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1、1 Financial Markets and Institutions,6e(Mishkin/Eakins)Chapter 23 Investment Banks,Security Brokers and Dealers,and Venture Capital Firms 23.1 Multiple Choice 1)An investment bank is a financial institution that A)bundles small deposits into larger loans.B)helps corporations raise funds.C)holds most
2、 of its assets in commercial paper.D)does all of the above.E)does only A and B of the above.Answer:B Question Status:Previous Edition 2)The Glass-Steagall Act A)separated commercial and investment banking.B)made it illegal for a commercial bank to buy or sell securities on behalf of its customers.C)
3、made it illegal for investment banks to engage in the underwriting of corporate securities.D)did all of the above.E)did only A and B of the above.Answer:E Question Status:Previous Edition 3)Investment banks sell _ securities to the public,and brokerage firms sell _ securities to the public.A)new;exi
4、sting B)new and existing;existing C)existing;new D)existing;new and existing Answer:A Question Status:Previous Edition 4)The primary function of investment banks is A)the bundling of deposits into loans.B)extending long-term credit to other financial institutions.C)helping corporations raise funds.D
5、)providing credit to firms engaged in international trade.Answer:C Question Status:Previous Edition 5)The primary function of investment banks is to A)extend credit to stock brokers and dealers.B)extend credit to investors.C)extend credit to corporations.D)help corporations issue new securities.Answ
6、er:D Question Status:Previous Edition 2 6)Which is not an activity of investment banks?A)Underwriting new issues of corporate stocks and bonds.B)Acting as deal-makers in mergers.C)Acting as intermediaries in the buying and selling of businesses or parts of businesses.D)Underwriting new issues of fed
7、eral government bonds.Answer:D Question Status:Previous Edition 7)Tasks that investment bankers perform when acting as underwriters to sell securities to the public include:A)pricing the security.B)preparing the filings required by the Securities and Exchange Commission.C)arranging for the security
8、to be rated.D)all of the above.E)only A and B of the above.Answer:D Question Status:Previous Edition 8)Investment banks find it less difficult to price securities if the firm has prior issues currently selling in the market,called A)secondary issues.B)seasoned issues.C)outstanding issues.D)experienc
9、ed issues.Answer:B Question Status:Previous Edition 9)The process of underwriting a stock or bond issue requires that the investment bank 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 in
10、sufficient 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.Answer:C Question Status:Previous Edition 10)The registration statement the securities underwriter files with the SEC contains information about
11、A)the firms financial condition,management,competition,industry,and experience.B)how the funds will be used.C)managements assessment of the risk of the securities.D)all of the above.E)only A and B of the above.Answer:D Question Status:Previous Edition 3 11)SEC registration is A)required for all secu
12、rities.B)required if less than$1.5 million in securities are issued per year.C)not required for securities that are sold through a private placement.D)required if the securities mature in less than one year.E)not required if securities are underwritten by a reputable investment bank.Answer:C Questio
13、n Status:Previous Edition 12)By law,investors must be given a portion of the registration statement before they can invest in a new security.This document is called a A)prospectus.B)proxy statement.C)fiduciary warrant.D)debenture.Answer:A Question Status:Previous Edition 13)Investment banks advertis
14、e upcoming securities offerings with block ads in the Wall Street Journal.Such an ad is called a A)tombstone.B)marker.C)prospectus.D)registration statement.Answer:A Question Status:Previous Edition 14)Most investment banks are attached to A)large commercial banks.B)large brokerage houses.C)finance c
15、ompanies.D)large nonfinancial corporations.Answer:B Question Status:Previous Edition 15)From an investment bankers perspective,the best outcome occurs when a new issue is A)undersubscribed.B)fully subscribed.C)oversubscribed.D)syndicated.Answer:B Question Status:Previous Edition 16)Investment banks
16、may lose _ if new securities issues are _.A)large amounts of money;oversubscribed B)large amounts of money;fully subscribed C)future business;oversubscribed D)future business;undersubscribed Answer:C Question Status:Previous Edition 4 17)The largest U.S.underwriter of global debt and equity issues,a
17、s of 2003,was A)Merrill Lynch.B)Citigroup.C)Morgan Stanley.D)Goldman Sachs.Answer:B Question Status:Previous Edition 18)Often investment bankers will form a group,each one buying only a portion of the new securities to be issued.Such a group is called an underwriting A)alliance.B)syndicate.C)associa
18、tion.D)guild.Answer:B Question Status:Previous Edition 19)In a _ agreement,the investment banker makes no guarantee regarding the price the issuing firm will receive,but agrees to sell the securities on a commission basis.A)best-effort B)brokered C)private-placement D)jump-start Answer:A Question St
19、atus:Previous Edition 20)Under best-efforts underwriting,the underwriter A)pays for the entire security issue.B)sells the security on a commission basis.C)spreads the risk among different brokerage houses.D)makes a special appeal to the Securities and Exchange Commission to delay the issue.Answer:B
