Exam 1: Investments: Background and Issues

Financial intermediaries exist because small investors cannot efficiently ________.

Which of the following is not an example of a financial intermediary?

________ assets generate net income to the economy, and ________ assets define allocation of income among investors.

In a perfectly efficient market the best investment strategy is probably ________.

Which of the following firms was not engaged in a major accounting scandal between 2000 and 2005?

________ is not a derivative security.

The value of a derivative security ________.

Venture capital is ________.

The systemic risk that led to the financial crisis of 2008 was increased by ________.

The Volcker Rule

In 2008 the largest corporate bankruptcy in U.S. history involved the investment banking firm of ________.

Debt securities promise: I. A fixed stream of income. II. A stream of income that is determined according to a specific formula. III. A share in the profits of the issuing entity.

After much investigation, an investor finds that Intel stock is currently underpriced. This is an example of ________.

Which of the following is an example of an agency problem?

When the market is more optimistic about a firm, its share price will ________; as a result, it will need to issue ________ shares to raise funds that are needed.

Which of the following are financial assets? I. Debt securities II. Equity securities III. Derivative securities

Which insurance company sold more than $400 billion of CDS contracts on subprime mortgages prior to the 2008 market crash?

Liabilities equal approximately ________ of total assets for nonfinancial U.S. businesses.

________ portfolio management calls for holding diversified portfolios without spending effort or resources attempting to improve investment performance through security analysis.

Individuals may find it more advantageous to purchase claims from a financial intermediary rather than directly purchasing claims in capital markets because: I. Intermediaries are better diversified than most individuals. II. Intermediaries can exploit economies of scale in investing that individual investors cannot. III. Intermediated investments usually offer higher rates of return than direct capital market claims.