1. All of the following were the objectives of the Glass-Steagall Act except
a.discouraging speculation in financial markets.
b.limiting bank mergers when the merger might adversely affect competition.
c.preventing conflict of interest and self-dealing.
d.restoring confidence in the commercial banking system.
e.All of the above were the objectives of the Glass-Steagall Act.
2.All of the following are the major services of investment banking firms except
a.making commercial loans
b.bringing new security issues to market
3.Full-service brokerage service includes
a.origination, underwriting, and sales.
b.registration of securities, storage of securities, and execution of trades.
c.execution of trades, investment advice, and margin credit.
d.cash management service, private placements, and security distribution.
4.Even before the Financial Services Modernization Act was passed, commercial banks could
a.invest in common equities
b.underwrite U.S. government securities
c.underwrite corporate bond issues.
d.purchase any debt securities for their own account.
e.both b and c
5. _______ involves an issuer of securities soliciting offers from several investment bankers.
6.All of the following are associated with the origination function of investment banking except
a.design of the security to fit the needs of the market and the issuing firms.
b.filing of the required registration statements.
c.obtain a credit rating on a debt issue.
d.commit to a specific price to the issuing firm and attempt to sell the security in the market.
7. SEC Rule144A may lower the cost of private placement financing for corporations for it
a.places an interest rate ceiling on private placement financing.
b.permits trading in private placement securities after a two-year wait, enhancing the liquidity of the investment.
c.permits sophisticated institutional investors to invest in private placement securities.
d.permits the trading of private placement trading before the traditional two-year holding period, enhancing the liquidity of the investment.
8.The adoption of SEC Rule 144A provided private placement borrowers
a.higher costs of financing because of increased regulation.
b.lower-cost financing because of the reduction in default risk provided by the regulation.
c.lower-cost financing because private placement investors can now trade private placement securities instead of holding them for a two-year period.
d.the right not to register their issues with SEC.
9.Which of the following is true about private placement?
a.The underwriting function is avoided.
b.The extremes of high credit quality firms and low or unknown credit quality firms use private placements.
c.The terms may be negotiated between the issuer and the investors.
d.The sale of securities must be restricted to a small group of accredited investors.
e.All of the above is true.
10. Which of the following is not true about private placement?
a.The sale of securities directly to the ultimate investor and not through a public offering.
b.The underwriting function cannot be avoided.
c.A fee is earned for the origination/selling or uniting the supplier and user of funds.
d.A private placement may reduce the total flotation costs for a business.
e.It is used by both lesser-known firms and large, well-known firms in need of funds.