Chapter 16 Pre Work

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. Multiple choice question. bid-ask spread commission dealer fee brokerage fee

bid-ask spread

The advantage of brokerage firm cash management accounts over commercial bank deposit accounts is that they make it easier to Multiple choice question. write checks. purchase retail certificates of deposit. access funds through an ATM network. buy and sell securities.

buy and sell securities.

Securities firms and investment banks offer deposit-like ______ to individual investors and, since the 1999 Financial Services Modernization Act, deposit accounts themselves.

cash management accounts

Investing involves managing pools of assets such as ______ and ______ in competition with commercial banks, life insurance companies and pension funds. Multiple choice question. stocks; bonds equities; derivatives money market securities; equities closed-end mutual funds; open-end mutual funds

closed-end mutual funds; open-end mutual funds

Venture capital is usually provided to a firm in exchange for a(n) Multiple choice question. bond. promissory note. share of the revenues. equity investment.

equity investment.

The fact that investment banks and securities firms hold foreign-issued securities subjects them to ______ risk and ______. Multiple choice question. interest rate; sovereign exchange rate; interest rate liquidity; default exchange rate; sovereign

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. Multiple choice question. five three four two

five

FINRA is a(n) ______ and ______ organization authorized by Congress to protect America's investors. Multiple choice question. government-sponsored; nonprofit independent; nonprofit independent; for-profit government-sponsored; for-profit

independent; nonprofit

Large full-line firms that provide both securities underwriting and brokerage services are called Multiple choice question. securities firms. mutual funds. investment banks. commercial banks.

investment banks.

Select all that apply The three types of private sector institutional venture capital firms are Multiple select question. limited partner venture capital firms. financial venture capital firms. university venture capital firms. nonprofit venture capital firms. limited liability venture capital firms. corporate venture capital firms.

limited partner venture capital firms. financial venture capital firms. corporate venture capital firms.

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. Multiple choice question. two; one; two one; two; two one; three; one two; two; one

one; two; two

Trading that involves purchasing large blocks of securities on the expectation of a favorable price move is called Multiple choice question. program trading. position trading. pure arbitrage. risk arbitrage.

position trading.

Trading that involves buying securities in anticipation of some information release that will be beneficial to the investor's position is called Multiple choice question. risk arbitrage. pure arbitrage. program trading. stock brokerage.

risk arbitrage.

Firms that specialize in the purchase, sale and brokerage of existing securities in a retail capacity are called Multiple choice question. commercial banks. investment banks. securities firms. mutual funds.

securities firms.

In 2019, ______ of the top ten advisors in merger and acquisition deals involving U.S. targets were U.S. investment banks. Multiple choice question. ten eight seven nine

seven

Since securities firms tend to trade for their customers and do not take positions for themselves, their assets and liabilities tend to be mostly Multiple choice question. short-term. long-term. capital market. medium-term.

short-term.

Traditional bank service areas into which investment banks are making increasing inroads are ______ and ______. Multiple choice question. retail currency exchange; retain money transfers lockbox services; overnight cash dropbox services mortgage servicing; savings accounts small business lending; trading of loans

small business lending; trading of loans

The portion of an investment bank's fee or commission that is allocated to research and advisory services is called Multiple choice question. hard dollars. soft dollars. hot dollars. shadow dollars.

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. Multiple choice question. volatile source of income stable flow of income significant source of income risky source of income

stable flow of income

Brokerage commission income is tied to Multiple choice question. stock market trading volume. foreign exchange market trading volume. money market trading volume. bond market trading volume.

stock market trading volume.

Performance trends in the investment banking and securities firm industry depend heavily on the state of the Multiple choice question. stock market. money market. foreign exchange market bond market.

stock market.

A professionally managed pool of money used to finance new and often high-risk firms is called Multiple choice question. venture debt. venture capital. private equity. private placement.

venture capital.

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 ______. Multiple choice question. $2.7 trillion; $3 trillion $500 billion; $1 trillion $1.8 trillion; $2 trillion $1.8 trillion; $3 trillion

$1.8 trillion; $3 trillion

Between 1995 and 2018, the total dollar value of global security offerings increased from about ______ to just over ______. Multiple choice question. $400 billion; $2 trillion $500 billion; $4 trillion $1 trillion; $5 trillion $440 billion; $3 trillion

$440 billion; $3 trillion

The top five underwriters of global debt and equity represented almost ______ percent of total debt issues and ______ percent of total equity issues in 2019. Multiple choice question. 58; 39 50; 50 33; 60 58; 55

58; 39

The day-to-day regulation of trading practices in the securities industry is performed by Multiple choice question. the SEC. FINRA. the OCC. the Federal Reserve.

FINRA.

In 1996, the ______ reaffirmed the SEC as the primary regulator of securities firms and greatly reduced the ability of states to regulate the industry. Multiple choice question. FDIC Improvement Act Financial Institutions Reform, Recovery and Enforcement Act National Securities Markets Improvement Act Financial Services Modernization Act

National Securities Markets Improvement Act

The primary regulator of the securities industry is the Multiple choice question. FINRA. Federal Reserve. SEC. OCC.

SEC.

The federal government, through the Small Business Administration, operates privately organized venture capital firms that provide capital to entrepreneurs called Multiple choice question. Small Business Administration Venture Firms. Small Entrepreneur Funding Firms. Small Business Venture Funds. Small Business Investment Companies.

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 false question.TrueFalse

True

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 Multiple choice question. shared underwriting. a group issue. a conglomerate. a syndicate.

a syndicate.

A two-way transaction made on behalf of a customer, for which the financial institution receives a fee or commission is called a(n) Multiple choice question. secondary transaction. agency transaction. primary transaction. principal transaction.

agency transaction.

Wealthy individuals who make equity investments in small startup firms are called Multiple choice question. single venture capitalists. angel venture capitalists. personal venture capitalists. individual venture capitalists.

angel venture capitalists.