Chapters 16-20

Chapters 16-20 - Chapter 16 True/False Questions 1. For...

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Chapter 16 True/False Questions 1. For securities firms, income from investment management is more stable than the income from underwriting or trading. Answer: True Page: 457 Level: Medium 2. Full line investment banks act as both broker dealers and securities underwriters. Answer: True Page: 455 Level: Easy 3. A private placement is allowed under SEC Rule 415 to allow large corporations to preregister an upcoming security offering for up to two years in advance. Answer: False Page: 458 Level: Medium 4. Issuers of privately placed securities must still register the issue with the SEC. Answer: False Page: 457 Level: Medium 5. In a best efforts offering the investment banker acts as an agent for the issuer rather than as a principle. Answer: True Page: 459 Level: Easy 6. A market maker buys IBM at $185 for his own account and sells the stock later in the day at $187. He is acting as a broker in this transaction. Answer: False Page: 460-461 Level: Easy 7. Buying large blocks of securities and holding them until the price rises sufficiently to warrant a sale is an example of pure arbitrage. Answer: False Page: 461 Level: Easy Saunders, Financial Markets and Institutions , 2/e 177
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Chapter 16 Securities Firms and Investment Banks 8. An example of a pure arbitrage strategy is to simultaneously buy and sell the same security in two different markets at different prices. Answer: True Page: 461 Level: Easy 9. A stock broker acts as a principle on behalf of the customer. Answer: False Page: 461 Level: Medium 10. Securities firms often provide deposit type services through cash management accounts. Answer: True Page: 462 Level: Easy 11. Program trading is the simultaneous buying and selling of at least $1 million worth of at least 15 stocks. Answer: True Page: 461 Level: Medium 12. The major source of funds for securities firms are repurchase agreements. Answer: True Page: 466-467 Level: Easy 13. Equity capital levels of securities firms are higher than for banks since securities firms cannot offer insured deposits. Answer: False Page: 467 Level: Medium 14. One could argue that decimalization has cut dealer profit margins but may have helped increase broker profits. Answer: True Page: 461 Level: Difficult 15. The Securities Investor Protection Corporation protects investors against losses due to unfavorable market moves of up to $500,000. Answer: False Page: 468 Level: Medium Saunders, Financial Markets and Institutions , 2/e 178
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16. In the recent past, stock research analysts received bonuses for generating allegedly biased research reports that helped to sell new issues underwritten by their firm. Answer: True Page: 463,468 Level: Easy 17. Total dollar value of debt underwriting exceeded total equity underwriting dollar volume in every year from 1990 to 2001. Answer: True
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This note was uploaded on 05/14/2011 for the course FIN 4309 taught by Professor Dt during the Spring '08 term at UCLA.

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Chapters 16-20 - Chapter 16 True/False Questions 1. For...

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