Professional Documents
Culture Documents
CH 01
CH 01
CH 01
1. Net worth represents _____ of the Liabilities and Net Worth of nonfinancial U.S. businesses.
a. about 50%
b. over 90%
c. under 10%
d. about 30%
a. Brokered markets
b. Dealer markets
c.
d. Auction markets
a. Nafta
b. Global
c. Euro
d. Zeppo
4. Net worth represents _____ of the Liabilities and Net Worth of Financial Institutions.
a. about 50%
b. over 90%
c. under 10%
d. about 30%
5. According to the Flow of Funds Accounts of the United States, the largest asset of U.S. households is ____.
b. real estate
c. pension reserves
d. corporate equity
6. According to the Flow of Funds Accounts of the United States, the largest liability of U.S. households is ____.
a. mortgages
b. consumer credit
c. bank loans
d. gambling debts
b. A call option
c. A futures contract
8. According to the Flow of Funds Accounts of the United States, the largest financial asset of U. S. households is _____.
b. corporate equity
c. pension reserves
d. personal trusts
9. According to the efficient market hypothesis, there should be __________ overpriced and __________ underpriced securities.
a. no, no
b. no, some
c. some, no
d. some, some
10. The material wealth of society is determined by the economy's __________, which is a function of the economy's __________.
11. In financial markets, corporations are net __________ and household are net __________.
a. borrowers, borrowers
b. borrowers, savers
c. savers, borrowers
d. savers, savers
12. __________ assets generate net income to the economy and __________ assets define allocation of income among investors.
a. Financial, financial
b. Financial, real
c. Real, financial
d. Real, real
13. Financial assets __________ means by which individuals hold claims on real assets. Financial assets __________ directly to the productive capacity of the economy.
a. are, contribute
a. Commercial banks
b. Insurance companies
c. Investment companies
b.
16. __________ and __________ were two pioneers of modern portfolio theory who won Nobel prizes.
a. Fama, Ross
b. Jensen, Treynor
c. Markowitz, Sharpe
a. Chase Manhattan
b. Citicorp
c. FNMA
d. GNMA
a. Bonds
b. Machines
c. Stocks
22. __________ portfolio construction starts with selecting attractively priced securities.
a. Bottom-up
b. Top-down
c. Upside-down
d.
a. Buildings are
b. Lands are
c. Machines are
a. call option
b. common stock
c. fixed-income security
26. A bond issue is broken up so that some investors will receive interest payments while others will receive principal payments. This is an example of __________.
a. bundling
b. credit enhancement
c. securitization
d. unbundling
27. __________ portfolio management calls for holding diversified portfolios without spending effort or resources attempting to improve investment performance through security analysis.
a. Active
b. Idiotic
c. Passive
28. __________ helped US banks unload their portfolios of Third World debt.
a. Financial engineering
b. Dr. Douglas Peters (Canada's Secretary of State for International Financial Institutions)
c. Securitization
a. an auction market
b. a brokered market
c. a dealer market
30. Financial intermediaries exist because small investors cannot efficiently __________.
b. gather information
d. the abbreviation for the name of a university which has an excellent business school
32. Firms that specialize in helping companies raise capital by selling securities are called __________.
a. commercial banks
b. investment banks
c. savings banks
33. In securities markets, there should be a risk-return trade-off with higher-risk assets having__________ expected returns than lower-risk assets.
a. higher
b. lower
c. the same
34. The primary market where new security issues are offered to the public is a good example of __________.
a. an auction market
b. a brokered market
c. a dealer market
35. __________ are an indirect way U.S. investors can invest in foreign companies.
a. ADRs
b. IRAs
c.
SDRs
c. deciding how much to invest in the market portfolio versus the riskless asset
c. both a and b
d. neither a nor b
a. Bottom-up
b. Top-down
c. Upside-down
b. Citicorp is an example
c. either a or b
d. neither a nor b
41. The sale of a mortgage portfolio through setting up mortgage pass-through securities is an example of __________.
a.
bundling
b. credit enhancement
c. securitization
d. unbundling
42. The success of common stock investments depends on the success of __________.
a. derivative securities
43. The rate of return on the stock market in its best year, 1933, was __________ while in. its worst year, 1931, the rate of return was __________
a. 43%, -54%
b. 43%, -43%
c. 54%, -54%
d. 54%, -43%
44. The average rate of return on common stocks of large firms since 1926 was __________.
a. 8%
b. 9%
c. 12%
d. 13%
a. a college education
b. customer goodwill
c. a patent
a. a patient
b. a Treasury bill
c. land
a. a mutual fund
b. an insurance company
48. The combined liabilities of American households represent approximately __________ percent of combined assets.
a. 11%
b. 16%
c.
24%
d. 32%
49. Tangible assets represent approximately __________ percent of the total asset holdings of American households.
a. 33%
b. 42%
c. 48%
d. 55%
50. Financial assets represent approximately___________ percent of total asset holdings of American households.
a. 37%
b.
45%
c. 58%
d. 67%
51. Liabilities equal approximately _____ of total assets for nonfinancial U.S. businesses.
a. 10%
b. 25%
c. 50%
d. 75%
b. Allstate Insurance
53. Tangible assets represent about ____ of total assets for financial institutions.
a. 4%
b. 15%
c. 25%
d. 40%
b. Treasury bills
c. loans
d. foreign governments
57. Holders of highly diversified investment portfolios most likely practice __________
a. active management
b. quantitative management
c. qualitative management
d.
passive management
c. either active or passive strategies may be appropriate, depending on the direction of the market.
d. the Peter Lynch (former manager of Fidelity's Magellan Fund) portfolio management strategy is most appropriate.
c.
a. an auction market
b. a brokered market
c. a dealer market
61. An important trend that has changed the contemporary investment market is __________.
a. financial engineering
b. globalization
c. securitization
a. bundling
b. unbundling
c. both a and b
d. neither a nor b
64. The rate of return on investments in large stocks has outpaced that on investments in Treasury bills since 1926. _______
65. Surf City Software Company develops new surf forecasting software. It sells the software to Microsoft in exchange for 1000 shares of Microsoft common stock. Surf City Software has exchanged a _____ asset for a _____ asset in this transaction.
a. real, real
b. financial, financial
c. real, financial
d. financial, real
66. 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.