Finance 4020 Howald exam review 2023 with complete
solution
The material wealth of a society is a function of
A) all physical assets.
B) all financial assets.
C) all financial and real assets.
D) all real assets.
D
________ are real assets.
A) Machines
B) Stocks and bonds
C) Land, machines, and knowledge
D) Knowledge
E) Land
C
________ financial asset(s).
A) U.S. agency bonds are
B) Derivatives and U.S. agency bonds are
C) Land is a
D) Derivatives are
E) Buildings are
B
A fixed-income security pays
A) a fixed or variable income stream at the option of the owner.
B) a variable level of income for owners on a fixed income.
C) a fixed stream of income or a stream of income that is determined according to
a specified formula for the life of the security.
D) a fixed level of income for the life of the owner.
C
The value of a derivative security
A) is unrelated to the value of the related security.
B) has been enhanced due to the recent misuse and negative publicity regarding
these instruments.
C) is unable to be calculated.
D) is worthless today.
E) depends on the value of the related security.
E
Financial assets permit all of the following except
A) allocation of risk.
B) elimination of risk.
C) consumption timing.
D) separation of ownership and control.
B
,The ________ refers to the potential conflict between management and
shareholders.
A) regulatory problem
B) solvency problem
C) diversification problem
D) agency problem
E) liquidity problem
D
A disadvantage of using stock options to compensate managers is that
A) 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.
B) it encourages managers to engage in empire building.
C) it encourages managers to undertake projects that will increase stock price.
D) All of the above
A
Theoretically, takeovers should result in
A) improved management and increased stock price.
B) improved management.
C) increased benefits to existing management of the taken-over firm.
D) increased stock price.
E) All of the options
A
The Sarbanes-Oxley Act
A) requires corporations to have more independent directors and requires the
firm's CFO to personally vouch for the firm's accounting statements.
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.
E) All of the above
E
Asset allocation refers to
A) bottom-up analysis.
B) choosing which securities to hold based on their valuation.
C) investing only in "safe" securities.
D) the allocation of assets into broad asset classes
D
Which of the following portfolio construction methods starts with security
analysis?
A) Bottom-up
B) Buy and hold
C) Middle-out
D) Asset allocation
E) Top-down
A
, Which of the following portfolio construction methods starts with asset
allocation?
A) Middle-out
B) Asset allocation
C) Buy and hold
D) Top-down
E) Bottom-up
D
________ are examples of financial intermediaries.
A) Commercial banks
B) Credit unions
C) Insurance companies
D) Investment companies
E) All of the options
E
________ specialize in helping companies raise capital by selling securities.
A) Investment bankers
B) Credit raters
C) Investment issuers
D) Commercial bankers
A
New issues of securities are sold in the ________ market(s).
A) primary
B) primary and secondary
C) over-the-counter
D) secondary
A
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.
A) I, III, and IV
B) I, II, III, and IV
C) II, III, and IV
D) II and IV
E) I, II, and IV
E
Which of the following is not a characteristic of a money market instrument?
A) Marketability
B) Liquidity premium
C) Long maturity
D) Liquidity
E) Long maturity and liquidity premium
E
solution
The material wealth of a society is a function of
A) all physical assets.
B) all financial assets.
C) all financial and real assets.
D) all real assets.
D
________ are real assets.
A) Machines
B) Stocks and bonds
C) Land, machines, and knowledge
D) Knowledge
E) Land
C
________ financial asset(s).
A) U.S. agency bonds are
B) Derivatives and U.S. agency bonds are
C) Land is a
D) Derivatives are
E) Buildings are
B
A fixed-income security pays
A) a fixed or variable income stream at the option of the owner.
B) a variable level of income for owners on a fixed income.
C) a fixed stream of income or a stream of income that is determined according to
a specified formula for the life of the security.
D) a fixed level of income for the life of the owner.
C
The value of a derivative security
A) is unrelated to the value of the related security.
B) has been enhanced due to the recent misuse and negative publicity regarding
these instruments.
C) is unable to be calculated.
D) is worthless today.
E) depends on the value of the related security.
E
Financial assets permit all of the following except
A) allocation of risk.
B) elimination of risk.
C) consumption timing.
D) separation of ownership and control.
B
,The ________ refers to the potential conflict between management and
shareholders.
A) regulatory problem
B) solvency problem
C) diversification problem
D) agency problem
E) liquidity problem
D
A disadvantage of using stock options to compensate managers is that
A) 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.
B) it encourages managers to engage in empire building.
C) it encourages managers to undertake projects that will increase stock price.
D) All of the above
A
Theoretically, takeovers should result in
A) improved management and increased stock price.
B) improved management.
C) increased benefits to existing management of the taken-over firm.
D) increased stock price.
E) All of the options
A
The Sarbanes-Oxley Act
A) requires corporations to have more independent directors and requires the
firm's CFO to personally vouch for the firm's accounting statements.
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.
E) All of the above
E
Asset allocation refers to
A) bottom-up analysis.
B) choosing which securities to hold based on their valuation.
C) investing only in "safe" securities.
D) the allocation of assets into broad asset classes
D
Which of the following portfolio construction methods starts with security
analysis?
A) Bottom-up
B) Buy and hold
C) Middle-out
D) Asset allocation
E) Top-down
A
, Which of the following portfolio construction methods starts with asset
allocation?
A) Middle-out
B) Asset allocation
C) Buy and hold
D) Top-down
E) Bottom-up
D
________ are examples of financial intermediaries.
A) Commercial banks
B) Credit unions
C) Insurance companies
D) Investment companies
E) All of the options
E
________ specialize in helping companies raise capital by selling securities.
A) Investment bankers
B) Credit raters
C) Investment issuers
D) Commercial bankers
A
New issues of securities are sold in the ________ market(s).
A) primary
B) primary and secondary
C) over-the-counter
D) secondary
A
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.
A) I, III, and IV
B) I, II, III, and IV
C) II, III, and IV
D) II and IV
E) I, II, and IV
E
Which of the following is not a characteristic of a money market instrument?
A) Marketability
B) Liquidity premium
C) Long maturity
D) Liquidity
E) Long maturity and liquidity premium
E
