Testbank&SolutionmanualforFundamentalsof
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Investing,14thEditionby Scott B. Smart
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,Fundamentals of Investing, 14e (Smart/Zutter) ss ss ss ss
Chapter 1 The Investment Environment
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1.1 Learning Goal 1 ss ss
1) A non-interest bearing checking account is still considered an investment.
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Answer: FALSE
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Learning Outcome: F-12 Discuss the implications of systematic risk in financial markets
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and its role in shaping investment choices
ss ss ss ss ss ss ss
AACSB: Analytical thinking s s ss
Question Status: Previous Edition
ss ss s s ss
Learning Goal: Learning Goal 1
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2) Land and buildings are examples of real property investments.
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Answer: TRUE
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Learning Outcome: F-12 Discuss the implications of systematic risk in financial markets
ss s s ss ss ss ss ss ss ss ss ss
and its role in shaping investment choices
ss ss ss ss ss ss ss
AACSB: Analytical thinking s s ss
Question Status: Previous Edition
ss ss s s ss
Learning Goal: Learning Goal 1
ss ss s s ss ss
3) Since 1900, the average return on stocks has exceeded the average return on
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savings accounts by more than 6 percentage points.
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Answer: TRUE
Learning Outcome: F-12 Discuss the implications of systematic risk in financial markets
ss s s ss ss ss ss ss ss ss ss ss
and its role in shaping investment choices
ss ss ss ss ss ss ss
AACSB: Analytical thinking s s ss
Question Status: Previous Edition
ss ss s s ss
Learning Goal: Learning Goal 1
ss ss s s ss ss
4) A United States Savings Bond is an example of an investment as defined in the
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text. Answer: TRUE
ss ss s s
Learning Outcome: F-12 Discuss the implications of systematic risk in financial markets
ss s s ss ss ss ss ss ss ss ss ss
and its role in shaping investment choices
ss ss ss ss ss ss ss
AACSB: Analytical thinking s s ss
Question Status: Previous Edition
ss ss s s ss
Learning Goal: Learning Goal 1
ss ss s s ss ss
5) Most sources of investment information are in print format, expensive, and difficult
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to access.
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Answer: FALSE
Learning Outcome: F-12 Discuss the implications of systematic risk in financial markets
ss s s ss ss ss ss ss ss ss ss ss
and its role in shaping investment choices
ss ss ss ss ss ss ss
AACSB: Analytical thinking s s ss
Question Status: Previous Edition
ss ss s s ss
Learning Goal: Learning Goal 1
ss ss s s ss ss
1
Copyright © 2020 Pearson Education, Inc. ss ss ss ss ss
,6) Which of the following is NOT an investment as defined in the text?
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A) a certificate of deposit issued by a bank
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B) a new automobile
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C) a United States Saving Bond
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D) a mutual fund held in a retirement account
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Answer: B
ss s s
Learning Outcome: F-12 Discuss the implications of systematic risk in financial markets
ss s s ss ss ss ss ss ss ss ss ss
and its role in shaping investment choices
ss ss ss ss ss ss ss
AACSB: Analytical thinking s s ss
Question Status: Previous Edition
ss ss s s ss
Learning Goal: Learning Goal 1
ss ss s s ss ss
7) Stocks are a(n) investment representing
ss of a business.s s ss ss ss ss ss
A) direct; ownership ss
B) direct; debt ss
C) indirect; ownership ss
D) indirect;debt s
Answer: A
ss s s
Learning Outcome: F-12 Discuss the implications of systematic risk in financial markets
ss s s ss ss ss ss ss ss ss ss ss
and its role in shaping investment choices
ss ss ss ss ss ss ss
AACSB: Analytical thinking s s ss
Question Status: Previous Edition
ss ss s s ss
Learning Goal: Learning Goal 1
ss ss s s ss ss
8) An exchange traded fund that invests in the stocks of large corporations is an example of
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A) direct investment. ss
B) indirect investment. ss
C) derivative investment. ss
D) tangible investment. ss
Answer: B
ss
Learning Outcome: F-12 Discuss the implications of systematic risk in financial markets
ss s s ss ss ss ss ss ss ss ss ss
and its role in shaping investment choices
ss ss ss ss ss ss ss
AACSB: Analytical thinking s s ss
Question Status: Previous Edition
ss ss s s ss
Learning Goal: Learning Goal 1
ss ss s s ss ss
9) Which of the following has declined in recent years?
