Reading 1 Questions

A Real Asset must be tangible has productive capacity could be intangible is equivalent to a financial asset

has productive capacity could be intangible

A derivative security's payoff is based on Multiple choice question. its own productive capacity other assets prices its selling price

other assets prices

What is a primary role of the Board of Directors Multiple choice question. Act as oversight to management Audit the firm's financial statements Make Day to Day Decisions regarding the firm's finance Make Day to Day Decisions of the firm's operations

Act as oversight to management

What is a primary role of the Board of Directors Multiple choice question. Act as oversight to management Make Day to Day Decisions of the firm's operations Audit the firm's financial statements Make Day to Day Decisions regarding the firm's finance

Act as oversight to management

__________ management is the attempt to improve performance either by identifying mispriced securities or by timing the performance of broad asset classes.

Active

Which of the following financial assets are included in household wealth? Multiple choice question. Corporate stock, insurance, and collectibles Bonds, automobiles and insurance Bank accounts, corporate stock, and bonds Bank accounts, bonds and automobiles

Bank accounts, corporate stock, and bonds

A floating-rate bonds promise payments that debt are Multiple choice question. based on company dividend levels based on current interest rates based on future interest rates illegal

Based on current interest rates

Which of the following are requirements of the Sarbanes-Oxley Act? Multiple select question. Dissolves the Oversight board which audited public companies CFOs personally vouch for accounting statements More Independent Directors Prohibits auditors from providing other services Bans Accrual Accounting Practices

CFOs personally vouch for accounting statements More Independent Directors Prohibits auditors from providing other services

Which of the following is a derivative security? Multiple select question. Call Option Common Stock Treasury Bill Put Option Preferred Stock

Call Option Put Option

Who are the demanders of capital? Multiple select question. Corporations The Federal Government Individual Households Individual Laborers

Corporations The Federal Government

Fixed-income otherwise known as __________ securities promise either a fixed stream of income or a stream of income that is determined according to a specific formula.

Debt

Define the best way in which you can shift your purchasing power from high-earning periods to low-earning periods of life? Multiple choice question. Invest in a collection of luxury automobiles. Spend all your disposable income as soon as you earn it. During high-earning periods invest your savings in financial assets (stocks/bonds). During low-earning periods invest your savings in financial assets (stocks/bonds).

During high-earning periods invest your savings in financial assets (stocks/bonds).

Which of the following real assets have some risk associated with it(them)? Multiple choice question. Large Cap. Stocks Small Cap. Stocks A factory Investment grade Bonds

Factory

True or false: Financial assets determine the wealth of an economy, while real assets merely represent claims on financial assets.

False Reason: Real assets determine the wealth, financial assets represent claims on real assets.

An investment is Multiple choice question. current consumption for future benefit forgone current consumption for expected future benefit. always a zero sum game. forgone current consumption for definite future benefit

Forgone current consumption for expected future benefit

Which of the following are characteristic of private equity investors? Multiple select question. Debt Position Hands-off management Hands-on management Equity ownership

Hands-on management Equity ownership

Which of the following are characteristic of private equity investors? Multiple select question. Hands-on management Equity ownership Hands-off management Debt Position

Hands-on management Equity ownership

Investors prefer Multiple select question. Lower Expected Return Higher Risk Higher Expected Return Lower Risk

Higher Expected Return Lower Risk

Which of the following are examples of Financial Intermediaries? Multiple select question. Department of Treasury Insurance Companies Commercial Banks Credit Unions

Insurance Companies Commercial Banks Credit Unions

Firms specializing in the sale of new securities to the public, typically by underwriting the issue are called ____ bankers

Investment

What are private equity investments? Multiple choice question. Investments in companies that are traded on a stock exchange. Previously issued securities that are traded among investors. Assets with higher expected returns. Investments in firms that do not trade on a public stock exchange.

Investments in firms that do not trade on a public stock exchange.

Which of the following would all be considered real assets? Automobiles, land, and insurance Bank accounts, insurance, and automobiles Stocks bonds, and insurance Land, buildings, and equipment

Land, buildings, and equipment

Which of the following would all be considered real assets? Automobiles, land, and insurance Land, buildings, and equipment Stocks, bonds, and equipment Bank accounts, insurance, and automobiles

Land, buildings, and equipment

Debt securities are _______ to the issuers of those securities.

