Securities Operations

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Question 1
Free
Multiple Choice

Which of the following is not a service that is commonly performed by a securities firm?

Choose correct answer/s
A

setting regulatory rules for stock exchanges

B

origination

C

underwriting

D

distribution

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Question 2
Free
Multiple Choice

The ____ regulates the issuance of securities.

Choose correct answer/s
A

Securities and Exchange Commission

B

National Association of Securities Dealers

C

Federal Reserve Board

D

Securities Investor Protection Corporation

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Question 3
Free
Multiple Choice

When an IPO is planned, all information relevant to the security, as well as the agreement between the issuer and the securities firm, must be included in the ___________ that is submitted totheSecurities and Exchange Commission.

Choose correct answer/s
A

origination

B

registration statement

C

best-efforts agreement

D

none of the above

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Question 4
Free
True/False

When a stock offering is based on a firm commitment, this means that the securities firm does not guarantee a price to the issuing corporation.

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True

False

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Question 5
Free
Multiple Choice

Research indicates that securities firms tend to

Choose correct answer/s
A

overprice IPOs.

B

underprice IPOs.

C

price IPOs correctly.

D

none of the above

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Question 6
Multiple Choice

The one-day return to investors who purchase IPO shares at the IPO offer price are ____ , and the returns to investors who purchase the shares a day after the IPO are generally ____ .

Choose correct answer/s
A
high; high
B
high; low
C
low; high
D
low; low
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Question 7
Multiple Choice

The ____ determines margin requirements on securities purchased.

Choose correct answer/s
A
Securities and Exchange Commission
B
Financial Industry Regulatory Authority
C
Federal Reserve Board
D
Securities Investor Protection Corporation
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Question 8
Multiple Choice

The ____ can liquidate failing brokerage firms.

Choose correct answer/s
A
Securities and Exchange Commission
B
Financial Industry Regulatory Authority
C
Federal Reserve Board
D
Securities Investor Protection Corporation
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Question 9
Multiple Choice

When securities firms help corporations issue bonds, their primary role is as a(n)

Choose correct answer/s
A
intermediary.
B
lender (creditor).
C
investor.
D
B and C
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Question 10
Multiple Choice

The price of newly issued stock should be ____ the market price of the firm's outstanding stock.

Choose correct answer/s
A
about the same as
B
much more than
C
much less than
D
B or C, depending on the amount of stock to be issued
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Question 11
Multiple Choice

Flotation costs as a percentage of the value of securities issued are ____ for ____ issues.

Choose correct answer/s
A
lower; small
B
lower; large
C
higher; large
D
A and C
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Question 12
Multiple Choice

Competitive bidding by securities firms for underwriting the issue of new bonds is primarily used for

Choose correct answer/s
A
federal government bonds.
B
bonds issued by banks.
C
public utility bonds.
D
bonds issued by nonbanking financial institution.
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Question 13
Multiple Choice

In a ____ of stock, all of the shares issued may be held by a small number of institutional investors.

Choose correct answer/s
A
market placement
B
public placement
C
shelf placement
D
private placement
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Question 14
Multiple Choice

After a target firm is acquired, the acquirer may sell off divisions of the target that are not compatible with the acquirer's business. This process is known as

Choose correct answer/s
A
bridging.
B
asset stripping.
C
greenmail.
D
none of the above.
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Question 15
Multiple Choice

The ____ is not involved in the regulation of the securities industry.

Choose correct answer/s
A
Deposit Insurance Fund
B
Financial Industry Regulatory Authority
C
Securities and Exchange Commission
D
Federal Reserve Board
E
All of the above are involved in the regulation of the securities industry.
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Question 16
Multiple Choice

Which of the following is not an SEC rule?

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A
Analysts at a securities firm underwriting an IPO cannot promote the new stock for the first 40 days after the IPO.
B
An analyst's compensation should be directly aligned with the amount of business that the analyst brings to the securities firm.
C
Analysts cannot be supervised by the investment banking department within the securities firm.
D
When rating a security, an analyst must divulge any recent investment banking business provided by the analyst's securities firm to the firm that issued the security.
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Question 17
Multiple Choice

The value of a securities firm is typically ____ related to interest rate movements

Choose correct answer/s
A
positively
B
not
C
inversely
D
A or B
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Question 18
Multiple Choice

____ is not a service that a securities firm provides in placing bonds.

Choose correct answer/s
A
Origination
B
Underwriting
C
Distribution
D
Advising
E
All of the above are services that securities firms provide in placing bonds
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Question 19
Multiple Choice

When facilitating a secondary stock offering, a securities firm commonly performs all of the following functions except _____

Choose correct answer/s
A
origination.
B
underwriting the stock.
C
distribution of the stock.
D
its own purchase of at least 20 percent of the offering.
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Question 20
Multiple Choice

Asset stripping refers to

Choose correct answer/s
A
acquiring shares in a firm and then causing the firm to repurchase the shares at a premium to prevent a takeover.
B
financing provided by securities firms to help support an acquisition.
C
investing in the shares of a firm that is expected to experience a leveraged buyout (LBO).
D
selling off individual divisions of an acquired firm that are not compatible with the acquirer's business.
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