投资学题库Chap001

Chapter 01The Investment Environment Multiple Choice Questions1.The material wealth of a society is a function ofA. a ll financial assets.B. a ll real assets.C. a ll financial and real assets.D. a ll physical assets.2._______ are real assets.A. L andB. M achinesC. S tocks and bondsD. K nowledgeE. L and, machines, and knowledge3.The means by which individuals hold their claims on real assets in a well-developed economyareA. i nvestment assets.B. d epository assets.C. d erivative assets.D. f inancial assets.E. e xchange-driven assets.4._______ are financial assets.A. B ondsB. M achinesC. S tocksD. B onds and stocksE. B onds, machines, and stocks5._________ financial asset(s).A. B uildings areB. L and is aC. D erivatives areD. U.S. agency bonds areE. D erivatives and U.S. agency bonds are6.Financial assetsA. d irectly contribute to the country's productive capacity.B. i ndirectly contribute to the country's productive capacity.C. c ontribute to the country's productive capacity both directly and indirectly.D. d o not contribute to the country's productive capacity either directly or indirectly.E. a re of no value to anyone.7.In 2012, ____________ was the most significant real asset of U.S. households in terms of totalvalue.A. c onsumer durablesB. a utomobilesC. r eal estateD. m utual fund sharesE. b ank loans8.In 2012, ____________ was the least significant financial asset of U.S. households in terms oftotal value.A. r eal estateB. m utual fund sharesC. d ebt securitiesD. l ife insurance reservesE. p ension reserves9.In 2012, ____________ was the most significant financial asset of U.S. households in terms oftotal value.A. r eal estateB. m utual fund sharesC. d ebt securitiesD. l ife insurance reservesE. p ension reserves10.In 2012, ____________ was the most significant asset of U.S. households in terms of totalvalue.A. r eal estateB. m utual fund sharesC. d ebt securitiesD. l ife insurance reservesE. p ension reserves11.In 2012, ____________ was the most significant liability of U.S. households in terms of totalvalue.A. c redit cardsB. m ortgagesC. b ank loansD. s tudent loansE. o ther debt12.Which of the following financial assets made up the greatest proportion of the financial assetsheld by U.S. households?A. P ension reservesB. L ife insurance reservesC. M utual fund sharesD. D ebt securitiesE. P ersonal trusts13.In 2012 _______ of the assets of U.S. households were financial assets as opposed totangible assets.A. 20.4%B. 34.2%C. 68.8%D. 71.7%E. 82.5%14.The largest component of domestic net worth in 2012 wasA. n onresidential real estate.B. r esidential real estate.C. i nventories.D. c onsumer durables.E. e quipment and software.15.The smallest component of domestic net worth in 2012 wasA. n onresidential real estate.B. r esidential real estate.C. i nventories.D. c onsumer durables.E. e quipment and software.16.The national net worth of the U.S. in 2012 wasA. $15.411 trillion.B. $26.431 trillion.C. $42.669 trillion.D. $48.616 trillion.E. $70.983 trillion.17.A fixed-income security paysA. a fixed level of income for the life of the owner.B. a fixed stream of income or a stream of income that is determined according to a specifiedformula for the life of the security.C. a variable level of income for owners on a fixed income.D. a fixed or variable income stream at the option of the owner.18.A debt security paysA. a fixed level of income for the life of the owner.B. a variable level of income for owners on a fixed income.C. a fixed or variable income stream at the option of the owner.D. a fixed stream of income or a stream of income that is determined according to a specifiedformula for the life of the security.19.Money market securitiesA. a re short term.B. a re highly marketable.C. a re generally very low risk.D. a re highly marketable and are generally very low risk.E. A ll of the options20.An example of a derivative security isA. a common share of Microsoft.B. a call option on Intel stock.C. a commodity futures contract.D. a call option on Intel stock and a commodity futures contract.E. a common share of Microsoft and a call option on Intel stock.21.The value of a