Test Bank For Investments 12th Edition Zvi Bodie Alex Kane Alan Marcus
Test Bank For Investments 12th Edition Zvi Bodie Alex Kane Alan Marcus
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Student name:__________
1) The material wealth of a society is a function of
Question Details
AACSB : Reflective Thinking
Bloom's : Remember
Difficulty : 1 Basic
Accessibility : Keyboard Navigation
Topic : Real and financial assets
Version 1 1
A) Land
B) Machines
C) Stocks and bonds
D) Knowledge
E) Land, machines, and knowledge
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AACSB : Reflective Thinking
Bloom's : Remember
Difficulty : 1 Basic
Accessibility : Keyboard Navigation
Topic : Real and financial assets
3) The means by which individuals hold their claims on real assets in a well-developed
economy are
A) investment assets.
B) depository assets.
C) derivative assets.
D) financial assets.
E) exchange-driven assets.
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AACSB : Reflective Thinking
Bloom's : Remember
Difficulty : 1 Basic
Accessibility : Keyboard Navigation
Topic : Real and financial assets
Version 1 2
4) _______ are financial assets.
A) Bonds
B) Machines
C) Stocks
D) Bonds and stocks
E) Bonds, machines, and stocks
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AACSB : Reflective Thinking
Bloom's : Remember
Difficulty : 1 Basic
Accessibility : Keyboard Navigation
Topic : Real and financial assets
A) Buildings are
B) Land is a
C) Derivatives are
D) U.S. agency bonds are
E) Derivatives and U.S. agency bonds are
Question Details
AACSB : Reflective Thinking
Bloom's : Remember
Difficulty : 1 Basic
Accessibility : Keyboard Navigation
Topic : Real and financial assets
Version 1 3
6) Financial assets
Question Details
AACSB : Reflective Thinking
Difficulty : 1 Basic
Accessibility : Keyboard Navigation
Bloom's : Understand
Topic : Real and financial assets
7) In 2018, ____________ was the most significant real asset of U.S. households in terms of
total value.
A) consumer durables
B) automobiles
C) real estate
D) mutual fund shares
E) bank loans
Question Details
AACSB : Reflective Thinking
Bloom's : Remember
Difficulty : 1 Basic
Accessibility : Keyboard Navigation
Topic : Real and financial assets
Version 1 4
8) In 2018, ____________ was the least significant financial asset of U.S. households in
terms of total value.
A) real estate
B) mutual fund shares
C) debt securities
D) life insurance reserves
E) pension reserves
Question Details
AACSB : Reflective Thinking
Bloom's : Remember
Difficulty : 1 Basic
Accessibility : Keyboard Navigation
Topic : Real and financial assets
9) In 2018, ____________ was the most significant financial asset of U.S. households in
terms of total value.
A) real estate
B) mutual fund shares
C) debt securities
D) life insurance reserves
E) pension reserves
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Question Details
AACSB : Reflective Thinking
Bloom's : Remember
Difficulty : 1 Basic
Accessibility : Keyboard Navigation
Topic : Real and financial assets
10) In 2018, ____________ was the most significant asset of U.S. households in terms of
total value.
A) real estate
B) mutual fund shares
C) debt securities
D) life insurance reserves
E) pension reserves
Question Details
AACSB : Reflective Thinking
Bloom's : Remember
Difficulty : 1 Basic
Accessibility : Keyboard Navigation
Topic : Real and financial assets
11) In 2018, ____________ were the most significant liability of U.S. households in terms of
total value.
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A) credit cards
B) mortgages
C) bank loans
D) student loans
E) other forms of debt
Question Details
AACSB : Reflective Thinking
Bloom's : Remember
Difficulty : 1 Basic
Accessibility : Keyboard Navigation
Topic : Debt financing
12) In 2018, which of the following financial assets make up the second highest proportion of
the financial assets held by U.S. households?
