Test Bank For Investments 12th Edition Zvi Bodie Alex Kane Alan Marcus

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
A) all financial assets.

B) all real assets.
C) all financial and real assets.
D) all physical assets.
Question Details
AACSB : Reflective Thinking
Bloom's : Remember
Difficulty : 1 Basic
Accessibility : Keyboard Navigation
Topic : Real and financial assets
2) _______ are real assets.
Version 1 1
A) Land
B) Machines
C) Stocks and bonds
D) Knowledge
E) Land, machines, and knowledge
Question Details
Bloom's : Remember
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.
Question Details
Bloom's : Remember
Version 1 2
4) _______ are financial assets.
A) Bonds
B) Machines
C) Stocks
D) Bonds and stocks
E) Bonds, machines, and stocks
Question Details
Bloom's : Remember
5) _________ financial asset(s).
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
Bloom's : Remember
Version 1 3
6) 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.
Question Details
Bloom's : Understand
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
Bloom's : Remember
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
Bloom's : Remember
9) In 2018, ____________ was the most significant financial asset of U.S. households in
terms of total value.
A) real estate
C) debt securities
E) pension reserves
Version 1 5
Question Details
Bloom's : Remember
10) In 2018, ____________ was the most significant asset of U.S. households in terms of
total value.
A) real estate
C) debt securities
E) pension reserves
Question Details
Bloom's : Remember
11) In 2018, ____________ were the most significant liability of U.S. households in terms of
total value.
Version 1 6
A) credit cards
B) mortgages
C) bank loans
D) student loans
E) other forms of debt
Question Details
Bloom's : Remember
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
Bloom's : Remember
Difficulty : 2 Intermediate
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
Bloom's : Remember
14) The largest component of domestic net worth in 2018 was
A) nonresidential real estate.

B) residential real estate.
C) inventories.
D) consumer durables.
E) equipment and software.
Question Details
Bloom's : Remember
Version 1 8
15) The smallest component of domestic net worth in 2018 was
A) nonresidential real estate.

B) residential real estate.
C) inventories.
D) consumer durables.
E) equipment and software.
Question Details
Bloom's : Remember
16) The domestic net worth of the U.S. in 2018 was
A) $9.350 trillion.
B) $22.642 trillion.
C) $32.539 trillion.
D) $72.683 trillion.
E) $80.983 trillion.
Question Details
Bloom's : Remember
Version 1 9
17) 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.
Question Details
Bloom's : Remember
Topic : Fixed-income securities
18) A debt security pays
A) a fixed level of income for the life of the owner.

B) a variable level of income for owners on a fixed income.
C) a fixed or variable income stream at the option of the owner.
D) a fixed stream of income or a stream of income that is determined according to a
specified formula for the life of the security.
Question Details
Bloom's : Remember
Topic : Fixed-income securities
Version 1 10
19) Money market securities
A) are short term.

B) are highly marketable.
C) are generally very low risk.
D) are highly marketable and are generally very low risk.
E) All of the options.
Question Details
Bloom's : Remember
Topic : Money market securities
20) An example of a derivative security is
A) a common share of Microsoft.

B) a call option on Intel stock.
C) a commodity futures contract.
D) a call option on Intel stock and a commodity futures contract.
E) a common share of Microsoft and a call option on Intel stock.
Question Details
Bloom's : Remember
Topic : Derivatives - general
Version 1 11
21) 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.
Question Details
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.
Version 1 12
Question Details
Bloom's : Remember
23) Financial assets permit all of the following except
A) consumption timing.
B) allocation of risk.
C) separation of ownership and control.
D) elimination of risk.
Question Details
Bloom's : Remember
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
Bloom's : Remember
Topic : Agency problems and issues
25) A disadvantage of using stock options to compensate managers is that
A) it encourages managers to undertake projects that will increase stock price.

B) it encourages managers to engage in empire building.
C) it can create an incentive for managers to manipulate information to prop up a stock
price temporarily, giving them a chance to cash out before the price returns to a level reflective
of the firm's true prospects.
D) All of the above.
Question Details
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
27) Corporate shareholders are best protected from incompetent management decisions by
A) the ability to engage in proxy fights.

B) management's control of pecuniary rewards.
C) the ability to call shareholder meetings.
D) the threat of takeover by other firms.
E) one-share/one-vote election rules.
Question Details
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.
Question Details
Bloom's : Remember
29) During the period between 2000 and 2002, a large number of scandals were uncovered.
Most of these scandals were related to
I) manipulation of financial data to misrepresent the actual condition of the firm.

II) misleading and overly optimistic research reports produced by analysts.
III) allocating IPOs to executives as a quid pro quo for personal favors.
IV) greenmail.
A) II, III, and IV

B) I, II, and IV
C) II and IV
D) I, III, and IV
E) I, II, and III
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Question Details
Topic : Ethics and corporate governance
30) The Sarbanes-Oxley Act
A) requires corporations to have more independent directors.

B) requires the firm's CFO to personally vouch for the firm's accounting statements.
C) prohibits auditing firms from providing other services to clients.
D) requires corporations to have more independent directors and requires the firm's
CFO to personally vouch for the firm's accounting statements.
E) All of the above.
Question Details
Bloom's : Remember
Topic : Financial market regulation and protections
31) Asset allocation refers to
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
Bloom's : Remember
Topic : Asset allocation and security selection
32) 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.
Question Details
Bloom's : Remember
Topic : Asset allocation and security selection
33) Which of the following portfolio construction methods starts with security analysis?
Version 1 18
A) Top-down
B) Bottom-up
C) Middle-out
D) Buy and hold
E) Asset allocation
Question Details
Bloom's : Remember
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
Bloom's : Remember
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
Bloom's : Remember
Topic : Financial intermediaries and market participants
36) Financial intermediaries exist because small investors cannot efficiently
A) diversify their portfolios.

