Chap 22
Which of the following statements about cash management accounts (CMAs) are true?
E) A & B
Private placements
E) A&B
Securities dealers
E) A&B
The buyers of private placement issues are most likely to be ________.
E) A&B
Which of the following statements about private placements are true?
E) A&B
The Glass-Steagall Act
E) Separated commercial and investment banking and made it illegal for a commercial bank to buy or sell securities on behalf of its customers
Which of the following best explains the difference between brokers and dealers?
A) Brokers re pure middlemen; brokers make markets by standing ready to buy and sell at given prices
________ perform their main function in the primary market for securities and ________ perform their main function in the secondary market.
A) Investment banks; securities brokers and dealers
In a ________ agreement, the investment banker makes no guarantee regarding the price the issuing firm will receive, but agrees to sell the securities on a commission basis.
A) best efforts
The securities sales, the ________ price is the price that the broker pays for securities they buy for their inventory.
A) bid
An investment pool is formed to
A) manipulate the market by spreading false rumors
A securities dealer stands ready to make a market in the security at any time. For this reason, dealers are also called ________.
A) market makers
Investment banks sell ________ securities to the public, and brokerage firms sell ________ securities to the public.
A) new; exisiting
In a _______, new issues of a security are sold to buyers by the corporation or government agency ultimately using the funds
A) primary market
By law, investors must be given a portion of the registration statement before they can invest in a new security. This document is called a ________.
A) prospectus
If an investment is liquid, it can be sold ________.
A) quickly
Investment banks advertise upcoming securities offerings with block ads in the Wall Street Journal. Such an ad is called a ________.
A) tombstone
A ________ is a specialized firm that finances young, start-up companies.
A) venture capital firm
The largest full-service broker is ________ with about 17,000 financial advisors and $2.2 trillion in client assets.
A)Bank of America Merrill Lynch
The largest U.S. underwriter of global debt and equity issues, as of 2009, was ________.
B) J.P. Morgan
The best known investment banker involved in mergers and acquisitions, credited with inventing the junk bond market, is ________.
B) Michael Milken
In a ______, a security sold between investors, and does not involve the corporation or government agency ultimately using the funds
B) Secondary market
The securities sales, the ________ price is the price that the broker receive when they sell the securities.
B) ask
From an investment banker's perspective, the best outcome occurs when a new issue is ________.
B) fully subscribed
An investment bank is a financial institution that
B) helps corporations rise funds
Most investment banks are attached to
B) large brokerage houses
A full-service broker offers its clients all of the following except
B) low transaction fees
An instruction to a securities agent to buy or sell the security at the current market price is called a ________.
B) market loss
Investment banks find it less difficult to price securities if the firm has prior issues currently selling in the market, called ________.
B) seasoned issues
Under best efforts underwriting, the underwriter
B) sells the security on a commission basis
Often investment bankers will form a group, each one buying only a portion of the new securities to be issued. Such a group is called an underwriting ________.
B) syndicate
To take advantage of anticipated stock price decreases, an investor would use ________.
C) A limit order
The most active investment banking firm in the private placement market is ________.
C) Goldman Sachs
Which of the following is not a service securities brokers offer their clients?
C) Providing insurance against loss of value of the securities
Investment banks may lose ________ if new securities issues are ________.
C) future business; oversubscribe
The primary function of investment banks is
C) helping corporations raise funds
In a primary market, ________ sell new issues of securities; in a secondary market, ________ assist in trading previously issued securities.
C) investment banks; securities, brokers, and dealers
An instruction to a securities agent to purchase a stock as long as its price does not exceed a specified level is a ________.
C) limit order
SEC registration is
C) not required for securities that are sold through private placement
The process of underwriting a stock or bond issue requires that the investment bank
C) purchase the entire issue at a predetermined price and then resell it in the market
During the depression, about _______ banks failed
D) 10,000
Investment bankers have been active in the mergers and acquisitions market since the 1960s. Their contributions have included
D) all of the above
Securities dealers
D) all of the above
Tasks that investment bankers perform when acting as underwriters to sell securities to the public include
D) all of the above
The buyers of private placement securities are most likely to be ________.
D) all of the above
The registration statement the securities underwriter files with the SEC contains information about
D) all of the above
Which of the following is not a step in the process by which an investment bank assists in the sale of a company or corporate division?
D) forming a syndicate of purchasers
The primary function of investment banks is to
D) help corporations issue new securities
By making a market in thinly traded stocks, securities dealers solve the ________ trading problem, which is of particular benefit to ________ businesses.
D) nonsynchronous; small
An instruction to a securities agent to sell a stock when it reaches a specific price is a ________.
D) stop loss order
Which is not an activity of investment banks?
D) underwriting new issues of federal government bonds