A) Corporate equity
B) Life insurance reserves
C) Mutual fund shares
D) Debt securities
E) Personal trusts
Question Details
AACSB : Reflective Thinking
Bloom's : Remember
Accessibility : Keyboard Navigation
Difficulty : 2 Intermediate
Topic : Real and financial assets
Version 1 7
13) In 2018, _______ of the assets of U.S. households were financial assets as opposed to
tangible assets.
A) 23.5%
B) 87.2%
C) 28.4%
D) 58.4%
E) 71.6%
Question Details
AACSB : Reflective Thinking
Bloom's : Remember
Accessibility : Keyboard Navigation
Difficulty : 2 Intermediate
Topic : Real and financial assets
Question Details
AACSB : Reflective Thinking
Bloom's : Remember
Accessibility : Keyboard Navigation
Difficulty : 2 Intermediate
Topic : Real and financial assets
Version 1 8
15) The smallest component of domestic net worth in 2018 was
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AACSB : Reflective Thinking
Bloom's : Remember
Accessibility : Keyboard Navigation
Difficulty : 2 Intermediate
Topic : Real and financial assets
A) $9.350 trillion.
B) $22.642 trillion.
C) $32.539 trillion.
D) $72.683 trillion.
E) $80.983 trillion.
Question Details
AACSB : Reflective Thinking
Bloom's : Remember
Accessibility : Keyboard Navigation
Difficulty : 2 Intermediate
Topic : Real and financial assets
Version 1 9
17) A fixed-income security pays
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AACSB : Reflective Thinking
Bloom's : Remember
Difficulty : 1 Basic
Accessibility : Keyboard Navigation
Topic : Fixed-income securities
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AACSB : Reflective Thinking
Bloom's : Remember
Difficulty : 1 Basic
Accessibility : Keyboard Navigation
Topic : Fixed-income securities
Version 1 10
19) Money market securities
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AACSB : Reflective Thinking
Bloom's : Remember
Difficulty : 1 Basic
Accessibility : Keyboard Navigation
Topic : Money market securities
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AACSB : Reflective Thinking
Bloom's : Remember
Difficulty : 1 Basic
Accessibility : Keyboard Navigation
Topic : Derivatives - general
Version 1 11
21) The value of a derivative security
Question Details
AACSB : Reflective Thinking
Difficulty : 1 Basic
Accessibility : Keyboard Navigation
Bloom's : Understand
Topic : Derivatives - general
22) Although derivatives can be used as speculative instruments, businesses most often use
them to
A) attract customers.
B) appease stockholders.
C) offset debt.
D) hedge risks.
E) enhance their balance sheets.
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Question Details
AACSB : Reflective Thinking
Bloom's : Remember
Difficulty : 1 Basic
Accessibility : Keyboard Navigation
Topic : Derivatives - general
A) consumption timing.
B) allocation of risk.
C) separation of ownership and control.
D) elimination of risk.
Question Details
AACSB : Reflective Thinking
Bloom's : Remember
Accessibility : Keyboard Navigation
Difficulty : 2 Intermediate
Topic : Real and financial assets
24) The ____________ refers to the potential conflict between management and
shareholders.
Version 1 13
A) agency problem
B) diversification problem
C) liquidity problem
D) solvency problem
E) regulatory problem
Question Details
AACSB : Reflective Thinking
Bloom's : Remember
Difficulty : 1 Basic
Accessibility : Keyboard Navigation
Topic : Agency problems and issues
Question Details
AACSB : Reflective Thinking
Difficulty : 1 Basic
Accessibility : Keyboard Navigation
Bloom's : Understand
Topic : Employee stock options
Version 1 14
26) Which of the following are mechanisms that have evolved to mitigate potential agency
problems? I) Using the firm's stock options for compensationII) Hiring bickering family
members as corporate spiesIII) Boards of directors forcing out underperforming managementIV)
Security analysts monitoring the firm closelyV) Takeover threats
A) II and V
B) I, III, and IV
C) I, III, IV, and V
D) III, IV, and V
E) I, III, and V
Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Intermediate
Topic : Agency problems and issues
27) Corporate shareholders are best protected from incompetent management decisions by
Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Intermediate
Topic : Agency problems and issues
Version 1 15
28) Theoretically, takeovers should result in
A) improved management.
