Question 1

Theoretically, takeovers should result in

Accepted Answer

A)   improved management.
B)   increased stock price.
C)   increased benefits to existing management of the taken-over firm.
D)   improved management and increased stock price.
E)   All of the options.F) A) and E)
G) B) and C)

Question 2

The smallest component of domestic net worth in 2018 was

Accepted Answer

A)   nonresidential real estate.
B)   residential real estate.
C)   inventories.
D)   consumer durables.
E)   equipment and software.F) None of the above
G) C) and D)

Question 3

________ specialize in helping companies raise capital by selling securities.

Accepted Answer

A)   Commercial bankers
B)   Investment bankers
C)   Investment issuers
D)   Credit ratersE) B) and D)
F) B) and C)

Question 4

In 2018, ____________ was(were)  the most significant real asset(s)  of U.S. nonfinancial businesses in terms of total value.

Accepted Answer

A)   equipment and software
B)   inventory
C)   real estate
D)   trade credit
E)   marketable securitiesF) C) and D)
G) B) and C)

Question 5

Money market securities

Accepted Answer

A)   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 options.F) A) and D)
G) A) and E)

Question 6

Which of the following portfolio construction methods starts with security analysis?

Accepted Answer

A)   Top-down
B)   Bottom-up
C)   Middle-out
D)   Buy and hold
E)   Asset allocationF) A) and B)
G) C) and D)

Question 7

In terms of total value, the most significant liability(ies)  of U.S. nonfinancial businesses in 2018 was(were)

Accepted Answer

A)   bank loans.
B)   bonds and mortgages.
C)   trade debt.
D)   other loans.
E)   marketable securities.F) B) and D)
G) A) and B)

Question 8

Security selection refers to

Accepted Answer

A)   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)   top-down analysis.E) None of the above
F) B) and D)

Question 9

Which of the following are mechanisms that have evolved to mitigate potential agency problems? 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 threats

Accepted Answer

A)   II and V
B)   I, III, and IV
C)   I, III, IV, and V
D)   III, IV, and V
E)   I, III, and VF) A) and B)
G) A) and C)

Question 10

A disadvantage of using stock options to compensate managers is that

Accepted Answer

A)   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 stock price temporarily, giving them a chance to cash out before the price returns to a level reflective of the firm's true prospects.
D)   All of the above.E) All of the above
F) C) and D)

Question 11

The domestic net worth of the U.S. in 2018 was

Accepted Answer

A)   $9.350 trillion.
B)   $22.642 trillion.
C)   $32.539 trillion.
D)   $72.683 trillion.
E)   $80.983 trillion.F) B) and E)
G) B) and D)

Question 12

In 2018, ____________ was(were)  the most significant liability(ies)  of U.S. commercial banks in terms of total value.

Accepted Answer

A)   loans and leases
B)   cash
C)   real estate
D)   deposits
E)   investment securitiesF) A) and B)
G) B) and D)

Question 13

_______ are financial assets.

Accepted Answer

A)   Bonds
B)   Machines
C)   Stocks
D)   Bonds and stocks
E)   Bonds, machines, and stocksF) A) and C)
G) A) and E)

Question 14

Financial assets permit all of the following except

Accepted Answer

A)   consumption timing.
B)   allocation of risk.
C)   separation of ownership and control.
D)   elimination of risk.E) B) and C)
F) A) and C)

Question 15

In 2018, ____________ was(were)  the least significant liability(ies)  of U.S. nonfinancial businesses in terms of total value.

Accepted Answer

A)   bonds and mortgages
B)   bank loans
C)   inventories
D)   trade debt
E)   marketable securitiesF) B) and E)
G) None of the above

Question 16

According to the Economic Growth, Regulatory Relief and Consumer Protection Act of 2019 many larger banks are no longer considered ________________.

Accepted Answer

A)   insurable
B)   high risk
C)   insolvent
D)   systematically important
E)   All of the options.F) B) and E)
G) All of the above

Question 17

The Sarbanes-Oxley Act

Accepted Answer

A)   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 CFO to personally vouch for the firm's accounting statements.
E)   All of the above.F) None of the above
G) All of the above

Question 18

A fixed-income security pays

Accepted Answer

A)   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 specified 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.E) None of the above
F) All of the above

Question 19

New issues of securities are sold in the ________ market(s) .

