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Chapters 1 Through 8
Chapter 1:
___________________________________________________________________________
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1.
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Financial assets
represent _____ of total assets of U.S. households.
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2.
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Real assets in the
economy include all but which one of the following?
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3.
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Net worth represents
_____ of the liabilities and net worth of commercial banks.
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4.
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According to the Flow of Funds Accounts of the United
States, the largest single asset of U.S. households is ___.
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5.
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According to the Flow of Funds Accounts of the United
States, the largest liability of U.S. households is ________.
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6.
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____ is not a derivative security.
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A.
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A share of common
stock
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D.
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None of these
options (All of the answers are derivative securities.)
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7.
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According to the Flow of Funds Accounts of the United
States, the largest financial asset of U.S. households is ____.
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8.
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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
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9.
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The material wealth
of society is determined by the economy's _________, which is a function of
the economy's _________.
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A.
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investment bankers;
financial assets
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B.
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investment bankers;
real assets
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C.
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productive
capacity; financial assets
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D.
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productive
capacity; real assets
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10.
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Which of the
following is not a money market
security?
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B.
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6-month maturity
certificate of deposit
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11.
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__________ assets
generate net income to the economy, and __________ assets define allocation
of income among investors.
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12.
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Which of the following
are financial assets?
I. Debt securities
II. Equity securities
III. Derivative securities
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13.
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__________ are
examples of financial intermediaries.
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14.
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Asset allocation refers to
_________.
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A.
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the allocation of
the investment portfolio across broad asset classes
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B.
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the analysis of the
value of securities
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C.
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the choice of
specific assets within each asset class
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15.
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Which one of the
following best describes the purpose of derivatives markets?
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A.
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Transferring risk
from one party to another
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B.
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Investing for a
short time period to earn a small rate of return
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C.
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Investing for
retirement
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D.
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Earning interest
income
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16.
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More than
_____________ of currency is traded each day in the market for foreign
exchange.
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17.
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Security selection refers to the
________.
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A.
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allocation of the
investment portfolio across broad asset classes
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B.
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analysis of the
value of securities
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C.
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choice of specific
securities within each asset class
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D.
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top-down method of
investing
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18.
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Which of the
following is an example of an agency problem?
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A.
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Managers engage in
empire building.
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B.
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Managers protect
their jobs by avoiding risky projects.
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C.
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Managers over
consume luxuries such as corporate jets.
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D.
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All of these
options are examples of agency problems.
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19.
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_____ is a mechanism
for mitigating potential agency problems.
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A.
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Tying income of
managers to success of the firm
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B.
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Directors defending
top management
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C.
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Antitakeover
strategies
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D.
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The straight voting
method of electing the board of directors
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20.
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__________ is (are)
real assets.
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21.
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__________ portfolio
construction starts with selecting attractively priced securities.
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22.
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In a market economy,
capital resources are primarily allocated by ____________.
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23.
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__________ represents
an ownership share in a corporation.
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C.
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A fixed-income
security
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24.
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The value of a
derivative security _________.
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A.
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depends on the
value of another related security
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B.
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affects the value
of a related security
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C.
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is unrelated to the
value of a related security
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D.
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can be integrated
only by calculus professors
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25.
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Commodity and
derivative markets allow firms to adjust their _________.
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B.
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focus from their
main line of business to their investment portfolios
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C.
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ways of doing
business so that they'll always have positive returns
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D.
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exposure to various
business risks
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26.
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__________ portfolio
management calls for holding diversified portfolios without spending effort
or resources attempting to improve investment performance through security
analysis.
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27.
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Financial markets
allow for all but which one of the following?
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A.
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Shift consumption
through time from higher-income periods to lower
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B.
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Price securities
according to their riskiness
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C.
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Channel funds from
lenders of funds to borrowers of funds
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D.
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Allow most
participants to routinely earn high returns with low risk
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28.
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Financial
intermediaries exist because small investors cannot efficiently
_________.
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A.
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diversify their
portfolios
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C.
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monitor their
portfolios
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29.
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Methods of
encouraging managers to act in shareholders' best interest include:
I. Threat of takeover
II. Proxy fights for control of the board of
directors
III. Tying managers' compensation to stock
price performance
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30.
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Firms that specialize
in helping companies raise capital by selling securities to the public are
called _________.
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