FIN 320 Week 5 Mid-Term Exam – Strayer

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Chapters 1 Through 8

Chapter 1: ___________________________________________________________________________

1.	Financial assets represent _____ of total assets of U.S. households.    A.  over 60% B.  over 90% C.  under 10% D.  about 30%

2.	Real assets in the economy include all but which one of the following?    A.  Land B.  Buildings C.  Consumer durables D.  Common stock

3.	Net worth represents _____ of the liabilities and net worth of commercial banks.    A.  about 51% B.  about 91% C.  about 11% D.  about 31%

4.	According to the Flow of Funds Accounts of the United States, the largest single asset of U.S. households is ___.    A.  mutual fund shares B.  real estate C.  pension reserves D.  corporate equity

5.	According to the Flow of Funds Accounts of the United States, the largest liability of U.S. households is ________.    A.  mortgages B.  consumer credit C.  bank loans D.  gambling debts

6.	____ is not a derivative security.    A.  A share of common stock B.  A call option C.  A futures contract D.  None of these options (All of the answers are derivative securities.)

7.	According to the Flow of Funds Accounts of the United States, the largest financial asset of U.S. households is ____.    A.  mutual fund shares B.  corporate equity C.  pension reserves D.  personal trusts

8.

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    A.  I only B.  I and II only C.  II and III only D.  I, II, and III

9.	The material wealth of society is determined by the economy's _________, which is a function of the economy's _________.    A.  investment bankers; financial assets B.  investment bankers; real assets C.  productive capacity; financial assets D.  productive capacity; real assets

10.	Which of the following is not a money market security?    A.  U.S. Treasury bill B.  6-month maturity certificate of deposit C.  Common stock D.  Bankers' acceptance

11.	__________ assets generate net income to the economy, and __________ assets define allocation of income among investors.    A.  Financial, financial B.  Financial, real C.  Real, financial D.  Real, real

12.	Which of the following are financial assets? I. Debt securities II. Equity securities III. Derivative securities    A.  I only B.  I and II only C.  II and III only D.  I, II, and III

13.	__________ are examples of financial intermediaries.    A.  Commercial banks B.  Insurance companies C.  Investment companies D.  All of these options

14.	Asset allocation refers to _________.    A.  the allocation of the investment portfolio across broad asset classes B.  the analysis of the value of securities C.  the choice of specific assets within each asset class D.  none of these options

15.	Which one of the following best describes the purpose of derivatives markets?    A.  Transferring risk from one party to another B.  Investing for a short time period to earn a small rate of return C.  Investing for retirement D.  Earning interest income

16.	More than _____________ of currency is traded each day in the market for foreign exchange.    A.  $300 million B.  $1 billion C.  $30 billion D.  $1 trillion

17.	Security selection refers to the ________.    A.  allocation of the investment portfolio across broad asset classes B.  analysis of the value of securities C.  choice of specific securities within each asset class D.  top-down method of investing

18.	Which of the following 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 these options are examples of agency problems.

19.	_____ is a mechanism for mitigating potential agency problems.    A.  Tying income of managers to success of the firm B.  Directors defending top management C.  Antitakeover strategies D.  The straight voting method of electing the board of directors