Question 1

Real assets in the economy include all but which one of the following?

Accepted Answer

A)  land 
B)  buildings 
C)  consumer durables 
D)  common stock 
A)  land 
B)  buildings 
C)  consumer durables 
D)  common stock

Question 2

Which one of the following firms falsely claimed to have a $4.8 billion bank account, eventually resulting in the firm's bankruptcy?

Accepted Answer

A)  WorldCom 
B)  Enron 
C)  Parmalat 
D)  Global Crossing 
A)  WorldCom 
B)  Enron 
C)  Parmalat 
D)  Global Crossing

Question 3

Real assets are ________.

Accepted Answer

A)  assets used to produce goods and services 
B)  always the same as financial assets 
C)  always equal to liabilities 
D)  claims on a company's income 
A)  assets used to produce goods and services 
B)  always the same as financial assets 
C)  always equal to liabilities 
D)  claims on a company's income

Question 4

________ is a mechanism for mitigating potential agency problems.

Accepted Answer

A)  Tying income of managers to success of the firm 
B)  Directors defending top management 
C)  Antitakeover strategies 
D)  All of the options. 
A)  Tying income of managers to success of the firm 
B)  Directors defending top management 
C)  Antitakeover strategies 
D)  All of the options.

Question 5

The inability of shareholders to influence the decisions of managers, despite overwhelming shareholder support, is a breakdown in what process or mechanism?

Accepted Answer

A)  auditing 
B)  public finance 
C)  corporate governance 
D)  public reporting 
A)  auditing 
B)  public finance 
C)  corporate governance 
D)  public reporting

Question 6

Money market securities are characterized by:
I. Maturity less than 1 year
II. Safety of the principal investment
III. Low rates of return

Accepted Answer

A)  I only 
B)  I and II only 
C)  I and III only 
D)  I, II, and III 
A)  I only 
B)  I and II only 
C)  I and III only 
D)  I, II, and III

Question 7

Commodity and derivative markets allow firms to adjust their ________.

Accepted Answer

A)  management styles 
B)  focus from their main line of business to their investment portfolios 
C)  ways of doing business so that they'll always have positive returns 
D)  exposure to various business risks 
A)  management styles 
B)  focus from their main line of business to their investment portfolios 
C)  ways of doing business so that they'll always have positive returns 
D)  exposure to various business risks

Question 8

The success of common stock investments depends on the success of ________.

Accepted Answer

A)  derivative securities 
B)  fixed-income securities 
C)  the firm and its real assets 
D)  government methods of allocating capital 
A)  derivative securities 
B)  fixed-income securities 
C)  the firm and its real assets 
D)  government methods of allocating capital

Question 9

Net worth represents ________ of the liabilities and net worth of commercial banks.

Accepted Answer

A)  about 51% 
B)  about 91% 
C)  about 11% 
D)  about 31% 
A)  about 51% 
B)  about 91% 
C)  about 11% 
D)  about 31%

Question 10

Real assets represent about ________ of total assets for commercial banks.

Accepted Answer

A)  1% 
B)  15% 
C)  25% 
D)  40% 
A)  1% 
B)  15% 
C)  25% 
D)  40%

Question 11

The Sarbanes-Oxley Act tightened corporate governance rules by requiring all but which one of the following?

Accepted Answer

A)  Required that corporations have more independent directors. 
B)  Required that the CFO personally vouch for the corporation's financial statements. 
C)  Required that firms could no longer employ investment bankers to sell securities to the public. 
D)  Required the creation of a new board to oversee the auditing of public companies. 
A)  Required that corporations have more independent directors. 
B)  Required that the CFO personally vouch for the corporation's financial statements. 
C)  Required that firms could no longer employ investment bankers to sell securities to the public. 
D)  Required the creation of a new board to oversee the auditing of public companies.

Question 12

Which of the following is (are) true about hedge funds?
I. They are open to institutional investors.
II. They are open to wealthy individuals.
III. They are more likely than mutual funds to pursue simple strategies.

Accepted Answer

A)  I and II only 
B)  I and III only 
C)  II and III only 
D)  I, II, and III 
A)  I and II only 
B)  I and III only 
C)  II and III only 
D)  I, II, and III

Question 13

Security selection refers to the ________.

Accepted Answer

A)  allocation of the investment portfolio across broad asset classes 
B)  analysis of the value of securities 
C)  choice of specific securities within each asset class 
D)  top-down method of investing 
A)  allocation of the investment portfolio across broad asset classes 
B)  analysis of the value of securities 
C)  choice of specific securities within each asset class 
D)  top-down method of investing

Question 14

After considering current market conditions, an investor decides to place 60% of her funds in equities and the rest in bonds. This is an example of ________.

Accepted Answer

A)  asset allocation 
B)  security analysis 
C)  top-down portfolio management 
D)  passive management 
A)  asset allocation 
B)  security analysis 
C)  top-down portfolio management 
D)  passive management

Question 15

Active trading in markets and competition among securities analysts helps ensure that:
I. Security prices approach informational efficiency.
II. Riskier securities are priced to offer higher potential returns.
III. Investors are unlikely to be able to consistently find under- or overvalued securities.