derivative securityA. d epends on the value of the related security.B. i s unable to be calculated.C. i s unrelated to the value of the related security.D. h as been enhanced due to the recent misuse and negative publicity regarding theseinstruments.E. i s worthless today.22.Although derivatives can be used as speculative instruments, businesses most often usethem toA. a ttract customers.B. a ppease stockholders.C. o ffset debt.D. h edge risks.E. e nhance their balance sheets.23.Financial assets permit all of the following exceptA. c onsumption timing.B. a llocation of risk.C. s eparation of ownership and control.D. e limination of risk.24.The ____________ refers to the potential conflict between management and shareholders.A. a gency problemB. d iversification problemC. l iquidity problemD. s olvency problemE. r egulatory problem25.A disadvantage of using stock options to compensate managers is thatA. i t encourages managers to undertake projects that will increase stock price.B. i t encourages managers to engage in empire building.C. i t can create an incentive for managers to manipulate information to prop up a stock pricetemporarily, giving them a chance to cash out before the price returns to a level reflective of the firm's true prospects.D. A ll of the options26.Which of the following are mechanisms that have evolved to mitigate potential agencyproblems?I) Using the firm's stock options for compensationII) Hiring bickering family members as corporate spiesIII) Boards of directors forcing out underperforming managementIV) Security analysts monitoring the firm closelyV) Takeover threatsA. I I and VB. I, III, and IVC. I, III, IV, and VD. I II, IV, and VE. I, III, and V27.Corporate shareholders are best protected from incompetent management decisions byA. t he ability to engage in proxy fights.B. m anagement's control of pecuniary rewards.C. t he ability to call shareholder meetings.D. t he threat of takeover by other firms.E. o ne-share/one-vote election rules.28.Theoretically, takeovers should result inA. i mproved management.B. i ncreased stock price.C. i ncreased benefits to existing management of taken-over firm.D. i mproved management and increased stock price.E. A ll of the options29.During the period between 2000 and 2002, a large number of scandals were uncovered. Mostof these scandals were related toI) manipulation of financial data to misrepresent the actual condition of the firm.II) misleading and overly optimistic research reports produced by analysts.III) allocating IPOs to executives as a quid pro quo for personal favors.IV) greenmail.A. I I, III, and IVB. I, II, and IVC. I I and IVD. I, III, and IVE. I, II, and III30.The Sarbanes-Oxley ActA. r equires corporations to have more independent directors.B. r equires the firm's CFO to personally vouch for the firm's accounting statements.C. p rohibits auditing firms from providing other services to clients.D. r equires corporations to have more independent directors and requires the firm's CFO topersonally vouch for the firm's accounting statements.E. A ll of the options31.Asset allocation refers toA. c hoosing which securities to hold based on their valuation.B. i nvesting only in "safe" securities.C. t he allocation of assets into broad asset classes.D. b ottom-up analysis.32.Security selection refers toA. c hoosing which securities to hold based on their valuation.B. i nvesting only in "safe" securities.C. t he allocation of assets into broad asset classes.D. t op-down analysis.33.Which of the following portfolio construction methods starts with security analysis?A. T op-downB. B ottom-upC. M iddle-outD. B uy and holdE. A sset allocation34.Which of the following portfolio construction methods starts with asset allocation?A. T op-downB. B ottom-upC. M iddle-outD. B uy and holdE. A sset allocation35._______ are examples of financial intermediaries.A. C ommercial banksB. I nsurance companiesC. I nvestment companiesD. C redit unionsE. A ll of the options36.Financial intermediaries exist because small investors cannot efficientlyA. d iversify their portfolios.B. a ssess credit risk of borrowers.C. a dvertise for needed investments.D. d iversify their portfolios and assess credit risk of borrowers.E. A ll of the options37.