Question 1

An instruction to a securities agent to sell a stock when it reaches a specific price is a ________.

Accepted Answer

A) short sell 
B) market order 
C) limit order 
D) stop loss order 
A) short sell 
B) market order 
C) limit order 
D) stop loss order D

Question 2

Which of the following is a characteristic feature of venture capital firms?

Accepted Answer

A) developing a portfolio of companies 
B) holding debt in the firms that are funded 
C) allowing firms to use the funds as they see fit 
D) having a short-term investment horizon 
A) developing a portfolio of companies 
B) holding debt in the firms that are funded 
C) allowing firms to use the funds as they see fit 
D) having a short-term investment horizon A

Question 3

Securities dealers

Accepted Answer

A) sell securities out of their inventories to customers who want to buy. 
B) buy securities, which they add to their inventories, from customers who want to sell. 
C) are largely responsible for the health and growth of small businesses in the United States. 
D) do all of the above. 
E) do only A and B of the above. 
A) sell securities out of their inventories to customers who want to buy. 
B) buy securities, which they add to their inventories, from customers who want to sell. 
C) are largely responsible for the health and growth of small businesses in the United States. 
D) do all of the above. 
E) do only A and B of the above. D

Question 4

Which of the following is a description of a private equity firm?

Accepted Answer

A) Public shares are retired. 
B) A public company goes private. 
C) The firm is no longer subject to controls and oversight required of publicly held companies. 
D) All of the above are correct. 
A) Public shares are retired. 
B) A public company goes private. 
C) The firm is no longer subject to controls and oversight required of publicly held companies. 
D) All of the above are correct.

Question 5

Tasks that investment bankers perform when acting as underwriters to sell securities to the public include:

Accepted Answer

A) pricing the security. 
B) preparing the filings required by the Securities and Exchange Commission. 
C) arranging for the security to be rated. 
D) all of the above. 
E) only A and B of the above. 
A) pricing the security. 
B) preparing the filings required by the Securities and Exchange Commission. 
C) arranging for the security to be rated. 
D) all of the above. 
E) only A and B of the above.

Question 6

One disadvantage of the private placement of securities issues is the high cost of registering the issue.

Accepted Answer

A) True 
 B)False

Question 7

Since the stock market decline in 2000, the number of companies funded and the total funds invested by venture capital firms have ________.

Accepted Answer

A) held steady 
B) declined 
C) increased slightly 
D) increased sharply 
A) held steady 
B) declined 
C) increased slightly 
D) increased sharply

Question 8

Which of the following is an advantage to a private equity buyout?

Accepted Answer

A) They are subject to the controversial regulations included in the 2002 Sarbanes-Oxley Act. 
B) The CEOs frequently have more time and flexibility to enact changes need to turn around subpar companies. 
C) both A and B. 
D) neither A nor B. 
A) They are subject to the controversial regulations included in the 2002 Sarbanes-Oxley Act. 
B) The CEOs frequently have more time and flexibility to enact changes need to turn around subpar companies. 
C) both A and B. 
D) neither A nor B.

Question 9

Describe the differences between securities brokers and securities dealers.

Accepted Answer

Securities brokers and securities dealer

Question 10

The process of underwriting a stock or bond issue requires that the investment bank

Accepted Answer

A) assure investors that the issue will provide them a high return. 
B) purchase the entire issue at a predetermined price if the quantity demanded by consumers is insufficient at the predetermined price. 
C) purchase the entire issue at a predetermined price and then resell it in the market. 
D) do both A and B of the above. 
A) assure investors that the issue will provide them a high return. 
B) purchase the entire issue at a predetermined price if the quantity demanded by consumers is insufficient at the predetermined price. 
C) purchase the entire issue at a predetermined price and then resell it in the market. 
D) do both A and B of the above.

Question 11

Which of the following statements about private placements are true?

Accepted Answer

A) Private placements are more common for the sale of bonds than for stocks. 
B) Investment bankers, though not required for a private placement, often facilitate the transaction. 
C) Investment bankers help the issuing firm file the paperwork required by the SEC. 
D) All of the above are true. 
E) Only A and B of the above are true. 
A) Private placements are more common for the sale of bonds than for stocks. 
B) Investment bankers, though not required for a private placement, often facilitate the transaction. 
C) Investment bankers help the issuing firm file the paperwork required by the SEC. 
D) All of the above are true. 
E) Only A and B of the above are true.

