Question 1

_______ are financial assets.

Accepted Answer

A)  Bonds 
B)  Machines 
C)  Stocks 
D)  a and c 
E)  a,b and c 
A)  Bonds 
B)  Machines 
C)  Stocks 
D)  a and c 
E)  a,b and c

Question 2

Corporate shareholders are best protected from incompetent management decisions by

Accepted Answer

A)  the ability to engage in proxy fights 
B)  management's control of pecuniary rewards 
C)  the ability to call shareholder meetings 
D)  the threat of takeover by other firms 
E)  one-share/one-vote election rules 
A)  the ability to engage in proxy fights 
B)  management's control of pecuniary rewards 
C)  the ability to call shareholder meetings 
D)  the threat of takeover by other firms 
E)  one-share/one-vote election rules

Question 3

Financial assets ______.

Accepted Answer

A)  directly contribute to the country's productive capacity 
B)  indirectly contribute to the country's productive capacity 
C)  contribute to the country's productive capacity both directly and indirectly 
D)  do not contribute to the country's productive capacity either directly or indirectly 
E)  are of no value to anyone 
A)  directly contribute to the country's productive capacity 
B)  indirectly contribute to the country's productive capacity 
C)  contribute to the country's productive capacity both directly and indirectly 
D)  do not contribute to the country's productive capacity either directly or indirectly 
E)  are of no value to anyone

Question 4

The net wealth of the aggregate economy is equal to the sum of _________.

Accepted Answer

A)  all financial assets 
B)  all real assets 
C)  all financial and real assets 
D)  all physical assets 
E)  none of these 
A)  all financial assets 
B)  all real assets 
C)  all financial and real assets 
D)  all physical assets 
E)  none of these

Question 5

Which of the following are mechanisms that have evolved to mitigate potential agency problems?
I.compensation in the form of the firm's stock options
II.hiring bickering family members as corporate spies
III.underperforming management teams being forced out by boards of directors
IV.security analysts monitoring the firm closely
V.takeover threats

Accepted Answer

A)  II and V 
B)  I,III,and IV 
C)  I,III,IV,and V 
D)  III,IV,and V 
E)  I,III,and V 
A)  II and V 
B)  I,III,and IV 
C)  I,III,IV,and V 
D)  III,IV,and V 
E)  I,III,and V

Question 6

The ____________ refers to the potential conflict between management and shareholders due to management's control of pecuniary rewards as well as the possibility of incompetent performance by managers.

Accepted Answer

A)  agency problem 
B)  diversification problem 
C)  liquidity problem 
D)  solvency problem 
E)  regulatory problem 
A)  agency problem 
B)  diversification problem 
C)  liquidity problem 
D)  solvency problem 
E)  regulatory problem

Question 7

A bond issue is broken up so that some investors will receive only interest payments while others will receive only principal payments,which is an example of ________.

Accepted Answer

A)  bundling 
B)  credit enhancement 
C)  unbundling 
D)  financial engineering 
E)  c and d 
A)  bundling 
B)  credit enhancement 
C)  unbundling 
D)  financial engineering 
E)  c and d

Question 8

Discuss the euro in relation to its impact on globalization.How is it currently used and what are the plans for its future use?

Accepted Answer

The euro was introduced in 1999 as a new

Question 9

__________ are an indirect way U.S.investors can invest in foreign companies.

Accepted Answer

A)  ADRs 
B)  RRSPs 
C)  SDRs 
D)  GNMAs 
E)  Krugerrands 
A)  ADRs 
B)  RRSPs 
C)  SDRs 
D)  GNMAs 
E)  Krugerrands

Question 10

The means by which individuals hold their claims on real assets in a well-developed economy are

Accepted Answer

A)  investment assets. 
B)  depository assets. 
C)  derivative assets 
D)  financial assets. 
E)  exchange-driven assets 
A)  investment assets. 
B)  depository assets. 
C)  derivative assets 
D)  financial assets. 
E)  exchange-driven assets

Question 11

A corporation needing financing engages an insurance company to place its credit behind the corporation's credit for a fee,which is an example of ________.

Accepted Answer

A)  bundling 
B)  credit enhancement 
C)  securitization 
D)  unbundling 
E)  none of these. 
A)  bundling 
B)  credit enhancement 
C)  securitization 
D)  unbundling 
E)  none of these.

Question 12

An example of a primitive security is __________.

Accepted Answer

A)  a common share of RBC 
B)  a call option on CIBC stock 
C)  a call option on a stock of a firm based in a Third World country 
D)  a Canada bond 
E)  a and d. 
A)  a common share of RBC 
B)  a call option on CIBC stock 
C)  a call option on a stock of a firm based in a Third World country 
D)  a Canada bond 
E)  a and d.

