Question 1

In 2012, ____________ was(were) the least significant real asset(s) of U.S.nonfinancial businesses in terms of total value.

Accepted Answer

A) equipment and software 
B) inventory 
C) real estate 
D) trade credit 
E) marketable securities 
A) equipment and software 
B) inventory 
C) real estate 
D) trade credit 
E) marketable securities

Question 2

Financial assets permit all of the following except

Accepted Answer

A) consumption timing. 
B) allocation of risk. 
C) separation of ownership and control. 
D) elimination of risk. 
A) consumption timing. 
B) allocation of risk. 
C) separation of ownership and control. 
D) elimination of risk.

Question 3

In 2012, ____________ was the most significant real asset of U.S.households in terms of total value.

Accepted Answer

A) consumer durables 
B) automobiles 
C) real estate 
D) mutual fund shares 
E) bank loans 
A) consumer durables 
B) automobiles 
C) real estate 
D) mutual fund shares 
E) bank loans

Question 4

New issues of securities are sold in the ________ market(s).

Accepted Answer

A) primary 
B) secondary 
C) over-the-counter 
D) primary and secondary 
A) primary 
B) secondary 
C) over-the-counter 
D) primary and secondary

Question 5

The value of a derivative security

Accepted Answer

A) depends on the value of the related security. 
B) is unable to be calculated. 
C) is unrelated to the value of the related security. 
D) has been enhanced due to the recent misuse and negative publicity regarding these instruments. 
E) is worthless today. 
A) depends on the value of the related security. 
B) is unable to be calculated. 
C) is unrelated to the value of the related security. 
D) has been enhanced due to the recent misuse and negative publicity regarding these instruments. 
E) is worthless today.

Question 6

________ specialize in helping companies raise capital by selling securities.

Accepted Answer

A) Commercial bankers 
B) Investment bankers 
C) Investment issuers 
D) Credit raters 
A) Commercial bankers 
B) Investment bankers 
C) Investment issuers 
D) Credit raters

Question 7

In 2012, ____________ was the most significant financial asset of U.S.households in terms of total value.

Accepted Answer

A) real estate 
B) mutual fund shares 
C) debt securities 
D) life insurance reserves 
E) pension reserves 
A) real estate 
B) mutual fund shares 
C) debt securities 
D) life insurance reserves 
E) pension reserves

Question 8

Investors trade previously issued securities in the ________ market(s).

Accepted Answer

A) primary 
B) secondary 
C) primary and secondary 
D) derivatives 
A) primary 
B) secondary 
C) primary and secondary 
D) derivatives

Question 9

In terms of total value, the most significant liability(ies) of U.S.nonfinancial businesses in 2012 was(were)

Accepted Answer

A) bank loans. 
B) bonds and mortgages. 
C) trade debt. 
D) other loans. 
E) marketable securities. 
A) bank loans. 
B) bonds and mortgages. 
C) trade debt. 
D) other loans. 
E) marketable securities.

Question 10

Security selection refers to

Accepted Answer

A) choosing which securities to hold based on their valuation. 
B) investing only in "safe" securities. 
C) the allocation of assets into broad asset classes. 
D) top-down analysis. 
A) choosing which securities to hold based on their valuation. 
B) investing only in "safe" securities. 
C) the allocation of assets into broad asset classes. 
D) top-down analysis.

Question 11

In 2012, ____________ was(were) the most significant liability(ies) of U.S.commercial banks in terms of total value.