B) assess credit risk of borrowers.
C) advertise for needed investments.
D) diversify their portfolios and assess credit risk of borrowers.
Question Details
Bloom's : Remember
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
Bloom's : Remember
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
Version 1 21
39) In 2018, ____________ was(were) the most significant financial asset(s) of U.S.
commercial banks in terms of total value.
A) loans and leases

B) cash
C) real estate
D) deposits
E) investment securities
Question Details
Bloom's : Remember
40) In 2018, ____________ was(were) the most significant liability(ies) of U.S. commercial
banks in terms of total value.
A) loans and leases

B) cash
C) real estate
D) deposits
E) investment securities
Question Details
Bloom's : Remember
Version 1 22
41) In 2018, ____________ was(were) the most significant real asset(s) of U.S. nonfinancial
businesses in terms of total value.
A) equipment and software

B) inventory
C) real estate
D) trade credit
E) marketable securities
Question Details
Bloom's : Remember
42) In 2018, ____________ was(were) the least significant real asset(s) of U.S. nonfinancial
A) equipment and software

B) inventory
C) real estate
D) trade credit
Version 1 23
Question Details
Bloom's : Remember
43) In 2018, ____________ was(were) the least significant liability(ies) of U.S. nonfinancial
A) bonds and mortgages

B) bank loans
C) inventories
D) trade debt
Question Details
Bloom's : Remember
44) In terms of total value, the most significant liability(ies) of U.S. nonfinancial businesses
in 2018 was(were)
Version 1 24
A) bank loans.
B) bonds and mortgages.
C) trade debt.
D) other.
E) marketable securities.
Question Details
Bloom's : Remember
45) In 2018, ____________ was(were) the least significant financial asset(s) of U.S.
nonfinancial businesses in terms of total value.
A) cash and deposits

B) trade credit
C) trade debt
D) inventory
Question Details
Bloom's : Remember
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
Bloom's : Remember
Topic : Primary and secondary markets
47) Investors trade previously issued securities in the ________ market(s).
A) primary
B) secondary
C) primary and secondary
D) derivatives
Question Details
Bloom's : Remember
Topic : Primary and secondary markets
Version 1 26
48) Investment bankers perform which of 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) All of the options
E) None of the options
Question Details
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
Bloom's : Remember
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
Bloom's : Remember
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
Version 1 28
Question Details
Bloom's : Remember
Topic : Mortgage securities and issues
52) The sale of a mortgage portfolio by setting up mortgage pass-through securities is an

example of
A) credit enhancement.
B) credit swap.
C) unbundling.
D) derivatives.
Question Details
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
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
Question Details
Topic : Collateralized mortgage obligations
Version 1 30
55) ________ are, in essence, an insurance contract against the default of one or more
borrowers.
A) Credit default swaps

B) CMOs
C) ETFs
D) Collateralized debt obligations
Question Details
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
Question Details
Bloom's : Remember
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
Question Details
Bloom's : Remember
58) Which country has banned initial coin offerings?
A) China
B) Germany
C) Japan
D) USA
Version 1 32
Question Details
Bloom's : Remember
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
Question Details
Bloom's : Remember
60) According to the Economic Growth, Regulatory Relief and Consumer Protection Act of
2019 many larger banks are no longer considered ________________.
Version 1 33
A) insurable
B) high risk
C) insolvent
D) systematically important
Question Details
Bloom's : Remember
Version 1 34
Answer Key
Test name: Chapter 01
1) B
2) E
3) D
4) D
5) E
6) B
7) C
8) D
9) E
10) A
11) B
12) A
Version 1 35
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
Version 1 36
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
Version 1 37
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
Version 1 38
55) A
56) B
57) C
58) A
59) D
60) D
Version 1 39

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Investments, 12th Edition, Zvi Bodie Alex Kane Alan

A) all financial assets.

2) _______ are real assets.

5) _________ financial asset(s).

A) directly contribute to the country's productive capacity.

14) The largest component of domestic net worth in 2018 was

A) nonresidential real estate.

A) nonresidential real estate.

16) The domestic net worth of the U.S. in 2018 was

A) a fixed level of income for the life of the owner.

18) A debt security pays

A) a fixed level of income for the life of the owner.

A) are short term.

20) An example of a derivative security is

A) a common share of Microsoft.

A) depends on the value of the related security.

23) Financial assets permit all of the following except

25) A disadvantage of using stock options to compensate managers is that

A) it encourages managers to undertake projects that will increase stock price.

A) the ability to engage in proxy fights.

I) manipulation of financial data to misrepresent the actual condition of the firm.

A) II, III, and IV

30) The Sarbanes-Oxley Act

A) requires corporations to have more independent directors.

31) Asset allocation refers to

32) Security selection refers to

A) choosing which securities to hold based on their valuation.

36) Financial intermediaries exist because small investors cannot efficiently

A) diversify their portfolios.

A) loans and leases

A) loans and leases

A) equipment and software

A) equipment and software

A) bonds and mortgages

A) cash and deposits

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

A) Market new stock and bond issues for firms

52) The sale of a mortgage portfolio by setting up mortgage pass-through securities is an

A) Credit default swaps

58) Which country has banned initial coin offerings?

Test name: Chapter 01

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