Question 1

As of 2015,income generated by securities brokerage accounted for over 25% of commercial bank holding company fee income.

Accepted Answer

A) True 
 B)False

Question 2

A best-efforts offering of a security is more risky for an investment bank than a firm commitment offering.

Accepted Answer

A) True 
 B)False

Question 3

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.
-If the investment bank can sell the shares for $34 per share,how much money does NetChoice,Inc.receive?

Accepted Answer

A) $150,000,000. 
B) $157,500,000. 
C) $112,000,000. 
D) $125,000,000. 
A) $150,000,000. 
B) $157,500,000. 
C) $112,000,000. 
D) $125,000,000.

Question 4

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. 
-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. 
A) $195,675,000. 
B) $187,500,000. 
C) $130,250,000. 
D) $175,000,000. 
E) $173,125,000.

Question 5

Over the last 10 years,the number of floor traders on the NYSE has remained relatively the same.

Accepted Answer

A) True 
 B)False

Question 6

Seeking international partners is a recent trend among securities firms and investment banks.

Accepted Answer

A) True 
 B)False

Question 7

The management of pools of assets by securities firms is considered to be the function of

Accepted Answer

A) market making. 
B) investment banking. 
C) trading. 
D) investing. 
A) market making. 
B) investment banking. 
C) trading. 
D) investing.

Question 8

The dominant form of institutional venture capital firms operate as a

Accepted Answer

A) Corporation. 
B) Subsidiary of a financial company. 
C) Bank holding company. 
D) Limited partnership. 
A) Corporation. 
B) Subsidiary of a financial company. 
C) Bank holding company. 
D) Limited partnership.

Question 9

The largest category of liabilities of securities firms as of 2015 was

Accepted Answer

A) bank loans payable. 
B) securities sold under repurchase agreements. 
C) payables to customers. 
D) short positions in securities and commodities. 
A) bank loans payable. 
B) securities sold under repurchase agreements. 
C) payables to customers. 
D) short positions in securities and commodities.

Question 10

The Financial Services Modernization Act of 1999 allowed investment banks and securities firms to offer deposit accounts to individuals.

Accepted Answer

A) True 
 B)False

Question 11

The primary advantage to the investor of a securities firm cash management account (CMA)over commercial bank deposit accounts is that

Accepted Answer

A) no FDIC insurance is required on CMAs. 
B) no regulatory oversight of CMAs. 
C) they make it easier to buy and sell securities using funds from the CMA. 
D) CMAs guarantee higher rates of return than money market deposit accounts. 
A) no FDIC insurance is required on CMAs. 
B) no regulatory oversight of CMAs. 
C) they make it easier to buy and sell securities using funds from the CMA. 
D) CMAs guarantee higher rates of return than money market deposit accounts.

Question 12

Which of the following two investment banks were acquired by financial services holding companies during the most recent financial crisis?

Accepted Answer

A) Merrill Lynch and Bear Stearns. 
B) Goldman Sachs and Morgan Stanley. 
C) Bear Stearns and Lehman Brothers. 
D) Merrill Lynch and Morgan Stanley. 
A) Merrill Lynch and Bear Stearns. 
B) Goldman Sachs and Morgan Stanley. 
C) Bear Stearns and Lehman Brothers. 
D) Merrill Lynch and Morgan Stanley.

Question 13

Activity and performance trends in the investment banking industry are highly correlated with general economic expansions and recessions.

Accepted Answer

A) True 
 B)False

Question 14

As of 2015,45 percent of all stock trades in the U.S.occurred through dark pools.

Accepted Answer

A) True 
 B)False

Question 15

The primary function of the Security Investor Protection Corporation (SIPC)is to

Accepted Answer

A) investigate member securities firms. 
B) regulate member securities firms. 
C) prosecute cases of fraud within securities firms. 
D) oversee accounting practices of securities firms and investment banks. 
E) Restore customer cash and securities of bankrupt or insolvent securities firms. 
A) investigate member securities firms. 
B) regulate member securities firms. 
C) prosecute cases of fraud within securities firms. 
D) oversee accounting practices of securities firms and investment banks. 
E) Restore customer cash and securities of bankrupt or insolvent securities firms.

