Securities Firms and Investment Banks Quiz

For securities firms, income from investment management is more stable than income from underwriting or trading activities.

• True

• False

An example of a national full-line investment banker that specializes in corporate finance is Goldman Sachs.

• True

• False

The process of creating a secondary market for securities or contracts is termed brokerage.

• True

• False

In a best efforts offering, the investment banker acts as an agent for the issuer rather than as a principal.

• True

• False

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.

• True

• False

Buying large blocks of securities and holding them until the price rises sufficiently to warrant a sale is an example of pure arbitrage.

• True

• False

An example of a pure arbitrage strategy is to simultaneously buy and sell the same security in two different markets at different prices.

• True

• False

A stock broker acts as a principal on behalf of the customer.

• True

• False

Cash management accounts offered by a securities firm allow investors to write checks on funds invested in money market securities.

• True

• False

Program trading is the simultaneous buying and selling of at least 15 stocks worth a total of $1 million or more.

• True

• False