Assignment #1 Flashcards
An example of a derivative security is:
A) a common share of Microsoft but not a commodity futures contract
B) a call option on Intel stock but not a commodity futures contract
C) a commodity futures contract or a common share of Microsoft
D) a call option on Intel stock or a commodity futures contract
E) a common share of Microsoft or a call option on Intel stock
D
___________ specialize in helping companies raise capital by selling securities.
A) Commercial bankers
B) Investment bankers
C) Investment issuers
D) Credit rating agencies
E) All of the choices are correct
B
New issues of securities are sold in the ___________ market(s).
A) Primary
B) Secondary
C) Over-the-counter
D) Primary and secondary
E) All of the choices are correct
A
Investors trade previously issued securities in the _________ market(s).
A) Primary
B) Secondary
C) Primary and secondary
D) Derivatives
E) Derivates and primary
B
___________ were designed to concentrate the credit risk of a bundle of loans on one class of investor leaving the other investor in the pool relatively protected from that risk.
A) Stocks
B) Bonds
C) Derivatives
D) Collateralized debt obligations
E) All of the options are correct
D
__________ are real assets.
A) land and mortgages
B) machines and bonds
C) stocks and bonds
D) knowledge and stocks
E) land, machines, and knowledge
E
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
D
____________ are financial assets.
A) bonds and land
B) machines and derivatives
C) stocks and intellectual property
D) bonds and stocks
E) bonds, machines, and stocks
D
Financial assets:
A) directly contribute to the country’s productive capacity
B) indirectly contribute to the country’s productive capacity
C) contribute to the country’s productive capacity, both directly and indirectly
D) do not contribute to the country’s productive capacity, either directly or indirectly
E) are of no value to anyone
B
The value of a derivative security:
A) depends on the value of the related security
B) is unable to be calculated
C) is unrelated to the value of the related security
D) has been enhanced due to the recent misuse and negative publicity regarding these instruments
E) is worthless today
A
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 sheet
D
Asset allocation refers to:
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
E) All of the choices are correct
C
Security selection refers to:
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) top-down analysis of
E) All of the choices are correct
A