Question 16

Which of the following is NOT a back-office service function in the securities industry?

Accepted Answer

A) Correspondent banking services. 
B) Escrow services. 
C) Clearance of securities transactions. 
D) Research services. 
A) Correspondent banking services. 
B) Escrow services. 
C) Clearance of securities transactions. 
D) Research services.

Question 17

Legislation designed to deter money laundering by implementing practices to identify and verify those seeking to open an account were instituted by the

Accepted Answer

A) National Securities Markets Improvement Act of 1996. 
B) Sarbanes-Oxley Act of 2002. 
C) U.S.A.Patriot Act of 2003. 
D) Financial Services Modernization Act of 1999. 
A) National Securities Markets Improvement Act of 1996. 
B) Sarbanes-Oxley Act of 2002. 
C) U.S.A.Patriot Act of 2003. 
D) Financial Services Modernization Act of 1999.

Question 18

Recent trends indicate that securities firms are increasingly focused on providing client services and downsizing proprietary trading products and services.

Accepted Answer

A) True 
 B)False

Question 19

In comparison to a typical commercial bank,an investment bank is likely to have

Accepted Answer

A) lower levels of capital. 
B) higher reliance on long-term debt. 
C) lower levels of repurchase agreements. 
D) higher levels of net interest margin. 
A) lower levels of capital. 
B) higher reliance on long-term debt. 
C) lower levels of repurchase agreements. 
D) higher levels of net interest margin.

Question 20

An attempt by a market maker to earn a profit on the price movements of securities by taking inventory positions for its own account is called

Accepted Answer

A) risk arbitrage. 
B) an agency transaction. 
C) best efforts underwriting. 
D) pure arbitrage. 
E) a principal transaction. 
A) risk arbitrage. 
B) an agency transaction. 
C) best efforts underwriting. 
D) pure arbitrage. 
E) a principal transaction.

Exam 4: Financial Services: Securities Firms and Investment Banks

As of 2015,income generated by securities brokerage accounted for over 25% of commercial bank holding company fee income.

A best-efforts offering of a security is more risky for an investment bank than a firm commitment offering.

Over the last 10 years,the number of floor traders on the NYSE has remained relatively the same.

Seeking international partners is a recent trend among securities firms and investment banks.

The management of pools of assets by securities firms is considered to be the function of

The dominant form of institutional venture capital firms operate as a

The largest category of liabilities of securities firms as of 2015 was

The Financial Services Modernization Act of 1999 allowed investment banks and securities firms to offer deposit accounts to individuals.

The primary advantage to the investor of a securities firm cash management account (CMA)over commercial bank deposit accounts is that

Which of the following two investment banks were acquired by financial services holding companies during the most recent financial crisis?

Activity and performance trends in the investment banking industry are highly correlated with general economic expansions and recessions.

As of 2015,45 percent of all stock trades in the U.S.occurred through dark pools.

The primary function of the Security Investor Protection Corporation (SIPC)is to

Which of the following is NOT a back-office service function in the securities industry?

Legislation designed to deter money laundering by implementing practices to identify and verify those seeking to open an account were instituted by the

Recent trends indicate that securities firms are increasingly focused on providing client services and downsizing proprietary trading products and services.

In comparison to a typical commercial bank,an investment bank is likely to have

An attempt by a market maker to earn a profit on the price movements of securities by taking inventory positions for its own account is called

Why Are Financial Institutions Special

Financial Services: Depository Institutions

Financial Services: Finance Companies

Financial Services: Mutual Fund and Hedge Fund Companies

Financial Services: Insurance Companies

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

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