However they do permit allocation of risk consumption

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Unformatted text preview: A) B) C) D) 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) B) C) D) 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 bottom-up analysis all of the above Answer: C Difficulty: Moderate Rationale: Asset allocation refers to the allocation of assets into broad asset classes. A) B) C) D) E) 45 Which of the following portfolio construction methods starts with security analysis? T op-down Bottom-up Middle-out 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. _x000C_ A) B) C) D) E) 46 Which of the following portfolio construction methods starts with asset allocation? T op-down Bottom-up Middle-out 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 B. marketability 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. Difficulty: Easy 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. Difficulty: Easy 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. Difficulty: Easy 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 B. Eurodollars C. real estate investment trusts D. money market mutual funds E. commercial paper Real estate investment trusts are not short-term investments. Difficulty: Easy 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.

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