________ specialize in helping companies raise capital by selling securities.A. C ommercial bankersB. I nvestment bankersC. I nvestment issuersD. C redit ratersmercial banks differ from other businesses in that both their assets and their liabilities aremostlyA. i lliquid.B. f inancial.C. r eal.D. o wned by the government.E. r egulated.39.In 2012, ____________ was(were) the most significant financial asset(s) of U.S. commercialbanks in terms of total value.A. l oans and leasesB. c ashC. r eal estateD. d epositsE. i nvestment securities40.In 2012, ____________ was(were) the most significant liability(ies) of U.S. commercial banksin terms of total value.A. l oans and leasesB. c ashC. r eal estateD. d epositsE. i nvestment securities41.In 2012, ____________ was(were) the most significant real asset(s) of U.S. nonfinancialbusinesses in terms of total value.A. e quipment and softwareB. i nventoryC. r eal estateD. t rade creditE. m arketable securities42.In 2012, ____________ was(were) the least significant real asset(s) of U.S. nonfinancialbusinesses in terms of total value.A. e quipment and softwareB. i nventoryC. r eal estateD. t rade creditE. m arketable securities43.In 2012, ____________ was(were) the least significant liability(ies) of U.S. nonfinancialbusinesses in terms of total value.A. b onds and mortgagesB. b ank loansC. i nventoriesD. t rade debtE. m arketable securities44.In terms of total value, the most significant liability(ies) of U.S. nonfinancial businesses in2012 was(were)A. b ank loans.B. b onds and mortgages.C. t rade debt.D. o ther loans.E. m arketable securities.45.In 2012, ____________ was(were) the least significant financial asset(s) of U.S. nonfinancialbusinesses in terms of total value.A. c ash and depositsB. t rade creditC. t rade debtD. i nventoryE. m arketable securities46.New issues of securities are sold in the ________ market(s).A. p rimaryB. s econdaryC. o ver-the-counterD. p rimary and secondary47.Investors trade previously issued securities in the ________ market(s).A. p rimaryB. s econdaryC. p rimary and secondaryD. d erivatives48.Investment bankers perform which of the following role(s)?A. M arket new stock and bond issues for firmsB. P rovide advice to the firms as to market conditions, price, etc.C. D esign securities with desirable propertiesD. A ll of the optionsE. N one of the options49.Until 1999, the ________ Act(s) prohibited banks in the United States from both acceptingdeposits and underwriting securities.A. S arbanes-OxleyB. G lass-SteagallC. S ECD. S arbanes-Oxley and SECE. N one of the options50.The spread between the LIBOR and the Treasury-bill rate is called theA. t erm spread.B. T-bill spread.C. L IBOR spread.D. T ED spread.51.Mortgage-backed securities were created when ________ began buying mortgage loans fromoriginators and bundling them into large pools that could be traded like any other financial asset.A. G NMAB. F NMAC. F HLMCD. F NMA and FHLMCE. G NMA and FNMA52.The sale of a mortgage portfolio by setting up mortgage pass-through securities is anexample ofA. c redit enhancement.B. s ecuritization.C. u nbundling.D. d erivatives.53.Which of the following is true about mortgage-backed securities?I) They aggregate individual home mortgages into homogeneous pools.II) The purchaser receives monthly interest and principal payments received from payments made on the pool.III) The banks that originated the mortgages maintain ownership of them.IV) The banks that originated the mortgages continue to service them.A. I I, III, and IVB. I, II, and IVC. I I and IVD. I, III, and IVE. I, II, III, and IV54.________ were designed to concentrate the credit risk of a bundle of loans on one class ofinvestor, leaving the other investors in the pool relatively protected from that risk.A. S tocksB. B ondsC. D erivativesD. C ollateralized debt obligationsE. A ll of the options55.