Exam 4: Securities, Brokerage, and Investment Banking

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.

In pure arbitrage, a trader would sell an asset in one market at one price while buying the same asset in another market at a higher price.

In market-making

The principal reasons for the growth in profitability of the securities industry in the middle 1990s were the trading profits from fixed income securities and the growth in new issue underwriting.

An investment banker agrees to underwrite an issue of 10 million shares of stock for TWResearch, Inc. on a firm commitment basis. The investment banker pays $10.50 per share to TWResearch, Inc. for the 10 million shares of stock. It then sells those shares to the public for $11.20 per share. How much money does TWResearch receive?

Which of the following two U.S. investment banks were granted approval to be chartered as commercial banks during the most recent financial crisis?

In comparison to a typical bank, an investment bank is likely to have

The Canadian Investor Protection Fund (CIPF) protects investors against losses of up to ____ on securities firm failures.

A best-efforts offering of a security is more risky for an investment bank than a firm commitment offering.

Investment banks engage in activities such as advising on mergers, acquisitions, and corporate restructuring.

Market making involves creating a primary market in a financial asset.

Which of the following U.S. investment banks is no longer in business as a result of the most recent financial crisis?

An investment banker agrees to underwrite an issue of 10 million shares of stock for TWResearch, Inc. on a firm commitment basis. The investment banker pays $10.50 per share to TWResearch, Inc. for the 10 million shares of stock. It then sells those shares to the public for $11.20 per share. What is the profit (loss) to the investment banker?

When conducting a firm commitment offering, the investment bank is acting as an agent on behalf of the issuing company or government.

Agency transactions of market makers are two-way transactions on behalf of customers

One of the primary reasons that U.S. investment banks were allowed to convert to bank holding companies during the recent financial crisis was recognition that

Securities firms have equity ratios that are lower than those for banks because their balance sheets contain a larger portion of

Venture capital firms often make loans to finance new and often high-risk companies that may have no business history.

Which of the following is true of private placement of securities?

Because the business of funds management generates fees based on the size of the pool of assets managed, the flow of income is more volatile than either investment banking function or the trading function.