Investment Banking and Financial Instruments Quiz
Test your knowledge on investment banking functions, financial instruments, IPOs, derivatives, and more with this quiz on financial markets.
#1
Which of the following is NOT a primary function of an investment bank?
Mergers and acquisitions advisory
Underwriting securities offerings
Providing retail banking services
Trading securities
#2
What is the main purpose of an Initial Public Offering (IPO)?
To raise capital by offering shares to the public for the first time
To merge with another company
To acquire assets from other companies
To reduce the number of outstanding shares
#3
Which of the following is NOT a characteristic of a mutual fund?
Professionally managed
Highly liquid
Diversified portfolio
Pooled investment
#4
Which of the following is NOT a function of the Securities and Exchange Commission (SEC)?
Enforcing federal securities laws
Regulating stock exchanges
Providing investment advisory services to the public
Overseeing corporate disclosure of financial information
#5
Which of the following is NOT a characteristic of a junk bond?
High credit rating
High yield
High risk
Issued by companies with poor credit quality
#6
Which financial instrument represents ownership in a corporation and gives the holder voting rights?
Bonds
Preferred stock
Common stock
Derivatives
#7
What is the role of an underwriter in securities offerings?
To purchase securities from the issuer and resell them to the public
To advise on investment strategies
To provide insurance against investment losses
To guarantee the sale of securities at a specified price
#8
What is the main purpose of a hedge fund?
To provide loans to individuals and businesses
To pool funds from investors and employ various strategies to generate returns
To offer checking and savings accounts to retail customers
To facilitate international trade transactions
#9
What does the term 'leverage' refer to in the context of investment banking?
Using borrowed funds to magnify returns
Reducing the risk of investment by diversifying
Exchanging securities without immediate payment
Analyzing financial statements to assess company performance
#10
Which financial instrument typically pays a fixed rate of interest and has a specified maturity date?
Common stock
Treasury bond
Call option
Credit default swap
#11
Which of the following is a characteristic of a call option?
The option gives the holder the right to sell an asset at a predetermined price
The option gives the holder the right to buy an asset at a predetermined price
The option requires the holder to buy an asset at a predetermined price
The option requires the holder to sell an asset at a predetermined price
#12
Which of the following is a characteristic of a put option?
The option gives the holder the right to buy an asset at a predetermined price
The option gives the holder the right to sell an asset at a predetermined price
The option requires the holder to sell an asset at a predetermined price
The option requires the holder to buy an asset at a predetermined price
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