earn more if interest rates are lower
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 efficient market hypothesis suggests that _______.
active portfolio management strategies are the most appropriate investment strategies
passive portfolio management strategies are the most appropriate investment strategies
either active or passive strategies may be appropriate, depending on the expected
direction of the market
a bottom-up approach is the most appropriate investment strategy
References
Multiple Choice Difficulty: 1 Easy Learning Objective: 01-04 Describe the
major steps in the construction of an
investment portfolio.
55.
Award: 10.00 points
56.
Award: 10.00 points
In a perfectly efficient market the best investment strategy is probably _______.
an active strategy
a passive strategy
asset allocation
market timing
References
Multiple Choice Difficulty: 1 Easy Learning Objective: 01-04 Describe the
major steps in the construction of an
investment portfolio.
Market signals will help to allocate capital efficiently only if investors are acting _______.
on the basis of their individual hunches
as directed by financial experts
as dominant forces in the economy
on accurate information
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.
57.
Award: 10.00 points
58.
Award: 10.00 points
Which of the following is (are) true about hedge funds?
1. They are open to institutional investors.
2. They are open to wealthy individuals.
3. They are more likely than mutual funds to pursue simple strategies.
1 and 2 only
1 and 3 only
2 and 3 only
1, 2, and 3
References
Multiple Choice Difficulty: 2 Medium Learning Objective: 01-04 Describe the
major steps in the construction of an
investment portfolio.
Venture capital is _______.
frequently used to expand the businesses of well-established companies
supplied by venture capital funds and individuals to start-up companies
illegal under current U.S. laws
most frequently issued with the help of investment bankers
References
Multiple Choice Difficulty: 2 Medium Learning Objective: 01-04 Describe the
major steps in the construction of an
investment portfolio.
59.
Award: 10.00 points
60.
Award: 10.00 points
Individuals may find it more advantageous to purchase claims from a financial intermediary rather
than directly purchasing claims in capital markets because:
1. Intermediaries are better diversified than most individuals.
2. Intermediaries can exploit economies of scale in investing that individual investors cannot.
3. Intermediated investments usually offer higher rates of return than direct capital market claims.
1 only
1 and 2 only
2 and 3 only
1, 2, and 3
References
Multiple Choice Difficulty: 2 Medium Learning Objective: 01-02 Distinguish
between real assets and financial assets.
Surf City Software Company develops new surf forecasting software. It sells the software to
Microsoft in exchange for 1,000 shares of Microsoft common stock. Surf City Software has
exchanged a _______ asset for a _______ asset in this transaction.
real; real
financial; financial
real; financial
financial; real
References
Multiple Choice Difficulty: 2 Medium Learning Objective: 01-02 Distinguish
between real assets and financial assets.
61.
Award: 10.00 points
62.
Award: 10.00 points
Stone Harbor Products takes out a bank loan. It receives $100,000 and signs a promissory note to
pay back the loan over 5 years. In this transaction, _______.
a new financial asset was created
a financial asset was traded for a real asset
a financial asset was destroyed
a real asset was created
References
Multiple Choice Difficulty: 2 Medium Learning Objective: 01-02 Distinguish
between real assets and financial assets.
Which of the following firms was not engaged in a major accounting scandal between 2000 and
2005?
General Electric
Parmalat