Question 1

The value of assets is the traditional measure of size in the securities brokerage and investment banking industry.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following two investment banks were granted approval to be chartered as commercial banks 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 3

Considering the securities firms and investment banking industries,The National Securities Markets Improvement Act (NSMIA)of 1996

Accepted Answer

A) appointed the Federal Reserve System as the primary regulator of the industry. 
B) diminished the role of the National Association of Securities Dealers (NASDs)in regulating the industry. 
C) allowed individual states the right to require registration of firms operating in the state. 
D) effectively affirmed the SEC as the primary regulator of the industry. 
A) appointed the Federal Reserve System as the primary regulator of the industry. 
B) diminished the role of the National Association of Securities Dealers (NASDs)in regulating the industry. 
C) allowed individual states the right to require registration of firms operating in the state. 
D) effectively affirmed the SEC as the primary regulator of the industry.

Question 4

Most securities firms are subject to large amounts of interest rate and market risk because of the large amount financial assets on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 5

An investment banker agrees to underwrite an issue of 10 million shares of stock for TWResearch,Inc.on a firm commitment basis.The investment banker pays $10.50 per share to TWResearch,Inc.for the 10 million shares of stock.It then sells those shares to the public for $11.20 per share. 
-How much money does TWResearch receive?

Accepted Answer

A) $105,000,000. 
B) $150,000,000. 
C) $112,000,000. 
D) $125,000,000. 
A) $105,000,000. 
B) $150,000,000. 
C) $112,000,000. 
D) $125,000,000.

Question 6

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 all 5 million shares were sold for $35 per share?

Accepted Answer

A) Profit of $1,275,000. 
B) Loss of $1,875,000. 
C) Profit of $1,875,000. 
D) Loss of $3,125,000. 
A) Profit of $1,275,000. 
B) Loss of $1,875,000. 
C) Profit of $1,875,000. 
D) Loss of $3,125,000.

Question 7

Securities underwriting and trading is an activity that requires a considerable investment in long-term assets and relatively small investments in short-term assets.

Accepted Answer

A) True 
 B)False

Question 8

According to SEC Rule 415,

Accepted Answer

A) larger corporations can register their new issues with the SEC up to two years in advance. 
B) firms should disclose soft dollar arrangements to their clients. 
C) large investors are allowed to begin trading privately placed securities among themselves. 
D) firms are required to maintain records of the information used to verify the identity of a person opening an account. 
A) larger corporations can register their new issues with the SEC up to two years in advance. 
B) firms should disclose soft dollar arrangements to their clients. 
C) large investors are allowed to begin trading privately placed securities among themselves. 
D) firms are required to maintain records of the information used to verify the identity of a person opening an account.

Question 9

In order for an investment bank to perform a firm commitment offering of securities,they must maintain at least 20% equity on their balance sheet.

Accepted Answer

A) True 
 B)False

Question 10

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 can sell the shares for $9.75 per share,what is the profit (loss)to the investment banker?

Accepted Answer

A) Profit of $1,000,000. 
B) Loss of $7,500,000. 
C) Profit of $7,000,000. 
D) Loss of $7,000,000. 
A) Profit of $1,000,000. 
B) Loss of $7,500,000. 
C) Profit of $7,000,000. 
D) Loss of $7,000,000.

Question 11

Venture capital firms often make loans to finance new and often high-risk companies that may have no business history.

Accepted Answer

A) True 
 B)False

Question 12

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.
-What would be the profit to the investment banker it were able to sell all 10 million shares for $12.75 per share?

Accepted Answer

A) Profit of $2,250,000. 
B) Loss of $7,500,000. 
C) Profit of $7,500,000. 
D) Loss of $3,000,000. 
A) Profit of $2,250,000. 
B) Loss of $7,500,000. 
C) Profit of $7,500,000. 
D) Loss of $3,000,000.

Question 13

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.
-What is the profit to the investment banker it sells 8 million shares for $9.75 per share?

Accepted Answer

A) Profit of $1,000,000. 
B) Loss of $7,500,000. 
C) Profit of $7,000,000. 
D) Loss of $7,000,000. 
E) Profit of $1,800,000. 
A) Profit of $1,000,000. 
B) Loss of $7,500,000. 
C) Profit of $7,000,000. 
D) Loss of $7,000,000. 
E) Profit of $1,800,000.

Question 14

Initial public offerings (IPOs)are first-time issues of firms whose equity has not previously traded in an organized market.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following is true?

