credit Risk on the Balance Sheet

Managing Liquidity Risk on the Balance Sheet

Managing Interest Rate Risk and Insolvency Risk on the Balance Sheet

Managing Risk Off the Balance Sheet With Derivative Securities

Managing Risk Off the Balance Sheet With Loan Sales and Securitization

Filters