Fundamentals of Investing (1st Canadian Edition) Test Bank – Smart & Zutter – Comprehensive Question Bank

TEST BANK

FUNDAMENTALS OF INVESTING
1ST CANADIAN EDITION

CHAPTER NO. 01: THE INVESTMENT ENVIRONMENT

1.1 LEARNING OBJECTIVE 1


1) A non-interest-bearing chequing account is still considered an investment.
Answer: FALSE
Learning Objective: 1.1 Understand the meaning of the term investment, and list the attributes
that distinguish one investment from another.
AACSB: Analytical thinking


2) Land and buildings are examples of real property investments.
Answer: TRUE
Learning Objective: 1.1 Understand the meaning of the term investment, and list the attributes
that distinguish one investment from another.
AACSB: Analytical thinking


3) Securities are investments issued by firms, governments, or other organizations that represent
a financial claim on the issuer's resources.
Answer: TRUE
Learning Objective: 1.1 Understand the meaning of the term investment, and list the attributes
that distinguish one investment from another.
AACSB: Application of knowledge


4) A Government of Canada bond is an example of a debt security.
Answer: TRUE
Learning Objective: 1.1 Understand the meaning of the term investment, and list the attributes
that distinguish one investment from another.
AACSB: Application of knowledge

,5) Most sources of investment information are in print format, expensive, and difficult to
access.
Answer: FALSE
Learning Objective: 1.1 Understand the meaning of the term investment, and list the attributes
that distinguish one investment from another.
AACSB: Analytical thinking


6) Which of the following is NOT an investment as defined in the text?
A) a certificate of deposit issued by a bank
B) a new automobile
C) a Government of Canada bond
D) a mutual fund held in a retirement account
Answer: B
Learning Objective: 1.1 Understand the meaning of the term investment, and list the attributes
that distinguish one investment from another.
AACSB: Analytical thinking


7) Stocks are a(n) ________ investment representing ________ of a business.
A) direct; ownership
B) direct; debt
C) indirect; ownership
D) indirect; debt
Answer: A
Learning Objective: 1.1 Understand the meaning of the term investment, and list the attributes
that distinguish one investment from another.
AACSB: Application of knowledge


8) An exchange traded fund that invests in the stocks of large corporations is an example of
A) direct investment.
B) indirect investment.
C) derivative investment.
D) tangible investment.
Answer: B

,Learning Objective: 1.1 Understand the meaning of the term investment, and list the attributes
that distinguish one investment from another.
AACSB: Analytical thinking


9) Which of the following has declined in both the US and Canada in recent years?
A) direct ownership of stock by individual investors
B) the percentage of foreign stocks held in typical portfolios
C) institutional ownership of common stocks
D) the timeliness of information available to investors
Answer: A
Learning Objective: 1.1 Understand the meaning of the term investment, and list the attributes
that distinguish one investment from another.
AACSB: Application of knowledge


10) Which of the following has increased in both the US and Canada in recent years?
A) direct ownership of stock by individual investors
B) the percentage of domestic stocks held in typical portfolios
C) institutional ownership of common stocks
D) indirect ownership of stocks through mutual funds and ETFs.
Answer: D
Learning Objective: 1.1 Understand the meaning of the term investment, and list the attributes
that distinguish one investment from another.
AACSB: Analytical thinking


11) Debt represents funds loaned in exchange for
A) dividend income and the repayment of the loan principal.
B) dividend income and an ownership interest in the firm.
C) interest income and a partial ownership interest in the firm.
D) interest income and the repayment of the loan principal.
Answer: D
Learning Objective: 1.1 Understand the meaning of the term investment, and list the attributes
that distinguish one investment from another.
AACSB: Analytical thinking

, 1.2 LEARNING OBJECTIVE 2


1) Institutional investors manage money for businesses and nonprofit organizations, but not for
individuals.
Answer: FALSE
Learning Objective: 1.2 Describe the investment process and types of investors.
AACSB: Application of knowledge


2) Institutional investors are individuals who invest indirectly through financial institutions.
Answer: FALSE
Learning Objective: 1.2 Describe the investment process and types of investors.
AACSB: Application of knowledge


3) Banks and insurance companies are examples of institutional investors.
Answer: TRUE
Learning Objective: 1.2 Describe the investment process and types of investors.
AACSB: Application of knowledge


4) In the financial markets, individuals are net suppliers of funds.
Answer: TRUE
Learning Objective: 1.2 Describe the investment process and types of investors.
AACSB: Application of knowledge


5) The government is generally
A) not involved in the financial market.
B) the owner of the financial market.
C) a supplier of funds to the financial market.
D) a demander of funds in the financial market.
Answer: D
Learning Objective: 1.2 Describe the investment process and types of investors.
AACSB: Application of knowledge