ESSENTIALS OF INVESTMENTS CH.1-6
VOCAB: BODIE|KANE| MARCUS
QUESTIONS WITH CORRECT ANSWERS
2026-2027
Investments - correct answer--
Commitment of current resources in the expectation of deriving greater resources in the future.
Real assets - correct answer-- Assets used to produce goods and services
Financial assets - correct answer-- Claims on real assets of the income generated by them
Equity - correct answer-- An ownershipSshare in a corporation
Derivative securities - correctSanswer--
Securities providing payoffs that depend on the values of other assets
Fixed income(debt) securities - correct answer--SPay a specified cash flow over a specific period
Agency problems - correct answer-- Conflicts of interest between managers and stockholders
Asset allocation - correct answer-- Allocation of an investment portfolio across broad asset classes
Security Selection - correct answer-- Choice of specific securities within each asset class
Security analysis - correct answer-- Analysis of the value of securities
Risk return trade off - correct answer-- Assets with higher expected returnsSentails greater risk
, Passive management -Scorrect answer--
buying and holding a diversified portfolio without attempting to identify mispriced securities
Active management - correct answer--
attempting to identify mispriced securities or to forecast broad market trends
Financial intermediaries -Scorrect answer--
Institutions that "connect" borrowers and lenders by accepting funds from lendersSand loaning funds to
borrowers
Investment companies - correct answer--
Firms managing funds for investors. An investment company may manageseveral mutual funds.
Investment Bankers - correct answer--
Firms specializing in the sale of new securities to the public, typically by underwriting the issues
Primary Market - correct answer-- a market in which new issues of securities are offered to the public
Secondary market - correct answer-- Previously issued securities are traded among investors
Venture capital - correct answer-- money invested to finance a new firm
Private equity - correct answer-- Investments in companies that are not traded on a stock exchange
Securitization - correct answer--
PoolingSloans into standardized securities backed by those loans, which can then be traded like any other
security
Systematic risk - correctSanswer--
Risk of breakdown in the financial system, particularly due to spillover effects from one market into other
s
VOCAB: BODIE|KANE| MARCUS
QUESTIONS WITH CORRECT ANSWERS
2026-2027
Investments - correct answer--
Commitment of current resources in the expectation of deriving greater resources in the future.
Real assets - correct answer-- Assets used to produce goods and services
Financial assets - correct answer-- Claims on real assets of the income generated by them
Equity - correct answer-- An ownershipSshare in a corporation
Derivative securities - correctSanswer--
Securities providing payoffs that depend on the values of other assets
Fixed income(debt) securities - correct answer--SPay a specified cash flow over a specific period
Agency problems - correct answer-- Conflicts of interest between managers and stockholders
Asset allocation - correct answer-- Allocation of an investment portfolio across broad asset classes
Security Selection - correct answer-- Choice of specific securities within each asset class
Security analysis - correct answer-- Analysis of the value of securities
Risk return trade off - correct answer-- Assets with higher expected returnsSentails greater risk
, Passive management -Scorrect answer--
buying and holding a diversified portfolio without attempting to identify mispriced securities
Active management - correct answer--
attempting to identify mispriced securities or to forecast broad market trends
Financial intermediaries -Scorrect answer--
Institutions that "connect" borrowers and lenders by accepting funds from lendersSand loaning funds to
borrowers
Investment companies - correct answer--
Firms managing funds for investors. An investment company may manageseveral mutual funds.
Investment Bankers - correct answer--
Firms specializing in the sale of new securities to the public, typically by underwriting the issues
Primary Market - correct answer-- a market in which new issues of securities are offered to the public
Secondary market - correct answer-- Previously issued securities are traded among investors
Venture capital - correct answer-- money invested to finance a new firm
Private equity - correct answer-- Investments in companies that are not traded on a stock exchange
Securitization - correct answer--
PoolingSloans into standardized securities backed by those loans, which can then be traded like any other
security
Systematic risk - correctSanswer--
Risk of breakdown in the financial system, particularly due to spillover effects from one market into other
s
