Module 6
The failure of Lehman Brothers in 2008 caused the first ever drop in the price of an MMMF share to below its fixed price of ___ per share and triggered a run on MMMF's .
$ 1
In 2019 , the total dollar value of mergers and acquisitions completed in the U.S. was about _____ and the total dollar value of mergers and acquisitions completed globally was just over _____.
$ 1.8 trillion : $ 3 trillion
Institutional investors can be qualified as accredited investors if total assets exceed
$ 5,000,000 .
A fee charged to mutual fund investors to meet distribution expenses and shareholder servicing costs is called a
12b - 1 fee .
A major effect of the 1987 stock market crash was a sharp decline in stock market trading volume and brokerage commissions that lasted until
1992 .
The top five underwriters of global debt and equity represented almost ___ percent of total debt issues and ___ percent of total equity issues in 2019 .
58 ; 39
By 2019 , corporate equities represented only about ___ percent of total long - term mutual fund asset portfolios , a drop from their pre - crisis levels .
67
To ensure that SEC rules governing mutual funds are enforced , the SEC required in 2004 that mutual funds hire _______ to monitor compliance with the rules .
Chief Compliance Officers
Cash management accounts offered by investment banks and securities firms may be covered directly or indirectly by
FDIC insurance .
Under _____ rules , the 12b - 1 fees that may be charged to mutual fund investors are capped .
FINRA
The day - to - day regulation of trading practices in the securities industry is performed by
FINRA .
The 2010 Wall Street Reform and Consumer Protection Act gave new authority for the _______ to supervise all firms that could pose a threat to financial stability .
Federal Reserve
_____ of the top five underwriters of global debt are U.S. firms .
Four
_______ other sectors of the financial institutions industry , securities firms and investment banks operate globally .
More than
The Securities Exchange Act of 1934 appointed the _____ to supervise mutual fund distributions ..
NASD
The 2010 Wall Street Reform and Consumer Protection Act also mandated that _______ be moved to listed futures markets and cleared through a registered clearing organization or exchange .
OTC derivatives trading
The ______ is the primary regulator of mutual funds .
SEC
The primary regulator of the securities industry is the
SEC .
The federal government , through the Small Business Administration , operates privately organized venture capital firms that provide capital to entrepreneurs called
Small Business Investment Companies .
True or false : Among other services provided in the area of mergers and acquisitions , investment banks may assist target firms in preventing the merger altogether .
True
True or false : Due to market supply and demand , it is possible for closed - end funds to trade at a price above or below their net asset value .
True
At the federal level , the ________ was created with the broad mandate to determine whether any changes are required in U.S. law to better protect the public .
U.S. Senate Permanent Subcommittee on Investigations
In 2010 , in response to the recent financial crisis , the ________ focused on the contributing role of investment banks in the financial crisis .
U.S. Senate Permanent Subcommittee on Investigations
An investment bank engaged in securities underwriting will often bring in other investment banks to help sell and distribute the new issue . This is called
a syndicate .
Venture capitalists are not passive investors . In addition to their equity investment , they also provide _______ and _______.
advice ; assistance with recruiting managers
Securities firms and investment banks act as market makers in financial securities , through either _____ transactions or _____ transactions .
agency , principal
Index funds may enjoy lower management fees because they are _____ managed .
aggressively
A large proportion of a market maker's profit on agency transactions is the _______ which is the difference between the price they pay for a security and what they sell it for
bid - ask spread
The largest firms in the industry today provide diversified financial services , acting as ________ to retail customers , and as ________ to corporate customers .
broker - dealers : securities underwriters
The largest firms in the industry today provide diversified financial services , acting as _______ to retail customers , and as _______ to corporate customers .
broker - dealers ; securities underwriters
Securities firms and investment banks play the role of _____ intermediating between fund suppliers and users .
brokers
The advantage of brokerage firm cash management accounts over commercial bank deposit accounts is that they make it easier to
buy and sell securities .
