A call option
Common stock
A fixed-income security
Preferred stock
References
Multiple Choice Difficulty: 1 Easy Learning Objective: 01-02 Distinguish
between real assets and financial assets.
23.
Award: 10.00 points
24.
Award: 10.00 points
The value of a derivative security _______.
depends on the value of another related security
affects the value of a related security
is unrelated to the value of a related security
can be integrated only by calculus professors
References
Multiple Choice Difficulty: 1 Easy Learning Objective: 01-02 Distinguish
between real assets and financial assets.
Commodity and derivative markets allow firms to adjust their _______.
management styles
focus from their main line of business to their investment portfolios
ways of doing business so that they’ll always have positive returns
exposure to various business risks
References
Multiple Choice Difficulty: 1 Easy Learning Objective: 01-03 Explain the
economic functions of financial markets
and how various securities are related to
the governance of the corporation.
25.
Award: 10.00 points
26.
Award: 10.00 points
_______ portfolio management calls for holding diversified portfolios without spending effort or
resources attempting to improve investment performance through security analysis.
Active
Momentum
Passive
Market-timing
References
Multiple Choice Difficulty: 1 Easy Learning Objective: 01-04 Describe the
major steps in the construction of an
investment portfolio.
Financial markets allow for all but which one of the following?
Shift consumption through time from higher-income periods to lower.
Price securities according to their riskiness.
Channel funds from lenders of funds to borrowers of funds.
Allow most participants to routinely earn high returns with low risk.
References
Multiple Choice Difficulty: 2 Medium Learning Objective: 01-03 Explain the
economic functions of financial markets
and how various securities are related to
the governance of the corporation.
27.
Award: 10.00 points
28.
Award: 10.00 points
Financial intermediaries exist because small investors cannot efficiently _______.
diversify their portfolios
gather information
assess and monitor the credit risk of borrowers
All of the choices are correct.
References
Multiple Choice Difficulty: 1 Easy Learning Objective: 01-05 Identify
different types of financial markets and
the major participants in each of those
markets.
Methods of encouraging managers to act in shareholders’ best interest include:
1. Threat of takeover.
2. Proxy fights for control of the board of directors.
3. Tying managers’ compensation to stock price performance.
1 only
1 and 2 only
2 and 3 only
1, 2, and 3
In each case, the method is designed to align the interests of management with the interests of the
shareholders.
References
Multiple Choice Difficulty: 1 Easy Learning Objective: 01-03 Explain the
economic functions of financial markets
and how various securities are related to
the governance of the corporation.
29.
Award: 10.00 points
30.
Award: 10.00 points
Firms that specialize in helping companies raise capital by selling securities to the public are called
_______.
pension funds
investment banks
savings banks
REITs
References
Multiple Choice Difficulty: 1 Easy Learning Objective: 01-05 Identify
different types of financial markets and
the major participants in each of those
markets.
In securities markets, there should be a risk-return trade-off with higher-risk assets having _______
expected returns than lower-risk assets.
higher
lower
the same
The answer cannot be determined from the information given.
References
Multiple Choice Difficulty: 1 Easy Learning Objective: 01-03 Explain the
economic functions of financial markets
and how various securities are related to
the governance of the corporation.
31.
Award: 10.00 points
32.
Award: 10.00 points
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.