rise; fewer
fall; fewer
rise; more
fall; more
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.
Security selection refers to _______.
choosing specific securities within each asset class
deciding how much to invest in each asset class
deciding how much to invest in the market portfolio versus the riskless asset
deciding how much to hedge
References
Multiple Choice Difficulty: 1 Easy Learning Objective: 01-04 Describe the
major steps in the construction of an
investment portfolio.
33.
Award: 10.00 points
34.
Award: 10.00 points
An example of a derivative security is _______.
a common share of General Motors
a call option on Intel stock
a Ford bond
a U.S. Treasury bond
References
Multiple Choice Difficulty: 1 Easy Learning Objective: 01-02 Distinguish
between real assets and financial assets.
_______ portfolio construction starts with asset allocation.
Bottom-up
Top-down
Upside-down
Side-to-side
References
Multiple Choice Difficulty: 1 Easy Learning Objective: 01-04 Describe the
major steps in the construction of an
investment portfolio.
35.
Award: 10.00 points
36.
Award: 10.00 points
Which one of the following firms falsely claimed to have a $4.8 billion bank account, eventually
resulting in the firm’s bankruptcy?
WorldCom
Enron
Parmalat
Global Crossing
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.
Debt securities promise:
1. A fixed stream of income.
2. A stream of income that is determined according to a specific formula.
3. A share in the profits of the issuing entity.
1 only
1 or 2 only
1 and 3 only
2 or 3 only
References
Multiple Choice Difficulty: 2 Medium Learning Objective: 01-02 Distinguish
between real assets and financial assets.
37.
Award: 10.00 points
38.
Award: 10.00 points
The Sarbanes-Oxley Act tightened corporate governance rules by requiring all but which one of the
following?
Required that corporations have more independent directors.
Required that the CFO personally vouch for the corporation’s financial statements.
Required that firms could no longer employ investment bankers to sell securities to the
public.
Required the creation of a new board to oversee the auditing of public companies.
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.
The success of common stock investments depends on the success of _______.
derivative securities
fixed-income securities
the firm and its real assets
government methods of allocating capital
References
Multiple Choice Difficulty: 1 Easy Learning Objective: 01-02 Distinguish
between real assets and financial assets.
39.
Award: 10.00 points
40.
Award: 10.00 points
The historical average rate of return on large company stocks since 1926 has been _______.
about 5%
about 8%
about 12%
about 20%
References
Multiple Choice Difficulty: 2 Medium Learning Objective: 01-04 Describe the
major steps in the construction of an
investment portfolio.
The average rate of return on U.S. Treasury bills since 1926 was _______.
less than 1%
less than 4%
over 4%
over 12%
References
Multiple Choice Difficulty: 2 Medium Learning Objective: 01-04 Describe the
major steps in the construction of an
investment portfolio.
41.
Award: 10.00 points
42.
Award: 10.00 points
An example of a real asset is:
1. A college education
2. Customer goodwill
3. A patent
1 only
2 only
1 and 3 only
1, 2, and 3
Each example has productive capacity, though intangible.
References
Multiple Choice Difficulty: 2 Medium Learning Objective: 01-02 Distinguish
between real assets and financial assets.