Question 13

Derivative securities are

Accepted Answer

A)  potentially dangerous because they are highly leveraged 
B)  an effective tool to better manage business returns and risk 
C)  always structured as option contracts 
D)  both a and b are true 
E)  all of these are true 
A)  potentially dangerous because they are highly leveraged 
B)  an effective tool to better manage business returns and risk 
C)  always structured as option contracts 
D)  both a and b are true 
E)  all of these are true

Question 14

_______ are examples of financial intermediaries.

Accepted Answer

A)  Chartered banks 
B)  Insurance companies 
C)  Investment companies 
D)  Credit unions 
E)  All of these 
A)  Chartered banks 
B)  Insurance companies 
C)  Investment companies 
D)  Credit unions 
E)  All of these

Question 15

Which of the following is true about GNMA pass-throughs?
I.They separate individual home mortgages into heterogeneous pools.
II.The purchaser of a GNMA receives monthly interest and principal payments received from payments made on the pool.
III.The banks that originated the mortgages continue to service them.
IV.The banks that originated the mortgages maintain ownership of them.

Accepted Answer

A)  II,III,and IV 
B)  II and III 
C)  I,II,and IV 
D)  I,III,and IV 
E)  I,II,III,and IV 
A)  II,III,and IV 
B)  II and III 
C)  I,II,and IV 
D)  I,III,and IV 
E)  I,II,III,and IV

Question 16

Discuss the various types of securities markets.Distinguish between initial sale of the assets and subsequent sales.Also distinguish between the middlemen in the different markets.

Accepted Answer

Real assets represent the productive cap

Question 17

_________ financial asset(s).

Accepted Answer

A)  Buildings are 
B)  Land is a 
C)  Derivatives are 
D)  EDC bonds are 
E)  c and d 
A)  Buildings are 
B)  Land is a 
C)  Derivatives are 
D)  EDC bonds are 
E)  c and d

Question 18

The term "human capital" refers to

Accepted Answer

A)  the total amount of capital owned by humans. 
B)  the value of the earnings potential of the workforce. 
C)  the value of a firm's management personnel. 
D)  the value of a firm's blue-collar workers. 
E)  the value of equipment that is operated by company personnel. 
A)  the total amount of capital owned by humans. 
B)  the value of the earnings potential of the workforce. 
C)  the value of a firm's management personnel. 
D)  the value of a firm's blue-collar workers. 
E)  the value of equipment that is operated by company personnel.

Question 19

An example of a derivative security is ______.

Accepted Answer

A)  a common share of Canadian Pacific 
B)  a call option on BMO stock 
C)  a commodity futures contract 
D)  b and c 
E)  a and b 
A)  a common share of Canadian Pacific 
B)  a call option on BMO stock 
C)  a commodity futures contract 
D)  b and c 
E)  a and b

Question 20

_______ was the first to introduce mortgage pass-through securities in Canada.

Accepted Answer

A)  CMHC 
B)  TD Bank 
C)  FNMA 
D)  GNMA 
E)  None of these 
A)  CMHC 
B)  TD Bank 
C)  FNMA 
D)  GNMA 
E)  None of these

Exam 1: Investments: Background and Issues

_______ are financial assets.

Corporate shareholders are best protected from incompetent management decisions by

Financial assets ______.

The net wealth of the aggregate economy is equal to the sum of _________.

The ____________ refers to the potential conflict between management and shareholders due to management's control of pecuniary rewards as well as the possibility of incompetent performance by managers.

A bond issue is broken up so that some investors will receive only interest payments while others will receive only principal payments,which is an example of ________.

Discuss the euro in relation to its impact on globalization.How is it currently used and what are the plans for its future use?

__________ are an indirect way U.S.investors can invest in foreign companies.

The means by which individuals hold their claims on real assets in a well-developed economy are

A corporation needing financing engages an insurance company to place its credit behind the corporation's credit for a fee,which is an example of ________.

An example of a primitive security is __________.

Derivative securities are

_______ are examples of financial intermediaries.

Discuss the various types of securities markets.Distinguish between initial sale of the assets and subsequent sales.Also distinguish between the middlemen in the different markets.

_________ financial asset(s).

The term "human capital" refers to

An example of a derivative security is ______.

_______ was the first to introduce mortgage pass-through securities in Canada.

Asset Classes and Financial Instruments

Securities Markets

Mutual Funds and Other Investment Companies

Risk and Return: Past and Prologue

Efficient Diversification

Capital Asset Pricing and Arbitrage Pricing Theory

The Efficient Market Hypothesis

Behavioral Finance and Technical Analysis

Bond Prices and Yield

Managing Bond Portfolios

Macroeconomic and Industry Analysis

Equity Valuation

Financial Statement Analysis

Options Markets

Option Valuation

Futures Markets and Risk Management

Performance Evaluation and Active Portfolio Management

Globalization and International Investing

Taxes, Inflation, and Investment Strategy

Investors and the Investment Process

Mutual Fund: Objectives, Types, NAV, Turnover Ratio, and More

International Finance and Investments: Understanding Foreign Markets and Risks

Filters