Investment Analysis Homework 1

According to the Flow of Funds Accounts of the United States, the largest single asset of U.S. households is a. real estate b. mutual funds c. pension reserves d. corporate equity

a. real estate

The Dodd-Frank Reform Act does all of the following except: a. reduces capital requirements for banks b. requires public companies to set "claw-back" provisions c. creates an office within the SEC to oversee credit rating agencies d. increases transparency in the derivatives market e. limits the risk-taking in which banks can engage

a. reduces capital requirements for banks

which of the following are financial assets? I. debt securities II. equity securities III. derivative securities a. I and II only b. I, II, III c. I only d. II and III only

b. I, II, III

______ is not a derivative security. a. none of the options (they are all derivative securities b. a share of common stock c. call option d. a futures contract

b. a share of common stock

The systematic risk that led to the financial crisis of 2008 was increased by ______. a. collateralized debt obligations b. all of the options c. credit default swaps d. subprime mortgages

b. all of the options

The historical average rate of return on large company stocks since 1926 has been___ a. 8% b. 20% c. 11.5% d 5%

c. 11.5%

Active trading in markets and competition among securities analysts helps ensure that: I. Security prices approach informational efficiency. II. Riskier securities are priced to offer higher potential returns. III. Investors are unlikely to be able to consistently find under- or overvalued securities. a. I and II only b. II and III only c. I, II, III d. I only

c. I, II, III

money market securities are characterized by: I. maturity less than 1 year II. safety of the principal investment III. low rates of return a. I and II only b. I only c. I, II, and III d. I and III only

c. I, II, III

_____ represents an ownership share in a corporation a. preferred stock b. a call option c. common stock d. a fixed-income security

c. common stock

_____ assets generate net income to the economy, and _____ assets define allocation of income among investors. a. real, real b. financial, financial c. real, financial d. financial, real

c. real, financial

financial markets allow for all but which of the following? a. channel funds from lenders of funds to borrowers of funds b. shift consumption through time from higher-income periods to lower c. price securities according to their riskiness d. allow most participants to routinely earn high returns with low risk

d. allow most participants to earn high returns with low risk

Real assets in the economy include all but which of the following a. buildings b. land c. consumer durables d. common stock

d. common stock

which of the following is not a financial intermediary? a. an insurance company b. credit union c. mutual fund d. real estate brokerage firm

d. real estate brokerage firm

The Sarbanes-Oxley Act tightened corporate governance rules by requiring all but which of the following? a. required that corporations have more independent directors b. required that the CFO personally vouch for the corporation's financial statements c. required the creation of a new board to oversee the auditing of public companies d. required that firms could no longer employ investment bankers to sell securities to the public

d. required that firms could no longer employ investment bankers to sell securities to the public