Exam 4: Financial Services: Securities Firms and Investment Banks

The Financial Services Modernization Act of 1999 and other regulatory changes have been the cause of the increase in interindustry mergers of investment banks and securities firms.

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

Which of the following would be a key area of activity for an investment bank specializing in the commercial side of the business?

Program trading involves

When conducting a firm commitment offering,the investment bank is acting as an agent on behalf of the issuing company or government.

An investment banker agrees to underwrite an issue of 5 million shares of stock for NetChoice,Inc.on a best-efforts basis.The investment banker is able to sell 4.5 million shares for $31.00 per share and it charges NetChoice,Inc.$0.375 per share sold. -What is the profit to the investment banker if it is able to sell 4.5 million shares for $31 per share?

An investment banker agrees to underwrite an issue of 10 million shares of stock for Rochester Industries on a best-efforts basis. The investment banker is able to sell 8 million shares for $10.50 per share, and it charges Rochester Industries $0.225 per share sold. -If the investment bank sells 8 million shares for $9.75 per share,how much money does Rochester Industries receive?

Identify a major reason behind the increase in domestic underwriting activity during the 1990s.

In a public offering of a new security,an investment banker places a new issue of securities with a handful of private,usually large,investors.

The principal reasons for the growth in profitability of the securities industry in the middle 1990s were the trading profits from fixed income securities and the growth in new issue underwriting.

The objective of the investing function of securities firms (funds management)is to allocate assets so that they outperform relative risk-return performance benchmark.

An investment banker agrees to underwrite an issue of 5 million shares of stock for NetChoice, Inc. on a firm commitment basis. The investment banker pays $31.50 per share to NetChoice, Inc. for the 5 million shares of stock. It then sells those shares to the public for $30.00 per share. -What is the profit (loss)to the investment banker?

Functions of the Financial Industry Regulatory Authority (FINRA)include all of the following EXCEPT

An investment banker agrees to underwrite an issue of 10 million shares of stock for Rochester Industries on a best-efforts basis. The investment banker is able to sell 8 million shares for $10.50 per share, and it charges Rochester Industries $0.225 per share sold. -If the investment bank were able to sell all 10 million shares for $12.75 per share,how much money does Rochester Industries receive?

As of 2015,approximately ________ of the industry total brokerage fee income was generated by firms operating as subsidiaries of commercial bank holding companies.

Recently (2013-2015),pre-tax profits at securities firms and investment banks have been declining because of new regulation.

Which of the following investment banks is no longer in business as a result of the most recent financial crisis?

Electronic brokerage allows an investor to have direct access to the trading floor.

Securities firms and investment banks engage in as many as seven key activity areas.

Securities firms have equity ratios that are lower than those for commercial banks because their balance sheets contain a larger portion of