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E) 43 T he Sarbanes-Oxley Act ____________.
requires corporations to have more independent directors
requires the firm's CFO to personally vouch for the firm's accounting statements
prohibits auditing firms from providing other services to clients
A and B are correct.
A, B, and C are correct. Answer: E Difficulty: Moderate
Rationale: T he Sarbanes-Oxley Act does all of the above. A)
E) 44 Asset allocation refers to ____________.
choosing which securities to hold based on their valuation
investing only in “safe” securities
the allocation of assets into broad asset classes
all of the above Answer: C Difficulty: Moderate
Rationale: Asset allocation refers to the allocation of assets into broad asset classes. A)
E) 45 Which of the following portfolio construction methods starts with security analysis?
Buy and hold
Asset allocation Answer: B Difficulty: Moderate
Rationale: Bottom-up refers to using security analysis to find securities that are attractively priced. T op-down refers to using asset allocation as a starting point.
E) 46 Which of the following portfolio construction methods starts with asset allocation?
Buy and hold
Asset allocation Answer: A Difficulty: Moderate
Rationale: Bottom-up refers to using security analysis to find securities that are attractively priced. chapter 02
Multiple Choice Questions
1. Which of the following is not a characteristic of a money market instrument?
A . liquidity
C. long maturity
D. liquidity premium
E. C and D
Money market instruments are short-term instruments with high liquidity and marketability; they do not have long maturities nor pay liquidity premiums.
3. Treasury Inflation-Protected Securities (TIPS)
A . pay a fixed interest rate for life.
B. pay a variable interest rate that is indexed to inflation.
C. provide a constant stream of income in real (inflation-adjusted) dollars.
D. have their principal adjusted in proportion to the Consumer Price Index.
E. C and D
T IPS provide a constant stream of income in real (inflation-adjusted) dollars because their principal is adjusted in proportion to the Consumer Price Index.
4. Which one of the following is not a money market instrument?
A . a Treasury bill
B. a negotiable certificate of deposit
C. commercial paper
D. a Treasury bond
E. a Eurodollar account
Money market instruments are instruments with maturities of one year or less, which applies to all of the above except T reasury bonds. Difficulty: Easy
5. T-bills are financial instruments initially sold by ________ to raise funds.
A . commercial banks
B. the U.S. government
C. state and local governments
D. agencies of the federal government
E. B and D
Only the U.S. government sells T -bills in the primary market.
6. The bid price of a T-bill in the secondary market is
A . the price at which the dealer in T-bills is willing to sell the bill.
B. the price at which the dealer in T-bills is willing to buy the bill.
C. greater than the asked price of the T-bill.
D. the price at which the investor can buy the T-bill.
E. never quoted in the financial press.
T -bills are sold in the secondary market via dealers; the bid price quoted in the financial press is the price at which the dealer is willing to buy the bill.
Difficulty: Easy 10. Which of the following is not a component of the money market is
A . repurchase agreements
C. real estate investment trusts
D. money market mutual funds
E. commercial paper
Real estate investment trusts are not short-term investments.
11. Commercial paper is a short-term security issued by ________ to raise funds.
A . the Federal...
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This document was uploaded on 02/06/2014.
- Spring '14