Ch 2

Question 1

Three asset classes

Answer 1

Common Stock (Equity)
Fixed Income Securities (Debt)
Derivate Securities

Question 2

Top Down Investment Strategies

Answer 2

Starts with Asset Allocation

Question 3

Bottom Up Investment Strategies

Answer 3

Starts with Security Selection

Question 4

Passive management (Efficient Market)

Answer 4

calls for holding highly diversified portfolios without spending effort or other resources attempting to improve investment performance through security analysis.

Question 5

Active management (Inefficient market)

Answer 5

the attempt to improve performance either by identifying mispriced securities or by timing
the performance of broad asset classes

Question 6

Primary versus Secondary Markets

Answer 6

In primary, issuer DOES receive proceeds from sale. In secondary, the issuer DOES NOT

Question 7

Initial Public Offering (IPO) process

Answer 7

Issuing firm -> Lead underwriter -> Investment Bankers -> private investors (the public)