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| 1 | |
In an efficient financial market, there would not be any ________________. |
| | A) | underpriced or overpriced securities |
| | B) | financial intermediaries |
| | C) | commissions or other transaction costs |
| | D) | taxes |
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| 2 | |
An ownership interest in a corporation is represented by a ________________. |
| | A) | bond |
| | B) | share of preferred stock |
| | C) | share of common stock |
| | D) | All of the above represent ownership |
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| 3 | |
The Sarbanes-Oxley Act does not require ________________. |
| | A) | that a company's CFO personally vouch for the company's financial statements |
| | B) | establishment of an accounting oversight board to oversee audits of public companies |
| | C) | auditors to provide other services to the companies they audit |
| | D) | corporations to have more independent directors |
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| 4 | |
The process of investing a portfolio across broad asset classes is called ________________. |
| | A) | security analysis |
| | B) | top-down portfolio construction |
| | C) | asset allocation |
| | D) | security selection |
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| 5 | |
Financial assets and markets play an important role in ________________. |
| | A) | allocation of capital resources |
| | B) | consumption timing, allowing investors to shift their consumption over time |
| | C) | allocation of investment risk, so that risk is borne by those investors willing to do so |
| | D) | All of the above are important roles of financial assets and markets |
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| 6 | |
Which of the following statements is true about derivative securities? |
| | A) | Derivatives are frequently used to hedge risks. |
| | B) | The term "derivatives" stems from the fact that related securities derive their value from options and futures contracts. |
| | C) | Since the buyers of derivatives use these securities to hedge risks, only sellers of derivatives take speculative positions in the underlying assets. |
| | D) | All of the above statements about derivatives are true. |
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| 7 | |
The three broad categories of financial assets are ____________. |
| | A) | money market securities, long-term debt and equity |
| | B) | debt, equity and derivatives |
| | C) | debt, equity and money market securities |
| | D) | corporate securities, derivatives and equity |
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| 8 | |
One of the implications of the "risk-return tradeoff" in the financial markets is the fact that ____________. |
| | A) | relatively high-risk assets sell at relatively high prices, resulting in high returns to investors |
| | B) | relatively high-risk assets sell at relatively low prices, resulting in high returns to investors |
| | C) | relatively low-risk assets sell at relatively low prices, resulting in high returns to investors |
| | D) | None of the above is an implication of the risk-return tradeoff |
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| 9 | |
In the financial markets, financial intermediaries ____________. |
| | A) | are considered "major players" who are net lenders |
| | B) | are considered "major players" who are net borrowers |
| | C) | bring lenders and borrowers together |
| | D) | raise funds by borrowing in order to invest in real assets |
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| 10 | |
A portfolio manager with a passive investment strategy manages a portfolio by ______________. |
| | A) | holding a diversified portfolio without expending effort to improve performance |
| | B) | selecting mispriced securities in order to improve performance |
| | C) | using a "bottom-up" strategy |
| | D) | emphasizing asset allocation and security selection |
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| 11 | |
Agency problems within a corporation are _______________. |
| | A) | conflicts among stockholders with differing objectives |
| | B) | conflicts between stockholders and financial intermediaries |
| | C) | conflicts among managers with competing interests |
| | D) | conflicts between managers and stockholders |
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| 12 | |
Which of the following is not a mechanism for U.S. investors to participate in foreign investment opportunities? |
| | A) | Purchase foreign securities using American Depository Receipts. |
| | B) | Invest in mutual funds that purchase securities in international markets. |
| | C) | Invest in World Equity Benchmark Shares. |
| | D) | Purchase pass-through securities. |
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| 13 | |
Which of the following is not a financial intermediary? |
| | A) | Credit unions |
| | B) | Insurance companies |
| | C) | Mutual funds |
| | D) | Investment bankers |
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| 14 | |
Financial intermediaries which pool and manage the money of many investors are called _________________. |
| | A) | financial engineers |
| | B) | investment bankers |
| | C) | investment companies |
| | D) | credit unions |
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| 15 | |
In the past 35 years, securitization has allowed investors to expand their investment alternatives to include investments in ____________. |
| | A) | World Equity Benchmark Shares |
| | B) | foreign currencies |
| | C) | mortgages |
| | D) | composite securities with features of more than one security |
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