Accepted Answer

A) Investment bankers earn fees based on the success of their placements when they underwrite using a best-efforts basis. 
B) Investment bankers earn fees based on the success of their placement when they underwrite using firm-commitment basis. 
C) With best-efforts underwriting,investment bankers act as principals because they purchase securities from the issuer and sell them at a higher price. 
D) An investment banker is acting as an agent when conducting a firm-commitment offering of securities. 
A) Investment bankers earn fees based on the success of their placements when they underwrite using a best-efforts basis. 
B) Investment bankers earn fees based on the success of their placement when they underwrite using firm-commitment basis. 
C) With best-efforts underwriting,investment bankers act as principals because they purchase securities from the issuer and sell them at a higher price. 
D) An investment banker is acting as an agent when conducting a firm-commitment offering of securities.

Question 16

Which of the following 2 firms survived as investment banks following the most recent financial crisis?

Accepted Answer

A) Morgan Stanley and Bear Stearns. 
B) Goldman Sachs and Merrill Lynch. 
C) Lehman Brothers and Morgan Stanley. 
D) Merrill Lynch and Lehman Brothers. 
E) None of the options. 
A) Morgan Stanley and Bear Stearns. 
B) Goldman Sachs and Merrill Lynch. 
C) Lehman Brothers and Morgan Stanley. 
D) Merrill Lynch and Lehman Brothers. 
E) None of the options.

Question 17

As of 2015,there were over 4,500 securities firms in operation.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is a self-regulatory organization involved in the day-to-day regulation of trading practices?

Accepted Answer

A) Securities and Exchange Commission. 
B) New York Stock Exchange. 
C) Securities Investor Protection Corporation. 
D) Chicago Board of Trade. 
A) Securities and Exchange Commission. 
B) New York Stock Exchange. 
C) Securities Investor Protection Corporation. 
D) Chicago Board of Trade.

Question 19

Discount brokers

Accepted Answer

A) are securities firms focused on providing research support for customers. 
B) conduct trades for customers but do not offer investment advice. 
C) allow customers to receive investment advice at very low rates. 
D) complete trades for customers on- or offline while offering investment advice. 
A) are securities firms focused on providing research support for customers. 
B) conduct trades for customers but do not offer investment advice. 
C) allow customers to receive investment advice at very low rates. 
D) complete trades for customers on- or offline while offering investment advice.

The value of assets is the traditional measure of size in the securities brokerage and investment banking industry.

Which of the following two investment banks were granted approval to be chartered as commercial banks during the most recent financial crisis?

Considering the securities firms and investment banking industries,The National Securities Markets Improvement Act (NSMIA)of 1996

Most securities firms are subject to large amounts of interest rate and market risk because of the large amount financial assets on the balance sheet.

Securities underwriting and trading is an activity that requires a considerable investment in long-term assets and relatively small investments in short-term assets.

According to SEC Rule 415,

In order for an investment bank to perform a firm commitment offering of securities,they must maintain at least 20% equity on their balance sheet.

Venture capital firms often make loans to finance new and often high-risk companies that may have no business history.

Initial public offerings (IPOs)are first-time issues of firms whose equity has not previously traded in an organized market.

Which of the following is true?

Which of the following 2 firms survived as investment banks following the most recent financial crisis?

As of 2015,there were over 4,500 securities firms in operation.

Which of the following is a self-regulatory organization involved in the day-to-day regulation of trading practices?

Discount brokers

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

Exam 4: Financial Services: Securities Firms and Investment Banks

The value of assets is the traditional measure of size in the securities brokerage and investment banking industry.

Which of the following two investment banks were granted approval to be chartered as commercial banks during the most recent financial crisis?

Considering the securities firms and investment banking industries,The National Securities Markets Improvement Act (NSMIA)of 1996

Most securities firms are subject to large amounts of interest rate and market risk because of the large amount financial assets on the balance sheet.

Securities underwriting and trading is an activity that requires a considerable investment in long-term assets and relatively small investments in short-term assets.

According to SEC Rule 415,

In order for an investment bank to perform a firm commitment offering of securities,they must maintain at least 20% equity on their balance sheet.

Venture capital firms often make loans to finance new and often high-risk companies that may have no business history.

Initial public offerings (IPOs)are first-time issues of firms whose equity has not previously traded in an organized market.

Which of the following is true?

Which of the following 2 firms survived as investment banks following the most recent financial crisis?

As of 2015,there were over 4,500 securities firms in operation.

Which of the following is a self-regulatory organization involved in the day-to-day regulation of trading practices?

Discount brokers

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