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A) direct ownership of stock by individual investors
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B) the percentage of foreign stocks held in typical portfolios
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C) institutional ownership of common stocks ss ss ss ss
D) the timeliness of information available to investors
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Answer: A
ss s s
Learning Outcome: F-12 Discuss the implications of systematic risk in financial markets
ss s s ss ss ss ss ss ss ss ss ss
and its role in shaping investment choices
ss ss ss ss ss ss ss
AACSB: Analytical thinking s s ss
Question Status: Previous Edition
ss ss s s ss
Learning Goal: Learning Goal 1
ss ss s s ss ss
2
Copyright © 2020 Pearson Education, Inc.
ss ss ss ss ss
, 10) Which of the following has increased in recent years?
ss ss ss ss ss ss ss s s
A) direct ownership of stock by individual investors
ss ss ss ss ss ss
B) the percentage of domestic stocks held in typical portfolios
ss ss ss ss ss ss ss ss
C) institutional ownership of common stocks ss ss ss ss
D) indirect ownership of stocks through mutual funds and ETFs.
ss ss ss ss ss ss ss ss
Answer: D
ss s s
Learning Outcome: F-12 Discuss the implications of systematic risk in financial markets
ss s s ss ss ss ss ss ss ss ss ss
and its role in shaping investment choices
ss ss ss ss ss ss ss
AACSB: Analytical thinking s s ss
Question Status: New
ss ss s s
Question Learning Goal:
ss ss ss
Learning Goal ss
1
ss
11) Debt represents funds loaned in exchange for
ss ss ss ss ss ss
A) dividend income and the repayment of the loan principal.
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B) dividend income and an ownership interest in the firm.
ss ss ss ss ss ss ss ss
C) interest income and a partial ownership interest in the firm.
ss ss ss ss ss ss ss ss ss
D) interest income and the repayment of the loan principal.
ss ss ss ss ss ss ss ss
Answer: D
ss s s
Learning Outcome: F-12 Discuss the implications of systematic risk in financial markets
ss s s ss ss ss ss ss ss ss ss ss
and its role in shaping investment choices
ss ss ss ss ss ss ss
AACSB: Analytical thinking s s ss
Question Status: Previous Edition
ss ss s s ss
Learning Goal: Learning Goal 1
ss ss s s ss ss
1.2 Learning Goal 2 ss ss
1) Institutional investors manage money for businesses and nonprofit organizations, but not
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for individuals.
ss ss
Answer: FALSE
Learning Outcome: F-01 Describe the different financial markets and the role of the
ss s s ss ss ss ss ss ss ss ss ss ss
financial managers
ss ss
AACSB: Application of knowledge
s s ss ss
Question Status: Previous Edition
ss ss s s ss
Learning Goal: Learning Goal 2
ss ss s s ss ss
2) Institutional investors are individuals who invest indirectly through financial
ss ss ss ss ss ss ss ss
institutions. Answer: FALSE
ss ss s s
Learning Outcome: F-01 Describe the different financial markets and the role of the
ss s s ss ss ss ss ss ss ss ss ss ss
financial managers
ss ss
AACSB: Application of knowledge
s s ss ss
Question Status: Previous Edition
ss ss s s ss
Learning Goal: Learning Goal 2
ss ss s s ss ss
3
Copyright © 2020 Pearson Education, Inc. ss ss ss ss ss
s s s s s s
Investing,14thEditionby Scott B. Smart
ss g ss ss ss
,Fundamentals of Investing, 14e (Smart/Zutter) ss ss ss ss
Chapter 1 The Investment Environment
ss ss ss ss
1.1 Learning Goal 1 ss ss
1) A non-interest bearing checking account is still considered an investment.
