FIN ECON CHAPTER 1

Which of the following is an example of an agency problem? Managers engage in empire building. Managers protect their jobs by avoiding risky projects. Managers overconsume luxuries such as corporate jets. All of the options are examples of agency problems.

All of the options are examples of agency problems.

__________ represents an ownership share in a corporation. A call option Common stock A fixed-income security Preferred stock

Common stock

Money market securities are characterized by: I. Maturity less than 1 year II. Safety of the principal investment III. Low rates of return I only I and II only I and III only I, II, and III

I, II, and III

Which of the following is not an example of a financial intermediary? Goldman Sachs Allstate Insurance First Interstate Bank IBM

IBM

In 2008 the largest corporate bankruptcy in U.S. history involved the investment banking firm of ______. Goldman Sachs Lehman Brothers Morgan Stanley Merrill Lynch

Lehman Brothers

__________ portfolio management calls for holding diversified portfolios without spending effort or resources attempting to improve investment performance through security analysis. Active Momentum Passive Market-timing

Passive

An example of a derivative security is _________. Multiple Choice a common share of General Motors a call option on Intel stock a Ford bond a U.S. Treasury bond

a call option on Intel stock

__________ are examples of financial intermediaries. Commercial banks Insurance companies Investment companies All of the options

all of the options

An intermediary that pools and manages funds for many investors is called ______. an investment company a credit union an investment banker a commercial bank

an investment company

Real assets are ______. assets used to produce goods and services always the same as financial assets always equal to liabilities claims on a company's income

assets used to produce goods and services.

Real assets in the economy include all but which one of the following? land buildings consumer durables common stock

common stock

Which of the following is not a money market security? U.S. Treasury bill 6-month maturity certificate of deposit common stock All of the options.

common stock

Which of the following are financial assets? I. Debt securities II. Equity securities III. Derivative securities

i,ii, & iii

Financial institutions that specialize in assisting corporations in primary market transactions are called _______. mutual funds investment bankers pension funds globalization specialists

investment bankers

Firms that specialize in helping companies raise capital by selling securities to the public are called _________. pension funds investment banks savings banks REITs

investment banks

__________ assets generate net income to the economy, and __________ assets define allocation of income among investors.

real, financial

Asset allocation refers to _________. the allocation of the investment portfolio across broad asset classes the analysis of the value of securities the choice of specific assets within each asset class none of the options

the allocation of the investment portfolios across broad asset classes