Week 1

Financial assets ______. 

• directly contribute to the country's productive capacity

• indirectly contribute to the country's productive capacity

• contribute to the country's productive capacity both directly and indirectly

• do not contribute to the country's productive capacity either directly or indirectly

A fixed-income security pays ____________. 

• a fixed level of income for the life of the owner

• a fixed stream of income or a stream of income that is determined according to a specified formula for the life of the security

• a variable level of income for owners on a fixed income

• . a fixed or variable income stream at the option of the owner

Investment bankers perform the following role(s) ___________. 

• market new stock and bond issues for firms

• provide advice to the firms as to market conditions, price

• design securities with desirable properties

• 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

An efficient market is defined as one in which:

• all participants have the same opportunity to make the make the same returns.

• securities’ prices quickly and fully reflect all available information.

• all participants have the same legal rights and transactions costs.

• securities’ prices are completely in line with the intrinsic value.

 

If a market is inefficient, as new information is received about a security:

• nothing will happen.

• there will be a lag in the adjustment of the stock price

• the stock price will fall at first and then later rise.

• there will be negative demand for the stock.

Which of the following portfolio construction methods starts with asset allocation? 

• Top-down

• Bottom-up

• Asset allocation

• Buy and hold

___________ revision strategy requires proactive and frequent adjustments to the portfolio

• Aggressive

• Turnaround

• Active

• Passive

The value of a derivative security _______. 

• depends on the value of the related security

• is unable to be calculated

• has been enhanced due to the recent misuse and negative publicity regarding these instruments

• is worthless today

Every financial market has the following characteristic

• It determines the level of interest rates

• It allows common stock to be traded.

• It allows loans to be made.

• It channels funds from lenders-savers to borrowers-spenders.

___ is the market which helps existing investors to sell their securities.

• Primary market

• Secondary market

• Capital market

• Commodity market