Investing involves managing pools of assets such as _______ and _______ in competition with commercial banks , life insurance companies and pension funds .
closed - end mutual funds ; open - end mutual funds
The largest of the large full - service firms , having extensive domestic and international operations offering a wide variety of retail and corporate financial services , are the
commercial bank holding companies or financial services holding companies .
The period 1990-2001 saw an increase in new issue underwriting activity , particularly underwriting of
corporate bond issues .
Just prior to the financial crisis in 2007 , _______ represented 70 percent of total long - term mutual fund asset portfolios .
corporate equities
States continue to exert regulatory influence over securities firms through _______ brought against securities violators by the state _______.
criminal investigations ; attorneys general
Arrangements between mutual fund companies and brokerage houses that afford brokers the opportunity to improperly influence investors on their fund recommendations is called
directed brokerage .
The most common type of mutual funds owned by households is _____ mutual funds followed by _____ mutual funds .
equity ; money market
In addition to using the pooled investment resources of institutions and wealthy investors for funding like venture capital firms , private equity firms may also use _______ and _______ to fund their investments .
equity securities ; non - publicly traded stocks
Long - term mutual funds that are designed to replicate a particular market index and that trade on secondary markets are called
exchange - traded funds .
The fact that investment banks and securities firms hold foreign - issued securities subjects them to _____ risk and _____.
exchange rate ; sovereign
The financial crisis of 2008 caused major changes in the investment banking industry . By the end of 2008 , the _____ largest firms in the industry were all gone as investment banks ..
five
To insulate the mutual fund Chief Compliance Officer from undue internal pressure or influence , SEC regulations require that only the _______ can fire this officer .
fund's board of directors
Non - U.S . mutual funds suffered _____ losses during the financial crisis than / as U.S. funds .
greater
An investment pool that solicits funds from wealthy individuals and other large investors and invests these funds on their behalf is a ( n )
hedge fund .
The primary advantage of money market mutual funds over bank deposits is
higher interest rates .
The majority of both long - term and short - term mutual funds are owned by
households .
Deceptive fund management practices that use share classes and 12b - 1 fees to trick investors into believing they are buying no - load funds are referred to as
improperly assessed fees .
FINRA is a ( n ) _____ and _____ organization authorized by Congress to protect America's investors .
independent ; nonprofit
FINRA is a ( n ) ______ and ______ organization authorized by Congress to protect America's investors .
independent ; nonprofit
Long - term mutual funds in which fund managers buy securities in proportions similar to those included in a specified major stock index are called
index funds .
The Insider Trading and Securities Fraud Enforcement Act of 1988 required mutual funds to develop mechanisms and procedures to avoid
insider trading abuses .
Mutual funds that manage retirement plans for an institutions ' employees are called
institutional funds .
A ( n ) _______ can buy ETF shares directly from the fund , while _______ must buy their ETF shares on secondary markets .
institutional investor ; individual investors
The principal type of risk to which money market mutual funds are exposed is _____ risk , but it is generally small due to short asset maturities ,
interest rate
Large full - line firms that provide both securities underwriting and brokerage services are called
investment banks .
Buying or selling of mutual fund shares long after the price had been set at the 4:00 pm U.S. market close is called
late trading .
Mutual funds that maintain a predetermined risk level are called
lifestyle funds .
Position traders make take ____ or ____ positions that last for many weeks or months .
long ; short
Mutual funds are especially advantageous to small investors because they make it possible for them to create diversified asset portfolios with
low transaction costs .
At the end of each trading day , the mutual fund assets are _______, liabilities are deducted, and the net amount divided by the number of shares to obtain the _______.
marked to market ; net asset value
During the 1970s , _______ were introduced as an alternative to bank deposits , causing the number of funds and industry asset size to grow dramatically .
money market mutual funds
The _______ is calculated once at the end of each trading day and is used to settle all of that day's fund trades .
net asset value
While venture capital firms concern themselves with investing in _______, private equity firms tend to focus more on _______.
new firms ; established firms
A mutual fund that does not assess a one - time sales charge to the share buyer is called a
no - load fund .