20、Question Status:Previous Edition 21)Private placements A)do not require the services of investment bankers.B)need not be registered with the SEC.C)are more common in the sale of stocks than for bonds.D)all of the above.E)only A and B of the above.Answer:E Question Status:Previous Edition 22)The most
21、 active investment banking firm in the private placement market is A)Merrill Lynch.B)Lehman Brothers.C)Goldman Sachs.D)Morgan Stanley.Answer:C Question Status:Previous Edition 5 23)The buyers of private placement issues are most likely to be A)insurance companies.B)pension funds.C)investment banks.D
22、)all of the above.E)only A and B of the above.Answer:E Question Status:Previous Edition 24)The buyers of private placement securities are most likely to be A)insurance companies.B)pension funds and mutual funds.C)commercial banks.D)all of the above.E)only A and B of the above.Answer:D Question Statu
23、s:Previous Edition 25)Which of the following statements about private placements 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
24、 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.Answer:E Question Status:Previous Edition 26)Investment bankers have been active in the mergers and acquisitions market since the 1960s.Their contributions have included A)helping firms that
25、 want to acquire another firm locate a firm to pursue.B)helping would-be acquirers solicit shareholders through a tender offer.C)helping target firms ward off undesired takeover attempts.D)all of the above.E)only A and B of the above.Answer:D Question Status:Previous Edition 27)Which of the followin
26、g is not a step in the process by which an investment bank assists in the sale of a company or corporate division?A)Preparation of a confidential memorandum B)Negotiation of a letter of intent C)Preparation of a definitive agreement D)Forming a syndicate of purchasers Answer:D Question Status:Previo
27、us Edition 6 28)The best known investment banker involved in mergers and acquisitions,credited with inventing the junk bond market,is A)Ivan Boskey.B)Michael Milken.C)James Garner.D)Michael Douglas.Answer:B Question Status:Previous Edition 29)_ perform their main function in the primary market for s
28、ecurities and _ perform their main function in the secondary market.A)Investment banks;securities brokers and dealers B)Securities brokers and dealers;investment banks C)Securities brokers;securities dealers D)Securities dealers;securities brokers Answer:A Question Status:Previous Edition 30)In a pr
29、imary market,_ sell new issues of securities;in a secondary market,_ assist in trading previously issued securities.A)securities dealers;securities brokers B)securities brokers;securities dealers C)investment banks;securities brokers and dealers D)securities brokers and dealers;investment banks Answ
30、er:C Question Status:Previous Edition 31)Which of the following best explains the difference between brokers and dealers?A)Brokers are pure middlemen;dealers make markets by standing ready to buy and sell at given prices.B)Dealers are pure middlemen;brokers make markets by standing ready to buy and
31、sell at given prices.C)Dealers link up buyers and sellers,but do not stand ready to buy and sell from their inventories of securities;brokers stand ready to buy and sell from their inventories of securities.D)There is no difference between brokers and dealers.Answer:A Question Status:Previous Editio
32、n 32)Securities dealers A)hold inventories of securities,which they sell to customers who want to buy.B)hold securities that they have purchased from customers who wanted to sell.C)are called market takers,as they have significantly cut into the market that brokers used to dominate.D)do all of the a
33、bove.E)do only A and B of the above.Answer:E Question Status:Previous Edition 7 33)Securities dealers 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
34、and growth of small businesses in the United States.D)do all of the above.E)do only A and B of the above.Answer:D Question Status:Previous Edition 34)By making a market in thinly traded stocks,securities dealers solve the _ trading problem,which is of particular benefit to _ businesses.A)synchronous
35、;large B)synchronous;small C)nonsynchronous;large D)nonsynchronous;small Answer:D Question Status:Previous Edition 35)Which of the following is not a service securities brokers offer their clients?A)Holding customers stock for safekeeping B)Providing insurance against loss of the securities C)Provid
36、ing insurance against loss of value of the securities D)Extending margin credit Answer:C Question Status:Previous Edition 36)An instruction to a securities agent to buy or sell the security at the current market price is called a A)limit order.B)market order.C)stop loss order.D)margin order.Answer:B
37、 Question Status:Previous Edition 37)An instruction to a securities agent to sell a stock when it reaches a specific price is a A)short sell.B)market order.C)limit order.D)stop loss order.Answer:D Question Status:Previous Edition 8 38)An instruction to a securities agent to purchase a stock as long
38、as its price does not exceed a specified level is a A)short sell.B)market order.C)limit order.D)stop loss order.Answer:C Question Status:Previous Edition 39)To take advantage of anticipated stock price decreases,an investor would use a A)a market order.B)a limit order.C)a short sell.D)margin credit.
