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Exam 1: Investments: Background and Issues

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Question 21

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Which of the following is not a financial intermediary?

A) a mutual fund
B) an insurance company
C) a real estate brokerage firm
D) a savings and loan company

E) A) and B)
F) A) and C)

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Question 22

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_____ is an example of an agency problem.

A) Managers engage in empire building
B) Managers protect their jobs by avoiding risky projects
C) Managers over consume luxuries such as corporate jets
D) All of the answers provide examples of agency problems

E) All of the above
F) C) and D)

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Question 23

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Accounting scandals can often be attributed to a particular concept in the study of finance known as the

__________ are real assets.

Financial assets represent _____ of total assets of U.S.households.

According to the Flow of Funds Accounts of the United States,the largest financial asset of U.S.households is ____.

Surf City Software Company develops new surf forecasting software.It sells the software to Microsoft in exchange for 1000 shares of Microsoft common stock.Surf City Software has exchanged a _____ asset for a _____ asset in this transaction.

Liabilities equal approximately _____ of total assets for nonfinancial U.S.businesses.

An investment advisor has decided to purchase gold,real estate,stocks,and bonds in equal amounts.This decision reflects which part of the investment process?

The efficient markets hypothesis suggests that _______.

WEBS allow investors to _______.

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

The 2002 law designed to improve corporate governance is titled the

Real assets in the economy include all but which one of the following?

The process of securitizing poor quality bank loans made to developing nations resulted in the creation of __________.

Real assets represent about ____ of total assets for financial institutions.

Methods to encourage managers to act in shareholders' best interest include I.Threat of takeover II.Proxy fights for control of the Board of Directors III.Tying managers' compensation to stock price performance

The historical average rate of return on the large company stocks since 1926 has been

The success of common stock investments depends on the success of _________.

Financial institutions that specialize in assisting corporations in primary market transactions are called _______.