Introduction to Careers in Finance D9126 : 1. FINANCE OVERVIEW AND FINANCIAL SERVICES

A family of four's share of the national debt would be about _____.

$225,000

For every $1 million of capital investment in the U.S., the amount from investors outside the U.S. is nearest to _____.

$50,000

A bank is audited and found to have insufficient reserves. It is probable that the SEC will move to shut the bank down.

False

Although the FDIC insures depositors' accounts up to $250,000, they don't pay out if the bank failure was due to some types of fraud or illegality.

False

For most Wall Street brokerage firms and the banks involved in the Enron scandal, the settlements they made put an end to their company.

False

In our current times, the United States' economy is mainly considered to be market-based.

False

The SEC was created before the Federal Reserve.

False

The U.S. and European countries do not need trade agreements because they have always freely traded without duties or quotas.

False

accounting

CPA exam

In 1994, NAFTA established a free trade agreement between _____. (Select all that apply.)

Canada Mexico United States

Global stock exchanges include _____. (Select all that apply.)

Chicago Mercantile Exchange NASDAQ

A corporation headquartered in London sells securities and is being investigated for questionable market behavior. The corporation would most likely be talking with officials from _____.

Financial Conduct Authority

The country with the lowest rate of inflation today is _____.

France

The Glass-Steagall Act was repealed by the _____.

Gramm-Leach Bliley Bill

The first insurance company in the United States was _____.

INA

An international bank needs economic advice and consultation. It is most likely they could receive this from _____.

International Monetary Fund

A company outside the United States is issuing shares of stock beginning at the end of the month. It is most likely there was the involvement of the _____.

International Organization of Stock Commissions

Legislation often referred to as the "Wall Street bailout" is _____.

TARP Act

The XYZ International Bank has higher margin requirements than the ABC International Bank. What does this mean?

Their deposits are higher.

Patient Protection and Affordable Care Act

This law mandates that every person in the U. S have health insurance.

Tarp Act

This law was basically a bailout program for Wall Street.

Federal Reserve Act

This law was created over 100 years ago as a direct result of the 1907 run on the banks.

A car salesman could work with a customer to sell her a car, and also could be involved with setting up the loan for the car. This is an example of layering of services.

True

Alex does not have a college degree. He may be able to get a job in a bank, although it will be limited by his lack of a degree.

True

Alex owns a bond with a high level of risk, and his partner owns one with much less risk. If both bonds reach maturity, Alex will end up with more money.

True

Although Deutsche Bank is headquartered in Germany, it is very likely it has some U.S. banking oversight.

True

Assuming that the money market, the foreign exchange market, and the secondary market for securities are functioning correctly, there will be economic growth.

True

Capital is the funds or resources available to fund investments and provide the necessary cash flow.

True

If the SEC had been in existence prior to 1929, it is less likely the stock market would have crashed.

True

Juan has some shares of risky stock from a start-up company, and other shares of stock from an established company with much less risk. It sounds as though Juan is diversifying his portfolio.

True

The Department of Labor has a voice in securities trading, since there is exposure through pension funds.

True

The International Monetary Fund provides advisement and also loans to countries.

True

The Patriot Act brought changes that were intended to decrease instances of computer hacking.

True

Workers' Compensation is considered a type of insurance.

True

An active primary market for the creation of new securities and the presence of plenty of buyers and sellers are all most indicative of _____.

a competitive marketplace

securtiy

a financial product, such as a stock or a bond, which is traded in a public stock market

Basel Committee

a group of international bankers who decide on global standards for foreign exchange

closed-end fund

a limited share investment fund not available to the general public

Jake is looking to sell his grandparents' marketable assets. Those with the most liquidity are _____. (Select all that apply.)

a municipal bond 100 shares of ABC Corporation common stock

Gramm-Leach-Bliley Act

allowing banks to enter all fields of financial services, including securities dealing. This ultimately led to the 2007 mortgage banking derivative meltdown