________ are in essence an insurance contract against the default of one or more borrowers.A. C redit default swapsB. C MOsC. E TFsD. C ollateralized debt obligationsE. A ll of the optionsShort Answer Questions56.Discuss the agency problem in detail.57.Discuss the similarities and differences between real and financial assets.58.Discuss securitization as it relates to the field of investments.Chapter 01 The Investment Environment Answer KeyMultiple Choice Questions1.The material wealth of a society is a function ofA.all financial assets.B.all real assets.C.all financial and real assets.D.all physical assets.The material wealth of a society is a function of all real assets.AACSB: AnalyticBlooms: RememberDifficulty: BasicTopic: Assets2._______ are real assets.ndB.MachinesC.Stocks and bondsD.Knowledgend, machines, and knowledgeLand, machines and knowledge are real assets; stocks and bonds are financial assets.AACSB: AnalyticBlooms: RememberDifficulty: BasicTopic: Assets3.The means by which individuals hold their claims on real assets in a well-developedeconomy areA.investment assets.B.depository assets.C.derivative assets.D.financial assets.E.exchange-driven assets.Financial assets allocate the wealth of the economy. Example: it is easier for an individual to own shares of an auto company than to own an auto company directly.AACSB: AnalyticBlooms: RememberDifficulty: BasicTopic: Assets4._______ are financial assets.A.BondsB.MachinesC.StocksD.Bonds and stocksE.Bonds, machines, and stocksMachines are real assets; stocks and bonds are financial assets.AACSB: AnalyticBlooms: RememberDifficulty: BasicTopic: Assets5._________ financial asset(s).A.Buildings arend is aC.Derivatives areD.U.S. agency bonds areE.Derivatives and U.S. agency bonds areBuildings and land are real assets.AACSB: AnalyticBlooms: RememberDifficulty: BasicTopic: Assets6.Financial assetsA.directly contribute to the country's productive capacity.B.indirectly contribute to the country's productive capacity.C.contribute to the country's productive capacity both directly and indirectly.D.do not contribute to the country's productive capacity either directly or indirectly.E.are of no value to anyone.Financial assets indirectly contribute to the country's productive capacity because these assets permit individuals to invest in firms and governments. This in turn allows firms and governments to increase productive capacity.AACSB: AnalyticBlooms: UnderstandDifficulty: BasicTopic: Assets7.In 2012, ____________ was the most significant real asset of U.S. households in terms oftotal value.A.consumer durablesB.automobilesC.real estateD.mutual fund sharesE.bank loansSee Table 1.1.AACSB: AnalyticBlooms: RememberDifficulty: Basic8.In 2012, ____________ was the least significant financial asset of U.S. households in termsof total value.A.real estateB.mutual fund sharesC.debt securitiesD.life insurance reservesE.pension reservesSee Table 1.1.AACSB: AnalyticBlooms: RememberDifficulty: BasicTopic: Assets9.In 2012, ____________ was the most significant financial asset of U.S. households in termsof total value.A.real estateB.mutual fund sharesC.debt securitiesD.life insurance reservesE.pension reservesSee Table 1.1.AACSB: AnalyticBlooms: RememberTopic: Assets10.In 2012, ____________ was the most significant asset of U.S. households in terms of totalvalue.A.real estateB.mutual fund sharesC.debt securitiesD.life insurance reservesE.pension reservesSee Table 1.1.AACSB: AnalyticBlooms: RememberDifficulty: BasicTopic: Assets11.In 2012, ____________ was the most significant liability of U.S. households in terms of totalvalue.A.credit cardsB.mortgagesC.bank loansD.student loansE.other debtSee Table 1.1.AACSB: AnalyticBlooms: RememberDifficulty: BasicTopic: Assets12.Which of the following financial assets made up the greatest proportion of the financialassets held by U.S. households?A.Pension reservesB.Life insurance reservesC.Mutual fund sharesD.Debt securitiesE.Personal trustsSee Table 1.1.AACSB: AnalyticBlooms: RememberDifficulty: IntermediateTopic: Assets13.In 2012 _______ of the assets of U.S. households were financial assets as opposed totangible assets.A.20.4%B.34.2%C.68.8%D.71.7%E.82.5%See Table 1.1.AACSB: AnalyticBlooms: RememberDifficulty: IntermediateTopic: Assets14.The largest component of domestic net worth in 2012 wasA.nonresidential real estate.B.residential real estate.C.inventories.D.consumer durables.E.equipment and software.See Table 1.2.AACSB: AnalyticBlooms: RememberDifficulty: IntermediateTopic: Assets15.The smallest component of domestic net worth in 2012 wasA.nonresidential real estate.B.residential real estate.C.inventories.D.consumer durables.E.equipment and software.See Table 1.2.AACSB: AnalyticBlooms: RememberDifficulty: IntermediateTopic: Assets16.The national net worth of the U.S. in 2012 wasA.