Chap 24 - Securities Firms Quiz

Securities firms are not legally allowed to purchase stocks for their own investment portfolios.

• True

• False

Securities firms facilitate mergers, acquisitions, and LBOs by placing bonds for their clients.

• True

• False

Securities firms underwrite commercial paper and purchase short-term securities for their own investment portfolios.

• True

• False

The earnings remitted by foreign subsidiaries are reduced when the foreign currencies weaken against the parent firm's home currency. This type of risk is called ____.

• Exchange Rate Risk

• Credit Risk

• Interest Rate Risk

• Market Risk

• Foreign Subsidiary Risk

Securities firms are not legally allowed to serve as brokers for options transactions.

• True

• False

Securities firms offer many services that are linked to stock market conditions. This type of risk is called ____.

• Market Risk
• Credit Risk

• Interest Rate Risk

• Exchange Rate Risk

Not too many securities firms serve as financial intermediaries in swap markets.

• True

• False

Securities firms are not allowed to serve as brokers for financial futures transactions because of the risk that it would create for the economy.

• True

• False

Some bond mutual funds have been created by securities firms.

• True

• False

The idea that financial institutions may pursue high-risk opportunities in order to achieve high returns with the assumption that they will be bailed out if their strategies fail is called a _______.

• Financial bank problem

• moral hazard problem

• entitlement problem

• credit risk problem.