Exam 1 practice questions with answers

Exam 1 practice questions with answers - Chapter 01...

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Chapter 01 Investments: Background and Issues
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1. Real assets in the economy include all but which one of the following? A. Land B. Buildings C. Consumer durables D. Common stock 2. According to the Flow of Funds Accounts of the United States, the largest single asset of U.S. households is ___. A. mutual fund shares B. real estate C. pension reserves D. corporate equity 3. 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 4. Active trading in markets and competition among securities analysts helps ensure that __________. I. security prices approach informational efficiency II. riskier securities are priced to offer higher potential returns III. investors are unlikely to be able to consistently find under- or overvalued securities A. I only B. I and II only C. II and III only D. I, II and III 5. The material wealth of society is determined by the economy's _________, which is a function of the economy's _________. A. investment bankers, financial assets B. investment bankers, real assets C. productive capacity, financial assets D. productive capacity, real assets 6. Which of the following is not a money market security? A. U.S. Treasury bill B. Six month maturity certificate of deposit C. Common stock D. Banker's acceptance 7. __________ 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
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8. Which of the following are financial assets? I. Debt securities II. Equity securities III. Derivative securities A. I only B. I and II only C. II and III only D. I, II and III 9. __________ are examples of financial intermediaries. A. Commercial banks B. Insurance companies C. Investment companies D. All of the above are financial intermediaries 10. _____ is an example of an agency problem. A. Managers engage in empire building B. Managers protect their jobs by avoiding risky projects C. Managers over consume luxuries such as corporate jets D. All of the answers provide examples of agency problems 11. _____ is a mechanism to mitigate potential agency problems. A. Tying income of managers to success of the firm B. Directors defending top management C. Anti takeover strategies D. Straight voting method of electing the board of directors 12. __________ are real assets. A. Bonds B. Production equipment C. Stocks D. Commercial paper 13. __________ portfolio construction starts with selecting attractively priced securities. A. Bottom-up B. Top-down C. Upside-down D. Side-to-side 14. In a capitalist system capital resources are primarily allocated by ____________. A.
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This note was uploaded on 03/06/2012 for the course BMGT 343 taught by Professor Staff during the Spring '08 term at Maryland.

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Exam 1 practice questions with answers - Chapter 01...

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