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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%
2. _______ are the least organized markets.
a. Brokered markets
b. Dealer markets
Direct search markets
d. Auction markets
3. In 1999 eleven countries established a new currency called the ______ .
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 ____.
a. mutual fund shares
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 ____.
gambling debts 7.b. A call option c. 8. bank loans d. A share of common stock b. A futures contract d. . According to the Flow of Funds Accounts of the United States. the largest financial asset of U. consumer credit c. a. ____ is not a derivative security. households is _____. S. all of the above are derivative securities.
pension reserves d. some. some c. According to the efficient market hypothesis. no. no. mutual fund shares b. no d. there should be __________ overpriced and __________ underpriced securities. a. some .a. corporate equity c. personal trusts 9. no b. some.
borrowers. a. real assets 11. investment bankers. productive capacity.10. a. financial assets d. investment bankers. real assets c. savers c. borrowers . The material wealth of society is determined by the economy's __________. which is a function of the economy's __________. borrowers b. borrowers. productive capacity. financial assets b. savers. In financial markets. corporations are net __________ and household are net __________.
Real. do not contribute . Real. are. financial d. real 13. Financial. a. contribute b. Financial assets __________ means by which individuals hold claims on real assets.d. savers 12. a. real c. savers. Financial assets __________ directly to the productive capacity of the economy. are. __________ assets generate net income to the economy and __________ assets define allocation of income among investors. financial b. Financial.
Investment companies d. Commercial banks b. a. __________ are examples of financial intermediaries. Insurance companies c. do not contribute 14. contribute d. Asset allocation refers to the __________. a.c. are not. are not. All of the above 15. allocation of the investment portfolio across broad asset classes b. .
Treynor c. Jensen. Chase Manhattan . a. Sharpe d. none of the above 16. choice of specific assets within each asset class d. Markowitz. a. __________ was the first to introduce mortgage pass-through securities. Fama.analysis of the value of securities c. none of the above 17. Ross b. __________ and __________ were two pioneers of modern portfolio theory who won Nobel prizes.
GNMA 18. _____ is an example of an agency problem . analysis of the value of securities c. FNMA d. Citicorp c. choice of specific securities within each asset class d. none of the above 19. Security selection refers to the ____ a. allocation of the investment portfolio across broad asset classes b.b.
Managers over consume luxuries such as corporate jets d. all of the above 20. Tying income of managers to success of the firm b. Managers protect their jobs by avoiding risky projects c. Managers engage in empire building b. Anti takeover strategies d. Directors defending top management c.a. all of the above . _____ is a mechanism to mitigate potential agency problems a.
21. Upside-down d. a. Top-down c. None of the above 22. __________ are real assets. a. . Bottom-up b. Machines c. Bonds b. __________ portfolio construction starts with selecting attractively priced securities. Stocks d.
a. fixed-income security . Machines are d. None of the above are 24. Lands are c. call option b. Buildings are b. a. __________ financial assets. common stock c. A __________ represents an ownership share in a corporation.none of the above 23.
bundling b. The value of a derivative security __________. credit enhancement . This is an example of __________. affects the value of its related primitive security c. depends on the value of its related primitive security b. a. can only be integrated by calculus professors 26. is unrelated to the value of its related primitive security d. a. A bond issue is broken up so that some investors will receive interest payments while others will receive principal payments. none of the above 25.d.
c. __________ portfolio management calls for holding diversified portfolios without spending effort or resources attempting to improve investment performance through security analysis. Passive d. Financial engineering . a. none of the above 28. Idiotic c. securitization d. __________ helped US banks unload their portfolios of Third World debt. unbundling 27. Active b. a.
a. Securitization d. none of the above 29. an auction market b. Douglas Peters (Canada's Secretary of State for International Financial Institutions) c.b. . a brokered market c. Dr. The New York Stock Exchange is a good example of __________. Financial intermediaries exist because small investors cannot efficiently __________. a dealer market d. a direct search market 30.
gather information c. a mutual fund that invests internationally b. the abbreviation for the name of a university which has an excellent business school . monitor their portfolios d.a. diversify their portfolios b. an example of financial engineering c. an index of a basket of European currency values d. ECU is __________ a. all of the above 31.
In securities markets. none of the above 33. higher b. a. lower c. Firms that specialize in helping companies raise capital by selling securities are called __________. commercial banks b. savings banks d. there should be a risk-return trade-off with higher-risk assets having__________ expected returns than lower-risk assets. a. investment banks c.32. the same .
. investors can invest in foreign companies. a. IRAs c. an auction market b.d.S. a direct search market 35. ADRs b. a. none of the above 34. __________ are an indirect way U. a brokered market c. The primary market where new security issues are offered to the public is a good example of __________. a dealer market d.