U.S. Council on Foreign Relations

an agency that researches trade and foreign relations issues and publishes reports about economic activity and policy making

commodity

an agricultural or natural resource product, like oil or corn, which is traded over a public securities market or commodities market such as the Chicago Board of Exchange

capitalism

an economic system where market factors such as demand and supply of goods and services influence prices and profits rather than controlled by a state or government

When the IPO for the successful Sweet Cookie Company came out, Bud bought 1,000 shares for $5.50 each. His friend eventually bought 500 shares at $8 each. It is most likely that Bud is _____. (Select all that apply.)

an investment banker a customer of an investment banker

mutual funds

an investment program trading in diversified holdings; professionally managed but owned by shareholders

Dale has bought 5,000 shares of ABC Corporation through a large firm, carrying out the purchase mainly online. Dale can be referred to as _____. (Select all that apply.)

an investor a customer a securities holder

U. S. Council on Foreign Relations

assesses and reports on foreign ownership of U. S. financial assets

North American Free Trade Agreement

began free trade between three geographically close countries

Libor is the price banks charge each other to _____.

borrow money

Which of the following careers in the financial industry requires a minimum of a four-year college Bachelor of Arts degree?

certified public accountant

An investment fund has 100 shares and is not available to investors in the general public. The fund is most likely a _____.

closed-end fund

Deregulation in the banking industry in 2007 was mainly intended to lead to _____. (Select all that apply.)

competitive pricing an efficient marketplace

As a result of concern over Latin American loans in 1975, the FDIC _____.

created the Interbank Payment System

The Securities and Exchange Commission will consider a monetary penalty to those financial institutions that do not abide by their mandates. This activity is an example of _____.

enforcement

The Securities and Exchange Commission is the primary regulatory authority for the banking industry.

fasle

McCarran Ferguson Act

federal law enacted in 1945 exempting most of the insurance business from federal regulation

Patient Protection and Affordable Care Act

federal law, created under President Barack Obama, requiring all people in the United States to have health insurance

Federal Reserve Act

federal legislation enacted in 1913, after the banking panic of 1907

By 2018, industries that are projected to represent 12 percent of the U.S. overall domestic product are _____. (Select all that apply.)

finance industry insurance industry

Since 2000, the U. S. national debt has quickly grown. This is mainly due to _____. (Select all that apply)

financing several wars increasing costs of federal programs the two-year economic downturn that began in 2007

Gramm-Leach-Bliley Bill

gives banks the authority to sell products and provide services previously thought of as nonbanking

International Monetary Fund

global agency that advises on monetary and trade policy

Fannie Mae and Freddie Mac are notable mainly because they _____. (Select all that apply.)

help first-time home buyers are run by the government

monetary system

includes a centralized banking system, securities mar-kets, and other financial instruments, to include insurance and real estate investment trusts

foreign exchange

international currencies that can be traded in the securities market and exchanged between nations in business transactions

Marco bought 1,000 euros on the foreign exchange market last week. If he buys 1,000 more this week, he will probably pay _____.

it cannot be determined from the information given

The United States financial system is attractive to international investors because _____. (Select all that apply.)

it is a stable system the FDIC insurance bank deposits the Federal Reserve oversees the system

In the event of a shock to the country's financial system, the best indication that it is well managed is _____.

it will automatically correct itself

Without the Gramm-Leach-Bliley Act, Bank of America would more than likely _____.

not be a mega-bank

International Monetary Fund

one component is loaning money to countries needing it

mutual fund

open-ended, trading securities that trade throughout their life

Characteristics of a functional financial market include being of sufficient size, liquidity, and _____. (Select all that apply.)

operational efficiency safety transparency

Gramm-Leach-Bliley Act of 2000

permitted banks to offer securities, insurance, and other financial products

Gina is buying 1,000 shares in an IPO of ABC Corporation. She is buying them through a _____.

primary market

The ABC Brokerage Firm has sold newly issued securities of the XYZ Corporation to a client. The client will hold onto these securities for a period of time. The securities are considered to be _____.

primary securities

Investment companies in the U.S. can be considered as one of four types: mutual funds, closed-end funds, unit investment funds, and (although not regulated by the SEC) _____.

private investment companies

Primary activities of the SEC include _____. (Select all that apply.)