Accepted Answer

A)  I only 
B)  I and II only 
C)  II and III only 
D)  I, II, and III 
A)  I only 
B)  I and II only 
C)  II and III only 
D)  I, II, and III

Question 16

The difference between LIBOR and the Treasury-bill rate

Accepted Answer

A)  is called the TED spread. 
B)  measures credit risk in the banking sector. 
C)  was very low just before the 2008 financial crisis. 
D)  All of the options. 
A)  is called the TED spread. 
B)  measures credit risk in the banking sector. 
C)  was very low just before the 2008 financial crisis. 
D)  All of the options.

Question 17

In a market economy, capital resources are primarily allocated by ________.

Accepted Answer

A)  governments 
B)  corporation CEOs 
C)  financial markets 
D)  investment bankers 
A)  governments 
B)  corporation CEOs 
C)  financial markets 
D)  investment bankers

Question 18

Which of the following is (are) true about nonconforming mortgage loans?

Accepted Answer

A)  They are also known as subprime loans. 
B)  They have higher default risk than conforming loans. 
C)  They were able to be offered without due diligence. 
D)  All of the options are true. 
A)  They are also known as subprime loans. 
B)  They have higher default risk than conforming loans. 
C)  They were able to be offered without due diligence. 
D)  All of the options are true.

Question 19

The combined liabilities of American households represent approximately ________ of combined assets.

Accepted Answer

A)  11% 
B)  14% 
C)  25% 
D)  33% 
A)  11% 
B)  14% 
C)  25% 
D)  33%

Real assets in the economy include all but which one of the following?

Which one of the following firms falsely claimed to have a $4.8 billion bank account, eventually resulting in the firm's bankruptcy?

Real assets are ________.

________ is a mechanism for mitigating potential agency problems.

The inability of shareholders to influence the decisions of managers, despite overwhelming shareholder support, is a breakdown in what process or mechanism?

Money market securities are characterized by: I. Maturity less than 1 year II. Safety of the principal investment III. Low rates of return

Commodity and derivative markets allow firms to adjust their ________.

The success of common stock investments depends on the success of ________.

Net worth represents ________ of the liabilities and net worth of commercial banks.

Real assets represent about ________ of total assets for commercial banks.

The Sarbanes-Oxley Act tightened corporate governance rules by requiring all but which one of the following?

Which of the following is (are) true about hedge funds? I. They are open to institutional investors. II. They are open to wealthy individuals. III. They are more likely than mutual funds to pursue simple strategies.

Security selection refers to the ________.

After considering current market conditions, an investor decides to place 60% of her funds in equities and the rest in bonds. This is an example of ________.

The difference between LIBOR and the Treasury-bill rate

In a market economy, capital resources are primarily allocated by ________.

Which of the following is (are) true about nonconforming mortgage loans?

The combined liabilities of American households represent approximately ________ of combined assets.

Asset Classes and Financial Instruments

Securities Markets

Mutual Funds and Other Investment Companies

Risk, Return, and the Historical Record

Efficient Diversification

Capital Asset Pricing and Arbitrage Pricing Theory

The Efficient Market Hypothesis

Behavioral Finance and Technical Analysis

Bond Prices and Yields

Managing Bond Portfolios

Macroeconomic and Industry Analysis

Equity Valuation

Financial Statement Analysis

Options Markets

Option Valuation

Futures Markets and Risk Management

Evaluating Investment Performance

International Diversification

Hedge Funds

Taxes, Inflation, and Investment Strategy

Investors and the Investment Process

Filters

Exam 1: Investments: Background and Issues

Real assets in the economy include all but which one of the following?

Which one of the following firms falsely claimed to have a $4.8 billion bank account, eventually resulting in the firm's bankruptcy?

Real assets are ________.

________ is a mechanism for mitigating potential agency problems.

The inability of shareholders to influence the decisions of managers, despite overwhelming shareholder support, is a breakdown in what process or mechanism?

Money market securities are characterized by: I. Maturity less than 1 year II. Safety of the principal investment III. Low rates of return

Commodity and derivative markets allow firms to adjust their ________.

The success of common stock investments depends on the success of ________.

Net worth represents ________ of the liabilities and net worth of commercial banks.

Real assets represent about ________ of total assets for commercial banks.

The Sarbanes-Oxley Act tightened corporate governance rules by requiring all but which one of the following?

Which of the following is (are) true about hedge funds? I. They are open to institutional investors. II. They are open to wealthy individuals. III. They are more likely than mutual funds to pursue simple strategies.

Security selection refers to the ________.

After considering current market conditions, an investor decides to place 60% of her funds in equities and the rest in bonds. This is an example of ________.

The difference between LIBOR and the Treasury-bill rate

In a market economy, capital resources are primarily allocated by ________.

Which of the following is (are) true about nonconforming mortgage loans?

The combined liabilities of American households represent approximately ________ of combined assets.

Asset Classes and Financial Instruments

Securities Markets

Mutual Funds and Other Investment Companies

Risk, Return, and the Historical Record

Efficient Diversification

Capital Asset Pricing and Arbitrage Pricing Theory

The Efficient Market Hypothesis

Behavioral Finance and Technical Analysis

Bond Prices and Yields

Managing Bond Portfolios

Macroeconomic and Industry Analysis

Equity Valuation

Financial Statement Analysis

Options Markets

Option Valuation

Futures Markets and Risk Management

Evaluating Investment Performance

International Diversification

Hedge Funds

Taxes, Inflation, and Investment Strategy

Investors and the Investment Process

Filters