ss ss ss ss ss ss ss ss ss
Answer: FALSE
ss s s
Learning Outcome: F-12 Discuss the implications of systematic risk in financial markets
ss s s ss ss ss ss ss ss ss ss ss
and its role in shaping investment choices
ss ss ss ss ss ss ss
AACSB: Analytical thinking s s ss
Question Status: Previous Edition
ss ss s s ss
Learning Goal: Learning Goal 1
ss ss s s ss ss
2) Land and buildings are examples of real property investments.
ss ss ss ss ss ss ss ss
Answer: TRUE
ss s s
Learning Outcome: F-12 Discuss the implications of systematic risk in financial markets
ss s s ss ss ss ss ss ss ss ss ss
and its role in shaping investment choices
ss ss ss ss ss ss ss
AACSB: Analytical thinking s s ss
Question Status: Previous Edition
ss ss s s ss
Learning Goal: Learning Goal 1
ss ss s s ss ss
3) Since 1900, the average return on stocks has exceeded the average return on
ss ss ss ss ss ss ss ss ss ss ss ss
savings accounts by more than 6 percentage points.
ss ss ss ss ss ss ss ss
Answer: TRUE
Learning Outcome: F-12 Discuss the implications of systematic risk in financial markets
ss s s ss ss ss ss ss ss ss ss ss
and its role in shaping investment choices
ss ss ss ss ss ss ss
AACSB: Analytical thinking s s ss
Question Status: Previous Edition
ss ss s s ss
Learning Goal: Learning Goal 1
ss ss s s ss ss
4) A United States Savings Bond is an example of an investment as defined in the
ss ss ss ss ss ss ss ss ss ss ss ss ss ss
text. Answer: TRUE
ss ss s s
Learning Outcome: F-12 Discuss the implications of systematic risk in financial markets
ss s s ss ss ss ss ss ss ss ss ss
and its role in shaping investment choices
ss ss ss ss ss ss ss
AACSB: Analytical thinking s s ss
Question Status: Previous Edition
ss ss s s ss
Learning Goal: Learning Goal 1
ss ss s s ss ss
5) Most sources of investment information are in print format, expensive, and difficult
ss ss ss ss ss ss ss ss ss ss ss
to access.
ss ss
Answer: FALSE
Learning Outcome: F-12 Discuss the implications of systematic risk in financial markets
ss s s ss ss ss ss ss ss ss ss ss
and its role in shaping investment choices
ss ss ss ss ss ss ss
AACSB: Analytical thinking s s ss
Question Status: Previous Edition
ss ss s s ss
Learning Goal: Learning Goal 1
ss ss s s ss ss
1
Copyright © 2020 Pearson Education, Inc. ss ss ss ss ss
,6) Which of the following is NOT an investment as defined in the text?
ss ss ss ss ss ss ss ss ss ss ss ss
A) a certificate of deposit issued by a bank
ss ss ss ss ss ss ss
B) a new automobile
ss ss
C) a United States Saving Bond
ss ss ss ss
D) a mutual fund held in a retirement account
ss ss ss ss ss ss ss
Answer: B
ss s s
Learning Outcome: F-12 Discuss the implications of systematic risk in financial markets
ss s s ss ss ss ss ss ss ss ss ss
and its role in shaping investment choices
ss ss ss ss ss ss ss
AACSB: Analytical thinking s s ss
Question Status: Previous Edition
ss ss s s ss
Learning Goal: Learning Goal 1
ss ss s s ss ss
7) Stocks are a(n) investment representing
ss of a business.s s ss ss ss ss ss
A) direct; ownership ss
B) direct; debt ss
C) indirect; ownership ss
D) indirect;debt s
Answer: A
ss s s
Learning Outcome: F-12 Discuss the implications of systematic risk in financial markets
ss s s ss ss ss ss ss ss ss ss ss
and its role in shaping investment choices
ss ss ss ss ss ss ss
AACSB: Analytical thinking s s ss
Question Status: Previous Edition
ss ss s s ss
Learning Goal: Learning Goal 1
ss ss s s ss ss
8) An exchange traded fund that invests in the stocks of large corporations is an example of
ss ss ss ss ss ss ss ss ss ss ss ss ss ss ss
A) direct investment. ss
B) indirect investment. ss
C) derivative investment. ss
D) tangible investment. ss
Answer: B
ss
Learning Outcome: F-12 Discuss the implications of systematic risk in financial markets
ss s s ss ss ss ss ss ss ss ss ss
and its role in shaping investment choices
ss ss ss ss ss ss ss
AACSB: Analytical thinking s s ss
Question Status: Previous Edition
ss ss s s ss
Learning Goal: Learning Goal 1
ss ss s s ss ss
9) Which of the following has declined in recent years?