39、Answer:C Question Status:Previous Edition 40)Which of the following statements about cash management accounts(CMAs)are true?A)The cash management account was developed in 1977 by Merrill Lynch.B)The advantage of brokerage-based cash management accounts is that they make it easier to buy and sell sec
40、urities.C)As a result of CMAs,the distinction between banking activities and the activities of nonbank financial institutions has become more clearly defined.D)All of the above are true.E)Only A and B of the above are true.Answer:E Question Status:Previous Edition 41)The largest full-service broker
41、is A)Merrill Lynch.B)Charles Schwab&Company.C)Ameritrade.D)Smith Barney.Answer:A Question Status:Previous Edition 42)A full-service broker offers its clients all of the following except A)execution of trades on request.B)low transactions fees.C)research and investment advice.D)development of long-te
42、rm customer relationships.Answer:B Question Status:Previous Edition 43)An investment pool is formed to A)manipulate the market by spreading false rumors.B)lower brokerage fees by combining security purchases.C)share investment advice among member investors.D)take advantage of tax breaks introduced b
43、y the 1933 and 1934 securities acts.Answer:A Question Status:Previous Edition 9 44)A _ is a specialized firm that finances young,start-up companies.A)venture capital firm B)finance company C)small-business finance company D)capital-creation company Answer:A Question Status:Previous Edition 45)Which
44、of the following provides funds to companies not yet ready to sell securities to the public?A)Investment banks B)Securities brokers and dealers C)Venture capital firms D)None of the above Answer:C Question Status:Previous Edition 46)Venture capital firms are usually organized as A)closed-end mutual
45、funds.B)limited partnerships.C)corporations.D)nonprofit businesses.Answer:B Question Status:Previous Edition 47)Which of the following is not a characteristic feature of venture capital firms?A)Funding just one or a small number of firms B)Holding equity in the firms that are funded C)Having a long-
46、term investment horizon D)Providing advice and assistance to the firms that are funded Answer:A Question Status:Previous Edition 48)Which of the following is a characteristic feature of venture capital firms?A)Developing a portfolio of companies B)Holding debt in the firms that are funded C)Allowing
47、 firms to use the funds as they see fit D)Having a short-term investment horizon Answer:A Question Status:Previous Edition 49)The sources of venture capital funding have A)shifted from wealthy individuals to pension funds and corporations.B)shifted from pension funds and corporations to wealthy indi
48、viduals.C)decreased since 1990.D)none of the above.Answer:A Question Status:Previous Edition 10 50)A typical venture capital firm has a _ number of investors who each contribute a _ amount of money to the fund.A)large;small B)small;large C)large;large D)small;small Answer:B Question Status:Previous
49、Edition 51)In 2000 the bulk of venture capital funds were used for A)seed investing.B)early stage investing.C)later stage investing.D)final stage investing.Answer:A Question Status:Previous Edition 52)Which of the following statements about venture capital funding is not correct?A)Exiting an investm
50、ent can occur through an initial public offering or by merger or acquisition.B)Venture capital investing is highly risky.C)Venture capital firms may focus on a limited geographic area or on specific industries to facilitate monitoring their investments.D)Firms hope to exit a start-up firm in 3-5 yea