$15.411 trillion.B.$26.431 trillion.C.$42.669 trillion.D.$48.616 trillion.E.$70.983 trillion.See Table 1.2.AACSB: AnalyticBlooms: RememberDifficulty: IntermediateTopic: Assets17. A fixed-income security paysA. a fixed level of income for the life of the owner.B. a fixed stream of income or a stream of income that is determined according to aspecified formula for the life of the security.C. a variable level of income for owners on a fixed income.D. a fixed or variable income stream at the option of the owner.A fixed-income security pays a fixed stream of income or a stream of income that isdetermined according to a specified formula for the life of the security.AACSB: AnalyticBlooms: RememberDifficulty: BasicTopic: Asset Types18. A debt security paysA. a fixed level of income for the life of the owner.B. a variable level of income for owners on a fixed income.C. a fixed or variable income stream at the option of the owner.D. a fixed stream of income or a stream of income that is determined according to aspecified formula for the life of the security.A debt security pays a fixed stream of income or a stream of income that is determinedaccording to a specified formula for the life of the security.AACSB: AnalyticBlooms: RememberDifficulty: BasicTopic: Asset Types19.Money market securitiesA.are short term.B.are highly marketable.C.are generally very low risk.D.are highly marketable and are generally very low risk.E.All of the optionsAll answers are correct.AACSB: AnalyticBlooms: RememberDifficulty: BasicTopic: Asset Types20.An example of a derivative security isA. a common share of Microsoft.B. a call option on Intel stock.C. a commodity futures contract.D. a call option on Intel stock and a commodity futures contract.E. a common share of Microsoft and a call option on Intel stock.The values of a call option on Intel stock and a commodity futures contract are derivedfrom that of an underlying asset; the value of a common share of Microsoft is based on the value of the firm only.AACSB: AnalyticBlooms: RememberDifficulty: BasicTopic: Asset Types21.The value of a derivative securityA.depends on the value of the related security.B.is unable to be calculated.C.is unrelated to the value of the related security.D.has been enhanced due to the recent misuse and negative publicity regarding theseinstruments.E.is worthless today.Of the factors cited above, only the value of the related security affects the value of thederivative and/or is a true statement.AACSB: AnalyticBlooms: UnderstandDifficulty: BasicTopic: Asset Types22.Although derivatives can be used as speculative instruments, businesses most often usethem toA.attract customers.B.appease stockholders.C.offset debt.D.hedge risks.E.enhance their balance sheets.Firms may use forward contracts and futures to protect against currency fluctuations orchanges in commodity prices. Interest-rate options help companies control financing costs.AACSB: AnalyticBlooms: RememberDifficulty: BasicTopic: Asset Types23.Financial assets permit all of the following exceptA.consumption timing.B.allocation of risk.C.separation of ownership and control.D.elimination of risk.Financial assets do not allow risk to be eliminated. However, they do permit allocation of risk, consumption timing, and separation of ownership and control.AACSB: AnalyticBlooms: RememberDifficulty: IntermediateTopic: Assets24.The ____________ refers to the potential conflict between management and shareholders.A.agency problemB.diversification problemC.liquidity problemD.solvency problemE.regulatory problemThe agency problem describes potential conflict between management and shareholders.The other