B) increased stock price.
C) increased benefits to existing management of the taken-over firm.
D) improved management and increased stock price.
E) All of the options.
Question Details
AACSB : Reflective Thinking
Bloom's : Remember
Difficulty : 1 Basic
Accessibility : Keyboard Navigation
Topic : Agency problems and issues
29) During the period between 2000 and 2002, a large number of scandals were uncovered.
Most of these scandals were related to
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AACSB : Reflective Thinking
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Bloom's : Understand
Difficulty : 2 Intermediate
Topic : Ethics and corporate governance
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AACSB : Reflective Thinking
Bloom's : Remember
Accessibility : Keyboard Navigation
Difficulty : 2 Intermediate
Topic : Financial market regulation and protections
Version 1 17
A) choosing which securities to hold based on their valuation.
B) investing only in "safe" securities.
C) the allocation of assets into broad asset classes.
D) bottom-up analysis.
Question Details
AACSB : Reflective Thinking
Bloom's : Remember
Accessibility : Keyboard Navigation
Difficulty : 2 Intermediate
Topic : Asset allocation and security selection
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AACSB : Reflective Thinking
Bloom's : Remember
Accessibility : Keyboard Navigation
Difficulty : 2 Intermediate
Topic : Asset allocation and security selection
33) Which of the following portfolio construction methods starts with security analysis?
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A) Top-down
B) Bottom-up
C) Middle-out
D) Buy and hold
E) Asset allocation
Question Details
AACSB : Reflective Thinking
Bloom's : Remember
Accessibility : Keyboard Navigation
Difficulty : 2 Intermediate
Topic : Portfolio construction
34) Which of the following portfolio construction methods starts with asset allocation?
A) Top-down
B) Bottom-up
C) Middle-out
D) Buy and hold
E) Asset allocation
Question Details
AACSB : Reflective Thinking
Bloom's : Remember
Accessibility : Keyboard Navigation
Difficulty : 2 Intermediate
Topic : Portfolio construction
Version 1 19
35) _______ are examples of financial intermediaries.
A) Commercial banks
B) Insurance companies
C) Investment companies
D) Credit unions
E) All of the options
Question Details
AACSB : Reflective Thinking
Bloom's : Remember
Difficulty : 1 Basic
Accessibility : Keyboard Navigation
Topic : Financial intermediaries and market participants
Question Details
AACSB : Reflective Thinking
Bloom's : Remember
Difficulty : 1 Basic
Accessibility : Keyboard Navigation
Topic : Financial intermediaries and market participants
Version 1 20
37) ________ specialize in helping companies raise capital by selling securities.
A) Commercial bankers
B) Investment bankers
C) Investment issuers
D) Credit raters
Question Details
AACSB : Reflective Thinking
Bloom's : Remember
Difficulty : 1 Basic
Accessibility : Keyboard Navigation
Topic : Financial intermediaries and market participants
38) Commercial banks differ from other businesses in that both their assets and their
liabilities are mostly
A) illiquid.
B) financial.
C) real.
D) owned by the government.
E) regulated.
Question Details
AACSB : Reflective Thinking
Difficulty : 1 Basic
Accessibility : Keyboard Navigation
Bloom's : Understand
Topic : Financial intermediaries and market participants
Version 1 21
39) In 2018, ____________ was(were) the most significant financial asset(s) of U.S.
commercial banks in terms of total value.
Question Details
AACSB : Reflective Thinking
Bloom's : Remember
Difficulty : 1 Basic
Accessibility : Keyboard Navigation
Topic : Financial intermediaries and market participants
40) In 2018, ____________ was(were) the most significant liability(ies) of U.S. commercial
banks in terms of total value.