processing all new stock issues penalizing individuals who violate trading rules

closed-end fund

raises a set amount of capital for a particular purpose

Basel Banking Committee

recognized by worldwide banks as the authority for drafting banking regulations

Dodd-Frank Act

restores some banking relations, especially those having to do with bank reserves and liquidity

Since interest rates in Argentina are not stringently controlled, the country has mainly experienced _____.

runaway inflation

Basel II mainly has to do with _____.

safety in the event of a run on the banks

Jed sold 1,000 shares of ABC, a Canada-based corporation stock, and purchased 1,000 shares of XYZ, a U.S. corporation stock - both transactions were done through his broker. It sounds as though Jed bought these shares most likely through a _____.

secondary market

The XYZ bank has sold shares of the ABC Company to a client, who plans to hold the shares for a period of time. The securities are considered to be _____.

secondary securities

Changes in our Gross Domestic Product can be most directly attributed to _____. (Select all that apply.)

securities owned by employees of certain companies through stock purchase plans ready credit for middle class mortgages

unit investment trust

securities that are traded in large blocks

A derivative is a type of _____.

security

secondary markets

security offerings traded in public exchanges after they are issued

The European Central Bank is similar to the Federal Reserve Bank because it _____. (Select all that apply.)

sets monetary policy provides banking oversight sets interest rates to stabilize the market

Troubled Asset Relief Program

signed into law in 2008 to assist banks and other financial institutions from the collapse of the financial industry due to the unscrupulous sub-prime operations by purchasing assets and equity of these institutions and strengthen the financial sector

A poll of the first 10 attendees at a meeting in town indicated that their jobs included a teacher, a banker, a plumber, a mail deliverer, a baker, a tutor, a piano teacher, two brothers who own a chocolate-making company, and an automotive factory worker. The demographics of this group are _____.

similar to that of the workers in the U.S.

From the time a whistleblower made the SEC aware of Enron irregularities to Congressional hearings beginning was a span of approximately _____.

six months

Basel Committee

standardized ways to assess a bank's stability (or lack of)

The McCarran-Ferguson Act allows for _____.

state-by-state insurance regulation

A loan company packages high-risk mortgage loans and invites investors to invest in portfolios containing units of these loans. These mortgage loans are most likely to be _____.

subprime

The Stability and Growth Part has to do with _____.

the Economic and Monetary Union

International Order of Securities Commissions

the European counterpart to the U.S. Securities and Exchange Commission

All agencies that sell, trade, or deal with the commodities or securities industry are regulated by _____.

the SEC

European Central Bank

the central banking system for Europe which makes policy and acts as a banking regulatory authority; similar to the U. S. Federal Reserve Bank

Medicare

the first socialized medical program

economy

the flow of goods and services for a nation; the wealth and resources of a country, to include both production and consumption of goods and services

World Bank

the international regulatory body for banking

finance

the part of economics that studies money management, credit, banking, and investments

securitization

the process of converting a business asset into a publicly traded security, such as a new stock issue; a method for developing capital through shares of stock and involves substantial legal, financial, and government review

Systemic risk most nearly means _____.

the risk of the collapse of an entire financial system

Economies of countries with dictatorships do not have healthy financial systems mainly because they lack _____.

transparency

The United States has free-trade agreements with approximately _____.

twenty countries

XYZ Corporation's securities are offered in units of 50,000 units. These securities are mutual funds and are most likely _____.

unit investment funds

Maggie has 10,000 shares of XYZ Corporation, part of an industry that is not doing well right now. She is said to have stocks specifically with _____.

unsystematic risk

investment banker

works directly with an individual she represents to help earn a return on investments

securities analyst

works directly with the company she represents to help them earn a return on investments

insurance broker

works with companies to guard against risks and losses, and to manage claims.

The best example of a marketable asset below is _____.

100 shares of XYZ Corporation's common stock

Of every 100,000 jobs in the U.S., the approximate number of those through international firms are ____.

18,000

The gold standard was eliminated in the U.S. in _____.

1971

The Enron scandal mainly took place in the year _____.

2001

Of every 500,000 jobs in the U.S., the approximate number of those through international firms are _____.

