Files: ch02, Chapter 2: Investment Alternatives
Multiple Choice Questions
1. The largest single institutional owner of common stocks is:
a. mutual funds.
b. insurance companies.
c. pension funds
d. commercial banks
Ans: c
Difficulty: Moderate
Ref: Organizing Financial Assets
2. Which of the following is not one of the characteristics of the primary
nonmarketable financial assets owned by most individuals?
a. high liquidity
b. high return
c. often issued by the U.S. government
d. low risk
Ans: b
Difficulty: Moderate
Ref: Nonmarketable Financial Assets
3. Savings accounts are ---------- but are not------------.
a. negotiable; liquid.
b. marketable; liquid.
c. liquid; personal
d. liquid; marketable
Ans: d
Difficulty: difficult
Ref: Nonmarketable Financial Assets
4. Nonmarketable financial assets that protect against inflation include:
a. Nonnegotiable certificates of deposit (CDs)
b. Money market deposit accounts (MMDAs)
c. Series EE US government savings bonds
d. US government savings bonds, I bonds
Ans: d
Difficulty: Moderate
Ref: Nonmarketable Financial Assets
Chapter Two 10
Investment Alternatives
, 5. Treasury bills are traded in the --------------------- .
a. money market.
b. capital market.
c. government market.
d. regulated market.
Ans: a
Difficulty: Easy
Ref: Money Market Securities
6. Which of the U.S. Treasury securities is always sold at a discount?
a. Treasury bills
b. Treasury notes
c. Treasury bonds
d. Treasury inflation protected securities (TIPS)
Ans: a
Difficulty: Moderate
Ref: Money Market Securities
7. Which of the following statements regarding money market instruments is
not true?
a. They tend to be highly marketable.
b. They have maturities from 1 to 3 years.
c. They tend to have a low probability of default.
d. Their rates tend to move together.
Ans: b
Difficulty: Moderate
Ref: Money Market Securities
8. Which of the following would not be considered a capital market security?
a. a 20-year corporate bond
b. a common stock
c. a 6-month Treasury bill
d. a mutual fund share
Ans: c
Difficulty: Moderate
Ref: Capital Market Securities
9. The coupon rate is another name for the:
a. market interest rate.
Chapter Two 11
Investment Alternatives
Multiple Choice Questions
1. The largest single institutional owner of common stocks is:
a. mutual funds.
b. insurance companies.
c. pension funds
d. commercial banks
Ans: c
Difficulty: Moderate
Ref: Organizing Financial Assets
2. Which of the following is not one of the characteristics of the primary
nonmarketable financial assets owned by most individuals?
a. high liquidity
b. high return
c. often issued by the U.S. government
d. low risk
Ans: b
Difficulty: Moderate
Ref: Nonmarketable Financial Assets
3. Savings accounts are ---------- but are not------------.
a. negotiable; liquid.
b. marketable; liquid.
c. liquid; personal
d. liquid; marketable
Ans: d
Difficulty: difficult
Ref: Nonmarketable Financial Assets
4. Nonmarketable financial assets that protect against inflation include:
a. Nonnegotiable certificates of deposit (CDs)
b. Money market deposit accounts (MMDAs)
c. Series EE US government savings bonds
d. US government savings bonds, I bonds
Ans: d
Difficulty: Moderate
Ref: Nonmarketable Financial Assets
Chapter Two 10
Investment Alternatives
, 5. Treasury bills are traded in the --------------------- .
a. money market.
b. capital market.
c. government market.
d. regulated market.
Ans: a
Difficulty: Easy
Ref: Money Market Securities
6. Which of the U.S. Treasury securities is always sold at a discount?
a. Treasury bills
b. Treasury notes
c. Treasury bonds
d. Treasury inflation protected securities (TIPS)
Ans: a
Difficulty: Moderate
Ref: Money Market Securities
7. Which of the following statements regarding money market instruments is
not true?
a. They tend to be highly marketable.
b. They have maturities from 1 to 3 years.
c. They tend to have a low probability of default.
d. Their rates tend to move together.
Ans: b
Difficulty: Moderate
Ref: Money Market Securities
8. Which of the following would not be considered a capital market security?
a. a 20-year corporate bond
b. a common stock
c. a 6-month Treasury bill
d. a mutual fund share
Ans: c
Difficulty: Moderate
Ref: Capital Market Securities
9. The coupon rate is another name for the:
a. market interest rate.
Chapter Two 11
Investment Alternatives
