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Investments, 4th Canadian Edition, 4/e

Zvi Bodie, Boston University School of Management
Alex Kane, University of California, San Diego
Alan Marcus, Boston College
Stylianos Perrakis, Concordia University
Peter Ryan, University of Ottawa

The Investment Objective

Multiple Choice Quiz

Prepared by William Lim, University of New Brunswick.


1	The productive capacity of the economy is determined by
		A)	all real assets
		B)	all financial assets
		C)	all physical assets
		D)	all real and financial assets
		E)	none of the above


2	The term "human capital" refers to
		A)	the total amount of capital owned by humans.
		B)	the value of the earnings potential of the workforce.
		C)	the value of a firm's management personnel.
		D)	the value of a firm's blue-collar workers.
		E)	the value of equipment that is operated by company personnel.


3	Financial intermediaries differ from other businesses in that both their assets and their liabilities are mostly
		A)	real.
		B)	financial.
		C)	illiquid.
		D)	owned by government.
		E)	primarily regulated at the municipal level.


4	Although derivatives can be used as speculative instruments, businesses most often use them to
		A)	hedge.
		B)	offset debt
		C)	appease stockholders
		D)	attract customers
		E)	enhance their balance sheets.


5	Financial intermediaries exist because small investors cannot efficiently
		A)	gather information
		B)	advertise for needed investments
		C)	monitor their portfolios
		D)	diversify their portfolios
		E)	all of the above


6	Financial assets
		A)	contribute to the country's productive capacity both directly and indirectly
		B)	do not contribute to the country's productive capacity either directly or indirectly
		C)	directly contribute to the country's productive capacity
		D)	indirectly contribute to the country's productive capacity
		E)	are of no value to anyone


7	In what roles do investment bankers perform?
		A)	design securities with desirable properties
		B)	market new stock and bond issues for firms
		C)	provide advice to the firms as to market conditions, price, etc.
		D)	all of the above
		E)	none of the above


8	Investing in shares of multinational corporations is a way of
		A)	tracking the performance of an index of share returns for a particular country.
		B)	risk-free investing.
		C)	international diversification.
		D)	linking directly to the value of a composite index of futures contracts.
		E)	earning a performance bonus within a corporation.


9	Which of the following is true about a Mortgage Backed Security (MBS)? I) It separates individual home mortgages into heterogeneous pools. II) The purchaser receives interest and principal payments received from the mortgages. III) It is insured and guaranteed by the CHMC. IV) The banks that originated the mortgages maintain ownership of them.
		A)	II, III, and IV
		B)	II and III
		C)	I, II, and IV
		D)	I, III, and IV
		E)	I, II, III, and IV


10	Faulty disclosure is an example of a market failure known as
		A)	greed
		B)	bankruptcy
		C)	an agency problem
		D)	irrational exuberance
		E)	high search costs

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