Investments Chapter 1

On a net basis, funds in the financial markets are generally supplied by A) individuals. B) both individuals and business firms. C) business firms. D) the government.

A

Stocks are a(n) ________ investment representing ________ of a business. A) direct; ownership B) direct; debt C) indirect; ownership D) indirect; debt

A

Which of the following has declined in recent years? A) direct ownership of stock by individual investors B) the percentage of foreign stocks held in typical portfolios C) institutional ownership of common stocks D) the timeliness of information available to investors

A

An exchange traded fund that invests in the stocks of large corporations is an example of A) direct investment. B) indirect investment. C) derivative investment. D) tangible investment.

B

Which of the following is NOT an investment as defined in the text? A) a certificate of deposit issued by a bank B) a new automobile C) a United States Saving Bond D) a mutual fund held in a retirement account

B

Debt represents funds loaned in exchange for A) dividend income and the repayment of the loan principal. B) dividend income and an ownership interest in the firm. C) interest income and a partial ownership interest in the firm. D) interest income and the repayment of the loan principal.

D

Stocks of large publicly traded companies are A) rarely traded. B) illiquid. C) rarely decline in value. D) highly liquid

D

The government is generally A) not involved in the financial markets. B) the owner of the financial market. C) a supplier of funds to the financial market. D) a demander of funds in the financial market.

D

Which of the following has increased in recent years? A) direct ownership of stock by individual investors B) the percentage of domestic stocks held in typical portfolios C) institutional ownership of common stocks D) indirect ownership of stocks through mutual funds and ETFs.

D

A non-interest bearing checking account is still considered an investment

False

Institutional investors are individuals who invest indirectly through financial institutions

False

Institutional investors manage money for businesses and nonprofit organizations, but not for individuals

False

Most sources of investment information are in print format, expensive, and difficult to access

False

A United States Savings Bond is an example of an investment as defined in the text.

True

Banks and insurance companies are examples of institutional investors

True

In the financial markets, individuals are net suppliers of funds

True

Land and buildings are examples of real property investments

True

Since 1900, the average return on stocks has exceeded the average return on savings accounts by more than 6 percentage points

True