Consumer - oriented money market mutual funds set their per share value at $ 1.00 and adjust the investor's _______ as fluctuations in fund value occur due to interest rate changes , default risk and capital gains or losses .
number of shares
Of the five largest investment banks in the U.S. at the start of 2008 , ___ failed , ___ were acquired by financial services holding companies , and ___ applied for commercial bank charters , during that year .
one ; two : two
The largest portion of investments company business is in
open - end mutual funds .
Trading that involves purchasing large blocks of securities on the expectation of a favorable price move is called
position trading .
A transaction in which the market maker seeks to profit on the price movements of securities and takes either long or short positions for its own account is called a ( n )
principal transaction .
Regulations require that mutual fund managers specify the investment objectives of their funds in a ( n ) _____ available to prospective investors .
prospectus
The fund objective described in the _____ provides general information about the types of securities the mutual fund holds as assets .
prospectus
fund Amendments adopted by the SEC in 2009 imposed new requirements on mutual fund companies regarding the language , format , and delivery of the
prospectus ,
Closed - end investment companies that specialize in real estate company shares and / or buying mortgages are called
real estate investment trusts .
Another major driver for growth in the mutual fund industry in recent decades has been the
rise in retirement funds under management by mutual funds .
The largest single source of funds on the securities firm balance sheet in 2016 was
securities sold under repurchase agreements .
Since securities firms tend to trade for their customers and do not take positions for themselves , their assets and liabilities tend to be mostly
short - term
One important difference between securities firms and other financial institutions is that securities firms tend to use liabilities that are very
short - term .
Since securities firms tend to trade for their customers and do not take positions for themselves , their assets and liabilities tend to be mostly
short - term ..
Traditional bank service areas into which investment banks are making increasing inroads are _______ and _______.
small business lending ; trading of loans
During the 1990s , the mutual fund industry enjoyed large growth in the number of funds and industry assets due to
soaring capital market values .
The portion of an investment bank's fee or commission that is allocated to research and advisory services is called
soft dollars .
Funds management generates fees that are based on the size of the pool of assets managed , and tends to produce a more _______ than does either Investment banking or trading .
stable flow of income
Brokerage commission income is tied to
stock market trading volume .
Well - diversified , long - term equity funds are exposed to _____ risk , while bond funds are exposed to _____ risk .
systematic ; interest rate
Mutual funds that follow a predetermined allocation of risk over time are called
target date funds .
Unlike other financial institutions , securities firms and investment banks do not _____ securities issued by users of funds into claims that may be more attractive to suppliers of funds .
transform
Money market mutual funds invest primarily in financial securities having a maturity of
under 1 year .
Load funds presumably provide the investor with more personal attention and advice on fund selection than no - load funds , which _______ translate into better performance .
usually does not
A professionally managed pool of money used to finance new and often high - risk firms is called
venture capital .
The types of long - term mutual funds are ( pick three )
•bond funds •equity funds •hybrid funds
The largest firms in the industry today can be divided into three subgroups , which are
•large investment banks located in major cities specializing in institutional clients •commercial bank holding companies or financial services holding companies •national full - service firms specializing in corporate finance and primary market activities
The three types of private sector institutional venture capital firms are
•limited partner venture capital firms •corporate venture capital firms •financial venture capital firms
The investment banking industry suffered a decline in bond and equity underwriting during the 1987-1990 period that was due to ( pick three )
•the 1987 stock market crash •investor concern about the failing junk bond market •a decline in mergers and acquisitions
As part of improved disclosure rules imposed on mutual funds by the SEC as of 2004 , mutual fund companies must provide clear information to investors on ( pick two )
•up - front sales charges •brokerage commissions and discounts
