Question 1

How much money does TWResearch receive?

Accepted Answer

A) $105,000,000. 
B) $150,000,000. 
C) $112,000,000. 
D) $125,000,000. 
E) $110,000,000. 
A) $105,000,000. 
B) $150,000,000. 
C) $112,000,000. 
D) $125,000,000. 
E) $110,000,000.

Question 2

Pure arbitrage trading involves

Accepted Answer

A) buying blocks of securities in anticipation of some information release. 
B) purchase of stock in a company being acquired and the sale of stock in the acquiring company. 
C) exploitation of a difference between a company's current value and its estimated liquidation value. 
D) buying an asset in one market at one price and selling it immediately in another market at a higher price. 
E) simultaneous purchase and sale of similar shares in a single market. 
A) buying blocks of securities in anticipation of some information release. 
B) purchase of stock in a company being acquired and the sale of stock in the acquiring company. 
C) exploitation of a difference between a company's current value and its estimated liquidation value. 
D) buying an asset in one market at one price and selling it immediately in another market at a higher price. 
E) simultaneous purchase and sale of similar shares in a single market.

Question 3

Securities firms and investment banks are more involved internationally than other member of the financial services industry.

Accepted Answer

A) True 
 B)False

Question 4

The number of investment banks and securities firms expanded rapidly from 1980 to October 1987.

Accepted Answer

A) True 
 B)False

Question 5

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

Question 6

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. 
E) publicly held companies must disclose all material information that might affect investment decisions to all investors at the same time. 
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. 
E) publicly held companies must disclose all material information that might affect investment decisions to all investors at the same time.

Question 7

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 8

The largest category of assets for broker-dealers as of the beginning of 2012 was

Accepted Answer

A) receivables from other broker-dealers. 
B) securities purchased under agreement to resell. 
C) receivables from customers. 
D) exchange membership. 
E) long position in securities and commodities. 
A) receivables from other broker-dealers. 
B) securities purchased under agreement to resell. 
C) receivables from customers. 
D) exchange membership. 
E) long position in securities and commodities.

Question 9

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 above. 
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 above.

Question 10

What is the profit (loss) to the investment banker?

Accepted Answer

A) Profit of $1,000,000. 
B) Profit of $2,000,000. 
C) Profit of $7,000,000. 
D) Loss of $7,500,000. 
E) Loss of $1,000,000. 
A) Profit of $1,000,000. 
B) Profit of $2,000,000. 
C) Profit of $7,000,000. 
D) Loss of $7,500,000. 
E) Loss of $1,000,000.

Question 11

What is the profit (loss) to the investment banker?

Accepted Answer

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

Question 12

Soft dollars is a term often used in reference to the portion of a fee or commission that is allocated to

Accepted Answer

A) research and other advisory services. 
B) custody and escrow services. 
C) clearance and settlement services. 
D) banking services. 
E) back office services. 
A) research and other advisory services. 
B) custody and escrow services. 
C) clearance and settlement services. 
D) banking services. 
E) back office services.

Question 13

How much money does NetChoice, Inc. receive?

Accepted Answer

A) $139,500,500. 
B) $137,812,500. 
C) $155,000,000. 
D) $153,125,000. 
E) $105,000,000. 
A) $139,500,500. 
B) $137,812,500. 
C) $155,000,000. 
D) $153,125,000. 
E) $105,000,000.

Question 14

By 2012, there were approximately ________ securities firms and investment banks operating.

Accepted Answer

A) 9,100 
B) 7,600 
C) 1,200 
D) 480 
E) 220 
A) 9,100 
B) 7,600 
C) 1,200 
D) 480 
E) 220

Question 15

The concentration of business among the largest firms in the securities firm/investment banking business has increased significantly since the stock market crash of 1987.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A) Purchase of existing securities. 
B) Sale of securities in the secondary market. 
C) Brokerage of existing securities. 
D) Underwriting issues of new securities. 
E) All of the above. 
A) Purchase of existing securities. 
B) Sale of securities in the secondary market. 
C) Brokerage of existing securities. 
D) Underwriting issues of new securities. 
E) All of the above.

Question 17

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.

Accepted Answer

A) True 
 B)False

Question 18

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 19

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. 
E) Profit of $3,125,500. 
A) Profit of $1,275,000. 
B) Loss of $1,875,000. 
C) Profit of $1,875,000. 
D) Loss of $3,125,000. 
E) Profit of $3,125,500.

Question 20

As of 2012, equity capital in the securities industry measured over 12 percent.

Accepted Answer

A) True 
 B)False

Exam 4: Financial Services: Securities Brokerage and Investment Banking

How much money does TWResearch receive?

Pure arbitrage trading involves

Securities firms and investment banks are more involved internationally than other member of the financial services industry.

The number of investment banks and securities firms expanded rapidly from 1980 to October 1987.

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

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.

The largest category of assets for broker-dealers as of the beginning of 2012 was

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

What is the profit (loss) to the investment banker?

What is the profit (loss) to the investment banker?

Soft dollars is a term often used in reference to the portion of a fee or commission that is allocated to

How much money does NetChoice, Inc. receive?

By 2012, there were approximately ________ securities firms and investment banks operating.

The concentration of business among the largest firms in the securities firm/investment banking business has increased significantly since the stock market crash of 1987.

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

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.

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

What is the profit to the investment banker if all 5 million shares were sold for $35 per share?

As of 2012, equity capital in the securities industry measured over 12 percent.

Why Are Financial Institutions Special

Financial Services: Depository Institutions

Financial Services: Finance Companies

Financial Services: Mutual Funds and Hedge Funds

Financial Services: Insurance

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

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