SDRs d. An example of a derivative security is __________. a. a. Security selection refers to __________. none of the above 37. a call option on Mobil stock . deciding how much to invest in each asset-class c. none of the above 36. deciding how much to invest in the market portfolio versus the riskless asset d. choosing specific securities within each asset-class b. a common share of General Motors b.
both a and b d. Upside-down d. a. Top-down c. neither a nor b 38. Bottom-up b. __________ of an investment bank. Bank of New York is an example . one of the above 39. a.c. __________ portfolio construction starts with asset allocation.
Fixed-income securities promise __________. Goldman Sachs is an example d. None of the above are examples 40. Citicorp is an example c. The sale of a mortgage portfolio through setting up mortgage pass-through securities is an example of __________. either a or b d.b. a fixed stream of income b. a. . a stream of income that is determined according to a specific formula c. neither a nor b 41. a.
1933. The success of common stock investments depends on the success of __________. was __________ while in. The rate of return on the stock market in its best year. its worst year. none of the above 43. fixed income securities c. a. securitization d. 1931.bundling b. the rate of return was __________ . credit enhancement c. unbundling 42. the firm and its real assets d. derivative securities b.
-43% 44. 12% d. a. 9% c. 54%. 43%. -43% c.a. 54%. The average rate of return on common stocks of large firms since 1926 was __________. 13% . -54% d. 43%. -54% b. 8% b.
a patent d. a Treasury bill c. a college education b. all of the above 46.45. a. An example of a real asset is __________. a. a patient b. customer goodwill c. land . An example of a financial asset is __________.
Which of the following is not a financial intermediary? a. an insurance company c. a real estate brokerage firm d. a savings and loan company 48. 11% b. a. 16% c. a mutual fund b. The combined liabilities of American households represent approximately __________ percent of combined assets. .d. none of the above 47.
Financial assets represent approximately___________ percent of total asset holdings of American households. 55% 50. Tangible assets represent approximately __________ percent of the total asset holdings of American households. a. 42% c. . a. 37% b.24% d. 48% d. 32% 49. 33% b.
50% d. 75% 52. _____ is an example of a financial intermediary. Liabilities equal approximately _____ of total assets for nonfinancial U. 25% c. Salomon Smith Barney .S. 58% d. a. businesses. 67% 51. 10% b.45% c. a.
Fifth Third Bank d. . Allstate Insurance c. Money Market securities are characterized by _________. 40% 54. all of the above 53.b. 15% c. a. 25% d. Tangible assets represent about ____ of total assets for financial institutions. 4% b.
Treasury bills c. none of the above 55. Pass-through securities are backed by __________ a. a long term to maturity d.a. equity securities issued by foreign companies b. foreign governments . loans d. a medium return to maturity c. a very short tern to maturity b.
qualitative management d. all of the principal and interest payments made by borrowers c. Owners of pass-through securities receive __________ a. active management b. quantitative management c. none of the above 57. a fee paid by lenders d. a specified portion of the principle and interest payments made by borrowers b. Holders of highly diversified investment portfolios most likely practice __________ a. .56.
passive management 58. d. passive portfolio management strategies are most appropriate c. 59. depending on the direction of the market. active portfolio management strategies are most appropriate b. analysis of the value of securities c. a. . allocation of the investment portfolio across broad asset classes b. either active or passive strategies may be appropriate. The efficient markets hypothesis suggests that ________ a. the Peter Lynch (former manager of Fidelity's Magellan Fund) portfolio management strategy is most appropriate. Security analysis refers to the __________.
a. The over-the-counter securities market is a good example of __________. An important trend that has changed the contemporary investment market is __________. a direct search market 61. none of the above 60. globalization . financial engineering b. a dealer market d. a brokered market c. an auction market b. a.choice of specific assets within each asset class d.
unbundling c. This is a real asset.c. securitization d. a. bundling b. . You discover a treasure chest of $5 billion in cash. Financial engineering refers to the creation of new securities by __________. both a and b d. neither a nor b 63. a. all of the above 62.
It sells the software to Microsoft in exchange for 1000 shares of Microsoft common stock.b. d. This makes society Wealthier. Surf City Software has exchanged a _____ asset for a _____ asset in this transaction. the government quit selling Treasury bills in the 1950s. c. d. . 65. As a result only government trust funds invest in Treasury bills. This makes you wealthier. That is why only currency traders buy Treasury bills. Surf City Software Company develops new surf forecasting software. c. The rate of return on investments in large stocks has outpaced that on investments in Treasury bills since 1926. b. All of the above 64. Investors wanting very low risk still invest in Treasury bills. _______ a. As a result.
c. b. A financial asset was traded for a real asset in this transaction. real 66.a.000 and signs a promissory note to pay back the loan over 5 years. real. financial. real. financial d. d. A financial asset was destroyed in this transaction. A new financial asset was created in this transaction. a. . real b. It receives $100. None of the above. Stone Harbor Products takes out a bank loan. financial c. financial.
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