ss ss ss ss ss ss ss s s
A) direct ownership of stock by individual investors
ss ss ss ss ss ss
B) the percentage of foreign stocks held in typical portfolios
ss ss ss ss ss ss ss ss
C) institutional ownership of common stocks ss ss ss ss
D) the timeliness of information available to investors
ss ss ss ss ss ss
Answer: A
ss s s
Learning Outcome: F-12 Discuss the implications of systematic risk in financial markets
ss s s ss ss ss ss ss ss ss ss ss
and its role in shaping investment choices
ss ss ss ss ss ss ss
AACSB: Analytical thinking s s ss
Question Status: Previous Edition
ss ss s s ss
Learning Goal: Learning Goal 1
ss ss s s ss ss
2
Copyright © 2020 Pearson Education, Inc.
ss ss ss ss ss
, 10) Which of the following has increased in recent years?
ss ss ss ss ss ss ss s s
A) direct ownership of stock by individual investors
ss ss ss ss ss ss
B) the percentage of domestic stocks held in typical portfolios
ss ss ss ss ss ss ss ss
C) institutional ownership of common stocks ss ss ss ss
D) indirect ownership of stocks through mutual funds and ETFs.
ss ss ss ss ss ss ss ss
Answer: D
ss s s
Learning Outcome: F-12 Discuss the implications of systematic risk in financial markets
ss s s ss ss ss ss ss ss ss ss ss
and its role in shaping investment choices
ss ss ss ss ss ss ss
AACSB: Analytical thinking s s ss
Question Status: New
ss ss s s
Question Learning Goal:
ss ss ss
Learning Goal ss
1
ss
11) Debt represents funds loaned in exchange for
ss ss ss ss ss ss
A) dividend income and the repayment of the loan principal.
ss ss ss ss ss ss ss ss
B) dividend income and an ownership interest in the firm.
ss ss ss ss ss ss ss ss
C) interest income and a partial ownership interest in the firm.
ss ss ss ss ss ss ss ss ss
D) interest income and the repayment of the loan principal.
ss ss ss ss ss ss ss ss
Answer: D
ss s s
Learning Outcome: F-12 Discuss the implications of systematic risk in financial markets
ss s s ss ss ss ss ss ss ss ss ss
and its role in shaping investment choices
ss ss ss ss ss ss ss
AACSB: Analytical thinking s s ss
Question Status: Previous Edition
ss ss s s ss
Learning Goal: Learning Goal 1
ss ss s s ss ss
1.2 Learning Goal 2 ss ss
1) Institutional investors manage money for businesses and nonprofit organizations, but not
ss ss ss ss ss ss ss ss ss ss
for individuals.
ss ss
Answer: FALSE
Learning Outcome: F-01 Describe the different financial markets and the role of the
ss s s ss ss ss ss ss ss ss ss ss ss
financial managers
ss ss
AACSB: Application of knowledge
s s ss ss
Question Status: Previous Edition
ss ss s s ss
Learning Goal: Learning Goal 2
ss ss s s ss ss
2) Institutional investors are individuals who invest indirectly through financial
ss ss ss ss ss ss ss ss
institutions. Answer: FALSE
ss ss s s
Learning Outcome: F-01 Describe the different financial markets and the role of the
ss s s ss ss ss ss ss ss ss ss ss ss
financial managers
ss ss
AACSB: Application of knowledge
s s ss ss
Question Status: Previous Edition
ss ss s s ss
Learning Goal: Learning Goal 2
ss ss s s ss ss
3
Copyright © 2020 Pearson Education, Inc. ss ss ss ss ss