Question Details
AACSB : Reflective Thinking
Bloom's : Remember
Difficulty : 1 Basic
Accessibility : Keyboard Navigation
Topic : Financial intermediaries and market participants
Version 1 22
41) In 2018, ____________ was(were) the most significant real asset(s) of U.S. nonfinancial
businesses in terms of total value.
Question Details
AACSB : Reflective Thinking
Bloom's : Remember
Difficulty : 1 Basic
Accessibility : Keyboard Navigation
Topic : Real and financial assets
42) In 2018, ____________ was(were) the least significant real asset(s) of U.S. nonfinancial
businesses in terms of total value.
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Question Details
AACSB : Reflective Thinking
Bloom's : Remember
Difficulty : 1 Basic
Accessibility : Keyboard Navigation
Topic : Real and financial assets
43) In 2018, ____________ was(were) the least significant liability(ies) of U.S. nonfinancial
businesses in terms of total value.
Question Details
AACSB : Reflective Thinking
Bloom's : Remember
Difficulty : 1 Basic
Accessibility : Keyboard Navigation
Topic : Debt financing
44) In terms of total value, the most significant liability(ies) of U.S. nonfinancial businesses
in 2018 was(were)
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A) bank loans.
B) bonds and mortgages.
C) trade debt.
D) other.
E) marketable securities.
Question Details
AACSB : Reflective Thinking
Bloom's : Remember
Difficulty : 1 Basic
Accessibility : Keyboard Navigation
Topic : Debt financing
45) In 2018, ____________ was(were) the least significant financial asset(s) of U.S.
nonfinancial businesses in terms of total value.
Question Details
AACSB : Reflective Thinking
Bloom's : Remember
Difficulty : 1 Basic
Accessibility : Keyboard Navigation
Topic : Real and financial assets
Version 1 25
46) New issues of securities are sold in the ________ market(s).
A) primary
B) secondary
C) over-the-counter
D) primary and secondary
Question Details
AACSB : Reflective Thinking
Bloom's : Remember
Difficulty : 1 Basic
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Topic : Primary and secondary markets
A) primary
B) secondary
C) primary and secondary
D) derivatives
Question Details
AACSB : Reflective Thinking
Bloom's : Remember
Difficulty : 1 Basic
Accessibility : Keyboard Navigation
Topic : Primary and secondary markets
Version 1 26
48) Investment bankers perform which of the following role(s)?
Question Details
AACSB : Reflective Thinking
Difficulty : 1 Basic
Accessibility : Keyboard Navigation
Bloom's : Understand
Topic : Financial intermediaries and market participants
49) Until 1999, the ________ Act(s) prohibited banks in the United States from both
accepting deposits and underwriting securities.
A) Sarbanes-Oxley
B) Glass-Steagall
C) SEC
D) Sarbanes-Oxley and SEC
E) None of the options
Question Details
AACSB : Reflective Thinking
Bloom's : Remember
Difficulty : 1 Basic
Accessibility : Keyboard Navigation
Topic : Financial market regulation and protections
Version 1 27
50) The spread between the LIBOR and the Treasury-bill rate is called the
A) term spread.
B) T-bill spread.
C) LIBOR spread.
D) TED spread.
Question Details
AACSB : Reflective Thinking
Bloom's : Remember
Difficulty : 1 Basic
Accessibility : Keyboard Navigation
Topic : Interest rates
51) Mortgage-backed securities were created when ________ began buying mortgage loans
from originators and bundling them into large pools that could be traded like any other financial
asset.
A) GNMA
B) FNMA
C) FHLMC
D) FNMA and FHLMC
E) GNMA and FNMA
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Question Details
AACSB : Reflective Thinking
Bloom's : Remember
Difficulty : 1 Basic
Accessibility : Keyboard Navigation
Topic : Mortgage securities and issues
A) credit enhancement.