90,000

Employee Retirement Income Security Act

Among other aims, this legislation protects funds in employee pension accounts.

The Basel Bank Accord(s) that deal with bank reserves in the event of a run on the banks is _____.

Basel II

McCarran Ferguson Act

Because of this law (which is about 70 years old) the insurance business is not federally regulated.

Some countries have changed their financial situation so much that they can now be referred to as emerging powerhouses. These countries include _____. (Select all that apply.)

Brazil India

What was the most direct reason for the creation of the Employee Retirement Income Security Act?

Employees were being taken advantage of in retirement, health, welfare programs.

The two regulatory bodies that are most alike are _____. (Select all that apply.)

European Central Bank Federal Reserve

Regulatory authorities for international banking include _____. (Select all that apply.)

European Central Bank International Monetary Fund Asian Development Bank Institute

The United States has free-trade agreements with _____. (Select all that apply.)

Korea Chile Israel

A corporation is in the final states of filing statements to issue their stock to investors. This stock issue was closely monitored by the _____.

SEC

Capital formation occurs by _____. (Select all that apply.)

Saving investing

The U. S. agency most like the Financial Conduct Authority is the _____.

Securities and Exchange Commission

stock broker

Series 7 General Exam

Enron overstated its earnings by $600 million for _____.

about four years

Sarbanes-Oxley Act

addressed accounting reform and financial disclosure for investors

Dodd-Frank Act

addressed unethical lending practices which allowed unqualified people to purchase homes they could not pay for

Aside from distributing investments and savings, the primary tasks of the financial service system are _____. (Select all that apply.)

aiding in the creation of capital formation growing the country's economy managing and mitigating the risks

The financial system is made up of _____. (Select all that apply.)

all of the industries which create and sell financial products the government regulatory agencies which police the financial service industry those who participate in the market

financial intermediaries

all the parties, both government and private sector corporations, that perform financial services in an economy; includes loans of all types, wire-transfers of money, and stock transactions

One standard guiding the SEC is to reduce systemic risk. That most importantly means they _____.

do not want the entire market to collapse

commercial banker

encourages deposits by customers, makes loans, negotiates terms

Bitcoin is currently being reviewed by Congress. This most likely means it will _____.

end up more regulated than it presently is

Dodd-Frank Act

known by its full term as the Dodd-Frank Wall Street Reform and Consumer Protection Act; a compliation of regulations addressed towards operations of financial institutions and protection of its customers; law was enacted in 2010

Although China has a robust economy, it is less attractive to invest there than the U.S. because of their _____.

lack of transparency in the financial markets

real estate

licensing varies by state

insurance

licensing varies depending on scope of license and type of position

Even an economically sound economy will have problems managing risk and with solving investment issues. As these are resolved, it is most crucial to maintain _____.

liquidity in the market

As of 2001, Enron was the largest corporate bankruptcy in U. S. history. That means it _____.

lost the largest amount of money

Basic requirements for a healthy securities marketplace are _____. (Select all that apply.)

low transaction costs accurate and timely information about previous trades the availability of reliable data on the value of securities

The Sarbanes-Oxley Act is mainly intended to _____.

make it more difficult to commit some kinds of stock fraud

Global financial markets are concerned with policies and regulations, and also _____. (Select all that apply.)

managing public debt pensions: private and publicly funded education for money management policies

primary markets

markets where new issues of stock, or Initial Purchase Options (IPOs) are created; the NYSE and NASDAQ are primary markets

securities market

may refer to the primary market for new stock issues or the secondary market where issued securi-ties are traded

Andres buys 1,000 shares of ABC Corporation's OTC stock. His next step is most likely to _____.

monitor the stock price

Important roles of the Federal Reserve are _____. (Select all that apply.)

monitoring of financial policies reviewing private banking reserves ensuring availability of credit through appropriate loan interest rates

When compared with 2007, the U.S. banking and financial industry is _____.

more regulated

A county three-lane highway that will stretch about 20 miles is being built in LeeTown. This highway is paid for by ____.

municipal bonds

Patient Protection and Affordable Care Act

national medical insurance mandate