#1
Which of the following is NOT a primary function of an investment bank?
Providing retail banking services
ExplanationInvestment banks focus on corporate finance and capital markets, not retail banking.
#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
ExplanationIPOs enable companies to raise funds by selling shares to the public for the first time.
#3
Which of the following is NOT a characteristic of a mutual fund?
Highly liquid
ExplanationWhile mutual funds offer liquidity, they are not typically considered highly liquid compared to some other investments.
#4
Which of the following is NOT a function of the Securities and Exchange Commission (SEC)?
Providing investment advisory services to the public
ExplanationThe SEC regulates securities markets and protects investors but does not provide investment advisory services.
#5
Which of the following is NOT a characteristic of a junk bond?
High credit rating
ExplanationJunk bonds have low credit ratings, indicating higher risk and potentially higher returns.
#6
Which financial instrument represents ownership in a corporation and gives the holder voting rights?
Common stock
ExplanationCommon stock represents ownership in a company and typically grants voting rights to shareholders.
#7
What is the role of an underwriter in securities offerings?
To guarantee the sale of securities at a specified price
ExplanationUnderwriters commit to purchasing securities from issuers at a predetermined price and then sell them to the public.
#8
What is the main purpose of a hedge fund?
To pool funds from investors and employ various strategies to generate returns
ExplanationHedge funds aim to generate high returns by employing diverse investment strategies and often target sophisticated investors.
#9
What does the term 'leverage' refer to in the context of investment banking?
Using borrowed funds to magnify returns
ExplanationLeverage involves using borrowed capital to increase the potential return on investment.
#10
Which financial instrument typically pays a fixed rate of interest and has a specified maturity date?
Treasury bond
ExplanationTreasury bonds are debt securities issued by the government with fixed interest payments and maturity dates.
#11
Which of the following is a characteristic of a call option?
The option gives the holder the right to buy an asset at a predetermined price
ExplanationCall options give holders the right to buy assets at a specified price within a specified period.
#12
Which of the following is a characteristic of a put option?
The option requires the holder to sell an asset at a predetermined price
ExplanationPut options grant holders the right to sell assets at a specified price within a specified period.