Accepted Answer

A)   primary
B)   secondary
C)   over-the-counter
D)   primary and secondaryE) C) and D)
F) A) and B)

Question 20

The sale of a mortgage portfolio by setting up mortgage pass-through securities is an example of

Accepted Answer

A)   credit enhancement.
B)   credit swap.
C)   unbundling.
D)   derivatives.E) A) and B)
F) All of the above

Exam 1: The Investment Environment

Security selection refers to

Correct Answer
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The sale of a mortgage portfolio by setting up mortgage pass-through securities is an example of

Correct Answer
verified

In 2018, ____________ was(were) the most significant real asset(s) of U.S. nonfinancial businesses in terms of total value.

Correct Answer
verified

_______ are financial assets.

Correct Answer
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In terms of total value, the most significant liability(ies) of U.S. nonfinancial businesses in 2018 was(were)

Correct Answer
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Which of the following portfolio construction methods starts with security analysis?

Correct Answer
verified

The Sarbanes-Oxley Act

Correct Answer
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In 2018, ____________ was(were) the least significant liability(ies) of U.S. nonfinancial businesses in terms of total value.

Correct Answer
verified

Financial assets permit all of the following except

Correct Answer
verified

The smallest component of domestic net worth in 2018 was

Correct Answer
verified

The domestic net worth of the U.S. in 2018 was

Correct Answer
verified

________ specialize in helping companies raise capital by selling securities.

Correct Answer
verified

Money market securities

Correct Answer
verified

Correct Answer
verified

A disadvantage of using stock options to compensate managers is that

Correct Answer
verified

In 2018, ____________ was(were) the most significant liability(ies) of U.S. commercial banks in terms of total value.

Correct Answer
verified

Theoretically, takeovers should result in

Correct Answer
verified

According to the Economic Growth, Regulatory Relief and Consumer Protection Act of 2019 many larger banks are no longer considered ________________.

Correct Answer
verified

A fixed-income security pays

Correct Answer
verified

New issues of securities are sold in the ________ market(s) .

Correct Answer
verified

Exam 1: The Investment Environment

Security selection refers to

Correct AnswerverifiedShow Answer

The sale of a mortgage portfolio by setting up mortgage pass-through securities is an example of

Correct AnswerverifiedShow Answer

In 2018, ____________ was(were) the most significant real asset(s) of U.S. nonfinancial businesses in terms of total value.

Correct AnswerverifiedShow Answer

_______ are financial assets.

Correct AnswerverifiedShow Answer

In terms of total value, the most significant liability(ies) of U.S. nonfinancial businesses in 2018 was(were)

Correct AnswerverifiedShow Answer

Which of the following portfolio construction methods starts with security analysis?

Correct AnswerverifiedShow Answer

The Sarbanes-Oxley Act

Correct AnswerverifiedShow Answer

In 2018, ____________ was(were) the least significant liability(ies) of U.S. nonfinancial businesses in terms of total value.

Correct AnswerverifiedShow Answer

Financial assets permit all of the following except

Correct AnswerverifiedShow Answer

The smallest component of domestic net worth in 2018 was

Correct AnswerverifiedShow Answer

The domestic net worth of the U.S. in 2018 was

Correct AnswerverifiedShow Answer

________ specialize in helping companies raise capital by selling securities.

Correct AnswerverifiedShow Answer

Money market securities

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A disadvantage of using stock options to compensate managers is that

Correct AnswerverifiedShow Answer

In 2018, ____________ was(were) the most significant liability(ies) of U.S. commercial banks in terms of total value.

Correct AnswerverifiedShow Answer

Theoretically, takeovers should result in

Correct AnswerverifiedShow Answer

According to the Economic Growth, Regulatory Relief and Consumer Protection Act of 2019 many larger banks are no longer considered ________________.

Correct AnswerverifiedShow Answer

A fixed-income security pays

Correct AnswerverifiedShow Answer

New issues of securities are sold in the ________ market(s) .

Correct AnswerverifiedShow Answer

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