Question 12

An investment bank is a financial institution that

Accepted Answer

A) bundles small deposits into larger loans. 
B) helps corporations raise funds. 
C) holds most of its assets in commercial paper. 
D) does all of the above. 
E) does only A and B of the above. 
A) bundles small deposits into larger loans. 
B) helps corporations raise funds. 
C) holds most of its assets in commercial paper. 
D) does all of the above. 
E) does only A and B of the above.

Question 13

A ________ is a specialized firm that finances young, start-up companies.

Accepted Answer

A) venture capital firm 
B) finance company 
C) small-business finance company 
D) capital-creation company 
A) venture capital firm 
B) finance company 
C) small-business finance company 
D) capital-creation company

Question 14

The primary function of investment banks is to

Accepted Answer

A) extend credit to stock brokers and dealers. 
B) extend credit to investors. 
C) extend credit to corporations. 
D) help corporations issue new securities. 
A) extend credit to stock brokers and dealers. 
B) extend credit to investors. 
C) extend credit to corporations. 
D) help corporations issue new securities.

Question 15

Explain why private placements of securities are an attractive way of raising funds for some firms.

Accepted Answer

Private placements of securities can be

Question 16

When a firm issues stock for the first time in an initial public offering, it is difficult for an investment bank to determine what the correct price should be.

Accepted Answer

A) True 
 B)False

Question 17

An instruction to a securities agent to buy or sell the security at the current market price is called a ________.

Accepted Answer

A) limit order 
B) market order 
C) stop loss order 
D) margin order 
A) limit order 
B) market order 
C) stop loss order 
D) margin order

Question 18

How do best efforts agreements and private placements differ from the usual process of underwriting new securities issues?

Accepted Answer

Best efforts agreements and private plac

Question 19

The primary function of investment banks is

Accepted Answer

A) the bundling of deposits into loans. 
B) extending long-term credit to other financial institutions. 
C) helping corporations raise funds. 
D) providing credit to firms engaged in international trade. 
A) the bundling of deposits into loans. 
B) extending long-term credit to other financial institutions. 
C) helping corporations raise funds. 
D) providing credit to firms engaged in international trade.

Question 20

An undersubscribed issue occurs when sales agents have been unable to generate sufficient interest among their customers to sell all the securities by the issue date.

Accepted Answer

A) True 
 B)False

Exam 22: Investment Banks, Security Brokers and Dealers, and Venture Capital Firms

An instruction to a securities agent to sell a stock when it reaches a specific price is a ________.

Which of the following is a characteristic feature of venture capital firms?

Securities dealers

Which of the following is a description of a private equity firm?

Tasks that investment bankers perform when acting as underwriters to sell securities to the public include:

One disadvantage of the private placement of securities issues is the high cost of registering the issue.

Since the stock market decline in 2000, the number of companies funded and the total funds invested by venture capital firms have ________.

Which of the following is an advantage to a private equity buyout?

Describe the differences between securities brokers and securities dealers.

The process of underwriting a stock or bond issue requires that the investment bank

Which of the following statements about private placements are true?

An investment bank is a financial institution that

A ________ is a specialized firm that finances young, start-up companies.

The primary function of investment banks is to

Explain why private placements of securities are an attractive way of raising funds for some firms.

When a firm issues stock for the first time in an initial public offering, it is difficult for an investment bank to determine what the correct price should be.

An instruction to a securities agent to buy or sell the security at the current market price is called a ________.

How do best efforts agreements and private placements differ from the usual process of underwriting new securities issues?

The primary function of investment banks is

An undersubscribed issue occurs when sales agents have been unable to generate sufficient interest among their customers to sell all the securities by the issue date.

Why Study Financial Markets and Institutions

Overview of the Financial System

What Do Interest Rates Mean and What Is Their Role in Valuation

Why Do Interest Rates Change

How Do Risk and Term Structure Affect Interest Rates

Are Financial Markets Efficient

Why Do Financial Institutions Exist

Why Do Financial Crises Occur and Why Are They so Damaging to the Economy

Central Banks and the Federal Reserve System

Conduct of Monetary Policy: Tools, Goals, Strategy, and Tactics

The Money Markets

The Bond Market

The Stock Market

The Mortgage Markets

The Foreign Exchange Market

The International Financial System

Banking and the Management of Financial Institutions

Financial Regulation

Banking Industry: Structure and Competition

The Mutual Fund Industry

Insurance Companies and Pension Funds

Risk Management in Financial Institutions

Hedging With Financial Derivatives

Savings Associations and Credit Unions

Finance Companies

Filters