Foundations of Financial Markets and Institutions, 4e (Fabozzi/Modigliani/Jones)
Chapter 1 Introduction
Multiple Choice Questions
1 Financial Assets
1) An asset is a possession that has value in an exchange and can be classified as
________.
A) financial or intangible.
B) financial or variable.
C) tangible or intangible.
D) fixed or variable.
Answer: C
Diff: 2
Topic: 1.1 Financial Assets
Objective: 1.5: the various ways to classify financial markets
2) The financial asset is referred to as a ________ if the claim is a fixed dollar.
A) debt instrument.
B) common equity instrument.
C) derivative instrument.
D) preferred equity instrument.
Answer: A
Diff: 2
,Topic: 1.1 Financial Assets
Objective: 1.4: the distinction between debt instruments and equity instruments
3) A basic economic principle is that the price of any financial asset ________ the
present value of its expected cash flow, even if the cash flow is not known with certainty.
A) is greater than
B) is equal to
C) is less than
D) is equal to or greater than
Answer: B
Diff: 2
Topic: 1.1 Financial Assets
Objective: 1.1: what a financial asset is and the principal economic functions of financial
assets
,4) A(n) ________ such as plant or equipment purchased by a business entity shares at
least one characteristic with a financial asset: Both are expected to generate future cash
flow for their owner.
A) tangible asset
B) intangible asset
C) balance sheet asset
D) cash asset
Answer: A
Diff: 1
Topic: 1.1 Financial Assets
Objective: 1.2: the distinction between financial assets and tangible assets
5) Financial assets have two principal economic functions. Which of the below is ONE of
these?
A) A principal economic function is to transfer funds from those who have surplus funds
to borrow to those who need funds to invest in intangible assets.
B) A principal economic function is to transfer funds in such a way as to redistribute the
avoidable risk associated with the cash flow generated by intangible assets among those
seeking and those providing the funds.
C) A principal economic function is to transfer funds in such a way as to redistribute the
unavoidable risk associated with the cash flow generated by tangible assets among those
seeking and those providing the funds.
D) A principal economic function is to transfer funds from those who have surplus funds
to invest to those who need funds to invest in intangible assets.
Answer: C
Comment: Financial assets have two principal economic functions.
(1) The first is to transfer funds from those who have surplus funds to invest to those
who need funds to invest in tangible assets.
(2) The second economic function is to transfer funds in such a way as to redistribute the
, unavoidable risk associated with the cash flow generated by tangible assets among those
seeking and those providing the funds.
Diff: 3
Topic: 1.1 Financial Assets
Objective: 1.1: what a financial asset is and the principal economic functions of financial
assets
Chapter 1 Introduction
Multiple Choice Questions
1 Financial Assets
1) An asset is a possession that has value in an exchange and can be classified as
________.
A) financial or intangible.
B) financial or variable.
C) tangible or intangible.
D) fixed or variable.
Answer: C
Diff: 2
Topic: 1.1 Financial Assets
Objective: 1.5: the various ways to classify financial markets
2) The financial asset is referred to as a ________ if the claim is a fixed dollar.
A) debt instrument.
B) common equity instrument.
C) derivative instrument.
D) preferred equity instrument.
Answer: A
Diff: 2
,Topic: 1.1 Financial Assets
Objective: 1.4: the distinction between debt instruments and equity instruments
3) A basic economic principle is that the price of any financial asset ________ the
present value of its expected cash flow, even if the cash flow is not known with certainty.
A) is greater than
B) is equal to
C) is less than
D) is equal to or greater than
Answer: B
Diff: 2
Topic: 1.1 Financial Assets
Objective: 1.1: what a financial asset is and the principal economic functions of financial
assets
,4) A(n) ________ such as plant or equipment purchased by a business entity shares at
least one characteristic with a financial asset: Both are expected to generate future cash
flow for their owner.
A) tangible asset
B) intangible asset
C) balance sheet asset
D) cash asset
Answer: A
Diff: 1
Topic: 1.1 Financial Assets
Objective: 1.2: the distinction between financial assets and tangible assets
5) Financial assets have two principal economic functions. Which of the below is ONE of
these?
A) A principal economic function is to transfer funds from those who have surplus funds
to borrow to those who need funds to invest in intangible assets.
B) A principal economic function is to transfer funds in such a way as to redistribute the
avoidable risk associated with the cash flow generated by intangible assets among those
seeking and those providing the funds.
C) A principal economic function is to transfer funds in such a way as to redistribute the
unavoidable risk associated with the cash flow generated by tangible assets among those
seeking and those providing the funds.
D) A principal economic function is to transfer funds from those who have surplus funds
to invest to those who need funds to invest in intangible assets.
Answer: C
Comment: Financial assets have two principal economic functions.
(1) The first is to transfer funds from those who have surplus funds to invest to those
who need funds to invest in tangible assets.
(2) The second economic function is to transfer funds in such a way as to redistribute the
, unavoidable risk associated with the cash flow generated by tangible assets among those
seeking and those providing the funds.
Diff: 3
Topic: 1.1 Financial Assets
Objective: 1.1: what a financial asset is and the principal economic functions of financial
assets