Liabilities

Which financial shenanigan was WorldCom guilty of in the early 21st Century? Multiple choice question. Special Purpose Entities to move Debt Understating Profits Imaginary Accounts Overstating Profits

Overstating Profits

Which of the following companies is NOT known for scandals and misleading the public, creating a crisis in corporate governance and ethics, between the years of 2000 and 2008 Multiple choice question. The telecom firm WorldCom HealthSouth Enron Procter and Gamble (P&G)

Proctor and Gamble

What is most likely the low-earnings period for which the sale of financial assets be most useful? Multiple choice question. Early Teenage Years Mid-Life Crisis Mid 30s Retirement

Retirement

What is most likely the low-earnings period for which the sale of financial assets be most useful? Multiple choice question. Mid-Life Crisis Retirement Mid 30s Early Teenage Years

Retirement

In 2002 in response to the spate of ethics scandals, what act did Congress pass to tighten the rules of corporate governance? Multiple choice question. Glass-Steagall Act Robinson-Patman Act . Sarbanes-Oxley Act Dodd-Frank Act

Sarbanes-Oxley Act

Which of the following statements is NOT true about equity. Multiple choice question. If a firm is successful, the value of equity will increase; if not it will decrease. Shareholders with equity are promised particular payments. Equity investments tend to be riskier than investments in debt securities. Shareholders with equity receive any dividends the firm may pay and have prorated ownership in the real assets of the firm.

Shareholders with equity are promised particular payments.

When discussing stock prices, which of the following statements is NOT true? Multiple choice question. When the market is more optimistic about the firm, its share price will rise. Fewer shares must be issued to raise the funds necessary, if the share price is high. Stock prices do not play a major role in the allocation of capital in market economies. Reason:

Stock prices do not play a major role in the allocation of capital in market economies.

True or false: An investment is the current commitment of money or other resources in the expectation of reaping future benefits

True

True or false: Equity is an ownership share in a corporation True false question. True False

True

True or false: In theory, stock prices reflect investors' collective assessment of a firm's current performance and future prospects.

True Reason: Stock prices reflect their collective professional judgment.

True or false: In theory, stock prices reflect investors' collective assessment of a firm's current performance and future prospects. True false question. True False

True Reason: Stock prices reflect their collective professional judgment.

True or false: Virtually all real assets involve some risk. True false question. True False

True Reason: investors are able to select security types with the best risk-return characteristics.

True or false: Securities markets play an important role in facilitating the deployment of capital resources to their most productive uses. The markets need to be transparent for investors to make informed decisions. True false question. True False

True Reason: transparent for investors to make informed decisions.

Start-up companies rely on bank loans and investors who are willing to invest in them in return for an ownership stake in the firm. What do you call the equity investment in these young companies? Multiple choice question. Passive management loans Investment market loans Active management loans Venture capital

Venture capital

As the representative of the owners, the Board of Directors help solve ________ problems

agency

The fundamental difference between real and financial assets is that real assets Multiple choice question. are tangible. can be bought and sold. are intangible. have productive capacity.

have productive capacity.

A derivative security's payoff is based on Multiple choice question. other assets prices its selling price its own productive capacity

other assets prices

Expected Return and Risk are ______. Multiple choice question. positively correlated both positively and negatively correlated not typically correlated negatively correlated

positively correlated

Financial assets do not directly contribute to the ___________ capacity of the economy.

productive

Investment bankers advise an issuing corporation on Multiple select question. factory floor efficiency research and development of new products the price it can charge for a new security issued appropriate yield on issued debt

the price it can charge for a new security issued appropriate yield on issued debt

If a market signals contain accurate information available to investors, then the market is said to be

transparent

Angel investors are Multiple choice question. dedicated corporate entities that invest in start-ups. wealthy individuals who invest in start-ups. religious institutions that invest in start-ups. government sponsored entities that invest in start-ups.

wealthy individuals who invest in start-ups.

Angel investors are Multiple choice question. wealthy individuals who invest in start-ups. religious institutions that invest in start-ups. government sponsored entities that invest in start-ups. dedicated corporate entities that invest in start-ups.

wealthy individuals who invest in start-ups.