B) credit swap.
C) unbundling.
D) derivatives.
Question Details
AACSB : Reflective Thinking
Difficulty : 1 Basic
Accessibility : Keyboard Navigation
Bloom's : Understand
Topic : Mortgage securities and issues
53) Which of the following is true about mortgage-backed securities? I) They aggregate
individual home mortgages into homogeneous pools.II) The purchaser receives monthly interest
and principal payments received from payments made on the pool.III) The banks that originated
the mortgages maintain ownership of them.IV) The banks that originated the mortgages may
continue to service them.
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A) II, III, and IV
B) I, II, and IV
C) II and IV
D) I, III, and IV
E) I, II, III, and IV
Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Bloom's : Understand
Difficulty : 2 Intermediate
Topic : Mortgage securities and issues
54) ________ were designed to concentrate the credit risk of a bundle of loans on one class
of investor, leaving the other investors in the pool relatively protected from that risk.
A) Stocks
B) Bonds
C) Derivatives
D) Collateralized debt obligations
E) All of the options
Question Details
AACSB : Reflective Thinking
Difficulty : 1 Basic
Accessibility : Keyboard Navigation
Bloom's : Understand
Topic : Collateralized mortgage obligations
Version 1 30
55) ________ are, in essence, an insurance contract against the default of one or more
borrowers.
Question Details
AACSB : Reflective Thinking
Difficulty : 1 Basic
Accessibility : Keyboard Navigation
Bloom's : Understand
Topic : Swaps
56) The technology behind cryptocurrencies that is ideal for secure digital transactions is
called ______________.
A) bitcoin
B) blockchain
C) distributed ledgers
D) ethereum
E) All of the options
Question Details
AACSB : Reflective Thinking
Bloom's : Remember
Difficulty : 1 Basic
Accessibility : Keyboard Navigation
Topic : Financial intermediaries and market participants
Version 1 31
57) A major problem experienced by cryptocurrency, which makes it problematic to store
value is _____________.
A) distributed ledgers
B) blockchain
C) price volatility
D) transaction security
E) All of the options
Question Details
AACSB : Reflective Thinking
Bloom's : Remember
Difficulty : 1 Basic
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Topic : Financial intermediaries and market participants
A) China
B) Germany
C) Japan
D) USA
E) All of the options
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Question Details
AACSB : Reflective Thinking
Bloom's : Remember
Difficulty : 1 Basic
Accessibility : Keyboard Navigation
Topic : Financial intermediaries and market participants
59) The Economic Growth, Regulatory Relief and Consumer Protection Act of 2019
exempted smaller banks from which rule?
A) Liquidity
B) Reserves
C) Demand deposit
D) Volker
E) All of the options
Question Details
AACSB : Reflective Thinking
Bloom's : Remember
Difficulty : 1 Basic
Accessibility : Keyboard Navigation
Topic : Financial market regulation and protections
60) According to the Economic Growth, Regulatory Relief and Consumer Protection Act of
2019 many larger banks are no longer considered ________________.
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A) insurable
B) high risk
C) insolvent
D) systematically important
E) All of the options.
Question Details
AACSB : Reflective Thinking
Bloom's : Remember
Difficulty : 1 Basic
Accessibility : Keyboard Navigation
Topic : Financial market regulation and protections
Version 1 34
Answer Key
1) B
2) E
3) D
4) D
5) E
6) B
7) C
8) D
9) E
10) A
11) B
12) A
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13) E
14) B
15) C
16) D
17) B
18) D
19) E
20) D
21) A
22) D
23) D
24) A
25) C
26) C
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27) D
28) D
29) E
30) E
31) C
32) A
33) B
34) A
35) E
36) E
37) B
38) B
39) A
40) D
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41) C
42) B
43) B
44) D
45) A
46) A
47) B
48) D
49) B
50) D
51) D
52) B
53) B
54) D
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55) A
56) B
57) C
58) A
59) D
60) D
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