2 Land and buildings are examples of real property investments.

1 Copyright © 2020 Pearson Education, Inc.Fundamentals of Investing, 14e (Smart/Zutter) Chapter 1 The Investment Environment

1.1 Learning Goal 1

1) A non-interest bearing checking account is still considered an investment.

Answer: FALSE

Learning Outcome: F-12 Discuss the implications of systematic risk in financial markets and its role in shaping investment choices

AACSB: Analytical thinking

Question Status: Previous Edition

Learning Goal: Learning Goal 1

2) Land and buildings are examples of real property investments.

Answer: TRUE

Learning Outcome: F-12 Discuss the implications of systematic risk in financial markets and its role in shaping investment choices

AACSB: Analytical thinking

Question Status: Previous Edition

Learning Goal: Learning Goal 1

3) Since 1900, the average return on stocks has exceeded the average return on savings accounts by more than 6 percentage points.

Answer: TRUE

Learning Outcome: F-12 Discuss the implications of systematic risk in financial markets and its role in shaping investment choices

AACSB: Analytical thinking

Question Status: Previous Edition

Learning Goal: Learning Goal 1

4) A United States Savings Bond is an example of an investment as defined in the text.

Answer: TRUE

Learning Outcome: F-12 Discuss the implications of systematic risk in financial markets and its role in shaping investment choices

AACSB: Analytical thinking

Question Status: Previous Edition

Learning Goal: Learning Goal 1

5) Most sources of investment information are in print format, expensive, and difficult to access.

Answer: FALSE

Learning Outcome: F-12 Discuss the implications of systematic risk in financial markets and its role in shaping investment choices

AACSB: Analytical thinking

Question Status: Previous Edition

Learning Goal: Learning Goal 1

(Fundamentals of Investing, 14e Scott B. Smart, Chad J Zutter) (Test Bank all Chapters) 1 / 4

2 Copyright © 2020 Pearson Education, Inc.6) Which of the following is NOT an investment as defined in the text?

• a certificate of deposit issued by a bank
• a new automobile
• a United States Saving Bond
• a mutual fund held in a retirement account

Answer: B

Learning Outcome: F-12 Discuss the implications of systematic risk in financial markets and its role in shaping investment choices

AACSB: Analytical thinking

Question Status: Previous Edition

Learning Goal: Learning Goal 1

7) Stocks are a(n) ________ investment representing ________ of a business.

• direct; ownership
• direct; debt
• indirect; ownership
• indirect; debt

Answer: A

Learning Outcome: F-12 Discuss the implications of systematic risk in financial markets and its role in shaping investment choices

AACSB: Analytical thinking

Question Status: Previous Edition

Learning Goal: Learning Goal 1

8) An exchange traded fund that invests in the stocks of large corporations is an example of

• direct investment.
• indirect investment.
• derivative investment.
• tangible investment.

Answer: B

Learning Outcome: F-12 Discuss the implications of systematic risk in financial markets and its role in shaping investment choices

AACSB: Analytical thinking

Question Status: Previous Edition

Learning Goal: Learning Goal 1

9) Which of the following has declined in recent years?

• direct ownership of stock by individual investors
• the percentage of foreign stocks held in typical portfolios
• institutional ownership of common stocks
• the timeliness of information available to investors

Answer: A

Learning Outcome: F-12 Discuss the implications of systematic risk in financial markets and its role in shaping investment choices

AACSB: Analytical thinking

Question Status: Previous Edition

Learning Goal: Learning Goal 1 2 / 4

3 Copyright © 2020 Pearson Education, Inc.

10) Which of the following has increased in recent years?

• direct ownership of stock by individual investors
• the percentage of domestic stocks held in typical portfolios
• institutional ownership of common stocks
• indirect ownership of stocks through mutual funds and ETFs.

Answer: D

Learning Outcome: F-12 Discuss the implications of systematic risk in financial markets and its role in shaping investment choices

AACSB: Analytical thinking

Question Status: New Question

Learning Goal: Learning Goal 1

11) Debt represents funds loaned in exchange for

• dividend income and the repayment of the loan principal.
• dividend income and an ownership interest in the firm.
• interest income and a partial ownership interest in the firm.
• interest income and the repayment of the loan principal.

Answer: D

Learning Outcome: F -12 Discuss the implications of systematic risk in financial markets and its role in shaping investment choices

AACSB: Analytical thinking

Question Status: Previous Edition

Learning Goal: Learning Goal 1

1.2 Learning Goal 2

1) Institutional investors manage money for businesses and nonprofit organizations, but not for individuals.

Answer: FALSE

Learning Outcome: F-01 Describe the different financial markets and the role of the financial managers

AACSB: Application of knowledge

Question Status: Previous Edition

Learning Goal: Learning Goal 2

2) Institutional investors are individuals who invest indirectly through financial institutions.

Answer: FALSE

Learning Outcome: F-01 Describe the different financial markets and the role of the financial managers

AACSB: Application of knowledge

Question Status: Previous Edition

Learning Goal: Learning Goal 2

• / 4

4 Copyright © 2020 Pearson Education, Inc.3) Banks and insurance companies are examples of institutional investors.

Answer: TRUE

Learning Outcome: F-01 Describe the different financial markets and the role of the financial managers

AACSB: Application of knowledge

Question Status: Previous Edition

Learning Goal: Learning Goal 2

4) In the financial markets, individuals are net suppliers of funds.

Answer: TRUE

Learning Outcome: F-01 Describe the different financial markets and the role of the financial managers

AACSB: Application of knowledge

Question Status: Revised

Learning Goal: Learning Goal 2

5) The government is generally

• not involved in the financial markets.
• the owner of the financial market.
• a supplier of funds to the financial market.
• a demander of funds in the financial market.

Answer: D

Learning Outcome: F-01 Describe the different financial markets and the role of the financial managers

AACSB: Application of knowledge

Question Status: Previous Edition

Learning Goal: Learning Goal 2

6) On a net basis, funds in the financial markets are generally supplied by

• individuals.
• both individuals and business firms.
• business firms.
• the government.

Answer: A

Learning Outcome: F-01 Describe the different financial markets and the role of the financial managers

AACSB: Application of knowledge

Question Status: Previous Edition

Learning Goal: Learning Goal 2

• / 4