problems are those of firm management only.AACSB: AnalyticBlooms: RememberDifficulty: BasicTopic: Financial Management25. A disadvantage of using stock options to compensate managers is thatA.it encourages managers to undertake projects that will increase stock price.B.it encourages managers to engage in empire building.C.it can create an incentive for managers to manipulate information to prop up a stockprice temporarily, giving them a chance to cash out before the price returns to a levelreflective of the firm's true prospects.D.All of the optionsEncouraging managers to undertake projects that will increase stock price is a desiredcharacteristic. Encouraging managers to engage in empire building is not necessarily agood or bad thing in and of itself. Creating an incentive for managers to manipulateinformation to prop up a stock price temporarily creates an agency problem.AACSB: AnalyticBlooms: UnderstandDifficulty: BasicTopic: Financial Management26.Which of the following are mechanisms that have evolved to mitigate potential agencyproblems?I) Using the firm's stock options for compensationII) Hiring bickering family members as corporate spiesIII) Boards of directors forcing out underperforming managementIV) Security analysts monitoring the firm closelyV) Takeover threatsA.II and VB.I, III, and IVC.I, III, IV, and VD.III, IV, and VE.I, III, and VAll the options except hiring bickering family members as corporate spies have been used to try to limit agency problems.AACSB: AnalyticBlooms: UnderstandDifficulty: IntermediateTopic: Financial Management27.Corporate shareholders are best protected from incompetent management decisions byA.the ability to engage in proxy fights.B.management's control of pecuniary rewards.C.the ability to call shareholder meetings.D.the threat of takeover by other firms.E.one-share/one-vote election rules.Proxy fights are expensive and seldom successful, and management may often control the board or own significant shares. It is the threat of takeover of underperforming firms that has the strongest ability to keep management on their toes.AACSB: AnalyticBlooms: UnderstandDifficulty: IntermediateTopic: Financial Management28.Theoretically, takeovers should result inA.improved management.B.increased stock price.C.increased benefits to existing management of taken-over firm.D.improved management and increased stock price.E.All of the optionsTheoretically, when firms are taken over, better managers come in and thus increase the price of the stock; existing management often must either leave the firm, be demoted, or suffer a loss of existing benefits.AACSB: AnalyticBlooms: RememberDifficulty: BasicTopic: Financial Management29.During the period between 2000 and 2002, a large number of scandals were uncovered.Most of these scandals were related toI) manipulation of financial data to misrepresent the actual condition of the firm.II) misleading and overly optimistic research reports produced by analysts.III) allocating IPOs to executives as a quid pro quo for personal favors.IV) greenmail.A.II, III, and IVB.I, II, and IVC.II and IVD.I, III, and IVE.I, II, and IIII, II, and III are all mentioned as causes of recent scandals.AACSB: AnalyticBlooms: UnderstandDifficulty: IntermediateTopic: Financial Management30.The Sarbanes-Oxley ActA.requires corporations to have more independent directors.B.requires the firm's CFO to personally vouch for the firm's accounting statements.C.prohibits auditing firms from providing other services to clients.D.requires corporations to have more independent directors and requires the firm's CFOto personally vouch for the firm's accounting statements.E.All of the optionsThe Sarbanes-Oxley Act does all of the above.AACSB: AnalyticBlooms: RememberDifficulty: IntermediateTopic: Regulation31.Asset allocation refers toA.choosing which securities to hold based on their valuation.B.investing only in "safe" securities.C.the allocation of assets into broad asset classes.D.bottom-up analysis.Asset allocation refers to the allocation of assets into broad asset classes.AACSB: AnalyticBlooms: RememberDifficulty: IntermediateTopic: Financial Management。