The Financial Sector: Questions

This is a file with questions for week 1. It consists of assessment questions to be administered for the purposes of grading and distributed at the end of week 1. (5% of total grade)

Week 1 Assignment 2: Assessment 1

1) Which of the following regulatory events in the 20th Century potentially influenced the financial sector.

a. Passing of the Glass-Steagall Act

b. Establishment of the Securities and Exchange Commission (SEC)

c. Establishment of the Federal Reserve Banking System

d. Repeal of the Glass-Steagall Act

e. Securities Investor Protection Act passed

2) Which regulation called for the separation between Investment and Commercial banking activities?

a. The Securities Investor Protection Act

b. The Securities Exchange Act

c. The Federal Reserve Act

d. The Glass-Steagall Act

3) What are some of the main functions of an Investment Bank?

a. Securities Issuance

b. Advice on and implementation of Mergers and Acquisitions

c. Buying and selling stocks for clients

d. Lending money to consumers for home mortgages

e. All of the above

1) List some equity and debt securities which are typically issued through Investment Banks.

Debt securities:

• Commercial paper

• Medium-term notes

• Corporate bonds

Equity securities:

• Initial public offering (IPOs)

• Seasoned equity offering (SEOs)

2) What is underwriting and what are the two broad types of underwriting? Underwriting refers to the process by which investment bankers raise investment capital on behalf of the issuer. They are two types of underwriting, equity underwriting and debt underwriting.

4) What risk do Investment Banks typically face when they underwrite a security? Once the underwriting agreement is struck, the underwriter