Accepted Answer

A) loans and leases 
B) cash 
C) real estate 
D) deposits 
E) investment securities 
A) loans and leases 
B) cash 
C) real estate 
D) deposits 
E) investment securities

Question 12

A disadvantage of using stock options to compensate managers is that

Accepted Answer

A) it encourages managers to undertake projects that will increase stock price. 
B) it encourages managers to engage in empire building. 
C) it can create an incentive for managers to manipulate information to prop up a stock price temporarily, giving them a chance to cash out before the price returns to a level reflective of the firm's true prospects. 
D) All of the options 
A) it encourages managers to undertake projects that will increase stock price. 
B) it encourages managers to engage in empire building. 
C) it can create an incentive for managers to manipulate information to prop up a stock price temporarily, giving them a chance to cash out before the price returns to a level reflective of the firm's true prospects. 
D) All of the options

Question 13

Commercial banks differ from other businesses in that both their assets and their liabilities are mostly

Accepted Answer

A) illiquid. 
B) financial. 
C) real. 
D) owned by the government. 
E) regulated. 
A) illiquid. 
B) financial. 
C) real. 
D) owned by the government. 
E) regulated.

Question 14

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 15

Discuss securitization as it relates to the field of investments.

Accepted Answer

Securitization refers to aggregating und

Question 16

Which of the following portfolio construction methods starts with asset allocation

Accepted Answer

A) Top-down 
B) Bottom-up 
C) Middle-out 
D) Buy and hold 
E) Asset allocation 
A) Top-down 
B) Bottom-up 
C) Middle-out 
D) Buy and hold 
E) Asset allocation

Question 17

A fixed-income security pays

Accepted Answer

A) a fixed level of income for the life of the owner. 
B) a fixed stream of income or a stream of income that is determined according to a specified formula for the life of the security. 
C) a variable level of income for owners on a fixed income. 
D) a fixed or variable income stream at the option of the owner. 
A) a fixed level of income for the life of the owner. 
B) a fixed stream of income or a stream of income that is determined according to a specified formula for the life of the security. 
C) a variable level of income for owners on a fixed income. 
D) a fixed or variable income stream at the option of the owner.

Question 18

In 2012, ____________ was(were) the most significant financial asset(s) of U.S.commercial banks in terms of total value.

Accepted Answer

A) loans and leases 
B) cash 
C) real estate 
D) deposits 
E) investment securities 
A) loans and leases 
B) cash 
C) real estate 
D) deposits 
E) investment securities

Exam 1: The Investment Environment

In 2012, ____________ was(were) the least significant real asset(s) of U.S.nonfinancial businesses in terms of total value.

Financial assets permit all of the following except

In 2012, ____________ was the most significant real asset of U.S.households in terms of total value.

New issues of securities are sold in the ________ market(s).

The value of a derivative security

________ specialize in helping companies raise capital by selling securities.

In 2012, ____________ was the most significant financial asset of U.S.households in terms of total value.

Investors trade previously issued securities in the ________ market(s).

In terms of total value, the most significant liability(ies) of U.S.nonfinancial businesses in 2012 was(were)

Security selection refers to

In 2012, ____________ was(were) the most significant liability(ies) of U.S.commercial banks in terms of total value.

A disadvantage of using stock options to compensate managers is that

Commercial banks differ from other businesses in that both their assets and their liabilities are mostly

Financial assets

Discuss securitization as it relates to the field of investments.

Which of the following portfolio construction methods starts with asset allocation

A fixed-income security pays

In 2012, ____________ was(were) the most significant financial asset(s) of U.S.commercial banks in terms of total value.

Asset Classes and Financial Instruments

How Securities Are Traded

Mutual Funds and Other Investment Companies

Risk, Return, and the Historical Record

Capital Allocation to Risky Assets

Optimal Risky Portfolios

Index Models

The Capital Asset Pricing Model

Arbitrage Pricing Theory and Multifactor Models of Risk and Return

The Efficient Market Hypothesis

Behavioral Finance and Technical Analysis

Empirical Evidence on Security Returns

Bond Prices and Yields

The Term Structure of Interest Rates

Managing Bond Portfolios

Macroeconomic and Industry Analysis

Equity Valuation Models

Financial Statement Analysis

Options Markets: Introduction

Option Valuation

Futures Markets

Futures, Swaps, and Risk Management

Portfolio Performance Evaluation

International Diversification

Hedge Funds

The Theory of Active Portfolio Management

Investment Policy and the Framework of the Cfa Institute

Filters