TEST BANK
CAPITAL MARKETS: INSTITUTIONS AND INSTRUMENTS
FABOZZI/MODIGLIANI
Chapter 1
INTRODUCTION
MULTIPLE CHOICE
1. Which one of the following are examples of financial assets?
a. U.S. Treasury bonds.
b. Foreign bonds.
c. Home mortgage loan.
d. Common stock.
* e. All of the above
[E]
2. Financial assets are referred to as debt instruments in the case of:
a. U.S. Treasury bonds.
b. Corporate bonds.
c. Corporate stock.
d. Municipal bonds.
* e. a, b, and d only.
[E]
3. Financial assets represent a residual claim in the case of:
, a. Preferred stock.
b. Common stock.
c. Partnership share.
* d. b and c only.
e. All of the above.
[E]
4. The process of valuing financial assets does not include:
a. Estimating the cash flows.
* b. Determining the length of time the asset is held.
c. Determining the appropriate discount rate.
d. Discounting the expected cash flows.
e. All of the above.
[M]
,5. Which of the following risks are associated with realizing the expected cash flows?
a. Default risk.
b. Purchasing power risk.
c. Foreign-exchange risk.
* d. All of the above.
[E]
6. The principal economic functions of financial assets include:
a. The transfer of funds from those with surplus funds to those who need
funds.
b. The transfer of ownership from seller to buyer.
c. The transfer of funds so as to redistribute the unavoidable risk associated
with the cash flow generated by tangible assets among those seeking and
providing the funds.
* d. a and c only.
e. All of the above.
[M]
7. Which of the following are properties of financial assets?
a. Reversibility.
b. Moneyness.
c. Liquidity.
d. Marketability.
* e. a, b and c only.
[E]
8. The length of time between the date the instrument was issued and is scheduled to
make final payment is called:
, a. Holding period.
b. Term to maturity.
c. Maturity.
* d. b and c only.
e. All of the above.
[E]
9. The price discovery process is an economic function, which refers to:
a. Financial markets that reduce the search and information costs.
* b. Financial markets that signal how funds in the economy should be allocated
among financial assets.
c. Financial markets that provide a mechanisms for an investor to sell a
financial asset.
d. Financial markets that offer liquidity.
e. None of the above.
[M]
CAPITAL MARKETS: INSTITUTIONS AND INSTRUMENTS
FABOZZI/MODIGLIANI
Chapter 1
INTRODUCTION
MULTIPLE CHOICE
1. Which one of the following are examples of financial assets?
a. U.S. Treasury bonds.
b. Foreign bonds.
c. Home mortgage loan.
d. Common stock.
* e. All of the above
[E]
2. Financial assets are referred to as debt instruments in the case of:
a. U.S. Treasury bonds.
b. Corporate bonds.
c. Corporate stock.
d. Municipal bonds.
* e. a, b, and d only.
[E]
3. Financial assets represent a residual claim in the case of:
, a. Preferred stock.
b. Common stock.
c. Partnership share.
* d. b and c only.
e. All of the above.
[E]
4. The process of valuing financial assets does not include:
a. Estimating the cash flows.
* b. Determining the length of time the asset is held.
c. Determining the appropriate discount rate.
d. Discounting the expected cash flows.
e. All of the above.
[M]
,5. Which of the following risks are associated with realizing the expected cash flows?
a. Default risk.
b. Purchasing power risk.
c. Foreign-exchange risk.
* d. All of the above.
[E]
6. The principal economic functions of financial assets include:
a. The transfer of funds from those with surplus funds to those who need
funds.
b. The transfer of ownership from seller to buyer.
c. The transfer of funds so as to redistribute the unavoidable risk associated
with the cash flow generated by tangible assets among those seeking and
providing the funds.
* d. a and c only.
e. All of the above.
[M]
7. Which of the following are properties of financial assets?
a. Reversibility.
b. Moneyness.
c. Liquidity.
d. Marketability.
* e. a, b and c only.
[E]
8. The length of time between the date the instrument was issued and is scheduled to
make final payment is called:
, a. Holding period.
b. Term to maturity.
c. Maturity.
* d. b and c only.
e. All of the above.
[E]
9. The price discovery process is an economic function, which refers to:
a. Financial markets that reduce the search and information costs.
* b. Financial markets that signal how funds in the economy should be allocated
among financial assets.
c. Financial markets that provide a mechanisms for an investor to sell a
financial asset.
d. Financial markets that offer liquidity.
e. None of the above.
[M]
