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Quiz 1

This document contains a quiz with 10 multiple choice questions taken by the student Ngô Gia Minh in Class 1. The questions cover topics related to real assets, financial assets, fixed-income securities, money market securities, the agency problem, primary and secondary markets, and the roles of investment bankers. The student selected answers and provided short explanations for each choice.

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Gia Minh
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267 views4 pages

Quiz 1

This document contains a quiz with 10 multiple choice questions taken by the student Ngô Gia Minh in Class 1. The questions cover topics related to real assets, financial assets, fixed-income securities, money market securities, the agency problem, primary and secondary markets, and the roles of investment bankers. The student selected answers and provided short explanations for each choice.

Uploaded by

Gia Minh
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Student name: Ngô Gia Minh

IDs: 11183333
Class: 1
Quiz 1
Select the correct answer and explain.

1. _______ is/are a real asset(s). 


A. Only land
B. Only machines
C. Only stocks and bonds
D. Only knowledge
E. Land, machines and knowledge are real assets
Choose E because they are are physical assets that have intrinsic value due to their properties
and characteristics. Real assets include precious metals, commodities, real estate, land,
equipment, and natural resources.

2. 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
Choose B because these assets permit individuals to invest in firms and governments which can
in turns allow firms/companies or governments to increase the productive capacity.

3. A fixed-income security pays ____________. 


A. a fixed level of income for the life of the owner
B. a fixed stream of income or a stream of income that is determined according to a specified
formula for the life of the security
C. a variable level of income for owners on a fixed income
D. a fixed or variable income stream at the option of the owner
E. a riskless return that is fixed for life

4. Money market securities ____________. 


A. are short term
B. are highly marketable
C. are generally very low risk
D. are short term, highly marketable, and generally very low risk
Choose D because they often have a relatively shorter time period (1-year). The market include
cash, cash equivalent securities, and high-credit-rating, debt-based securities with a short-term
maturity.
E. highly marketable and generally very low risk

5. Financial assets can permit all of the following except ____________. 


A. consumption timing
B. allocation of risk
C. separation of ownership and control
D. elimination of risk
E. easy transfer of ownership
Choose D because financial assets do not allow risk to be eliminated. However, they do permit
allocation of risk, consumption timing, and separation of ownership and control.
6. The ____________ refers to the potential conflict between management and shareholders. 
A. agency problem
B. diversification problem
C. liquidity problem
D. solvency problem
E. regulatory problem
Choose A because the agency problem refers to a conflict of interest between a company's
management and the company's stockholders in corporate finance. The term inherents in any
relationship where one party is expected to act in another's best interests.
7. Which of the following are mechanisms that have evolved to mitigate potential agency
problems?
I) Compensation in the form of the firm's stock options
II) Hiring bickering family members as corporate spies
III) Underperforming management teams being forced out by boards of directors
IV) Security analysts monitoring the firm closely
V) 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

8. New issues of securities are sold in the ________ market(s). 


A. primary
B. secondary
C. over the counter
D. primary and secondary
E. primary and over the counter

9. Investors trade previously issued securities in the ________ market(s). 


A. primary
B. secondary
C. primary and secondary
D. derivatives
E. primary and derivatives

10. Investment bankers perform the following role(s) ___________. 


A. market new stock and bond issues for firms
B. provide advice to the firms as to market conditions, price, etc
C. design securities with desirable properties
D. make trades for small investors
E. market new stock and bond issues for firms, provide advice to the firms as to market
conditions, price, etc, and design securities with desirable properties

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