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1 Copyright © 2019 McGraw-Hill Education. All rights reserved.No reproduction or distribution without the prior written consent of McGraw-Hill Education.
Chapter 1 Investments: Background and Issues
1) Financial assets represent ________ of total assets of U.S. households.
- under 70%
- over 90%
- under 10%
- about 30%
Answer: A
Difficulty: 1 Easy
Topic: Real Assets versus Financial Assets
Learning Objective: 01-02 Distinguish between real assets and financial assets.
Bloom's: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
2) Real assets in the economy include all but which one of the following?
- land
- buildings
- consumer durables
- common stock
Answer: D
Difficulty: 1 Easy
Topic: Real Assets versus Financial Assets
Learning Objective: 01-02 Distinguish between real assets and financial assets.
Bloom's: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
3) Net worth represents ________ of the liabilities and net worth of commercial banks.
- about 51%
- about 91%
- about 11%
- about 31%
Answer: C
Difficulty: 2 Medium
Topic: Financial Intermediaries
Learning Objective: 01-02 Distinguish between real assets and financial assets.
Bloom's: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
(Essentials of Investments, 11e Zvi Bodie, Alex Kane, Alan Marcus) (Test Bank all Chapters) 1 / 4
2 Copyright © 2019 McGraw-Hill Education. All rights reserved.No reproduction or distribution without the prior written consent of McGraw-Hill Education.4) According to the Flow of Funds Accounts of the United States, the largest single asset of U.S.households is ________.
- mutual fund shares
- real estate
- pension reserves
- corporate equity
Answer: B
Difficulty: 2 Medium
Topic: Real Assets versus Financial Assets
Learning Objective: 01-02 Distinguish between real assets and financial assets.
Bloom's: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
5) According to the Flow of Funds Accounts of the United States, the largest liability of U.S.households is ________.
- mortgages
- consumer credit
- bank loans
- gambling debts
Answer: A
Difficulty: 2 Medium
Topic: Real Assets versus Financial Assets
Learning Objective: 01-02 Distinguish between real assets and financial assets.
Bloom's: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
6) ________ is not a derivative security.
- A share of common stock
- A call option
- A futures contract
- None of the options (All of the answers are derivative securities.)
Answer: A
Difficulty: 1 Easy
Topic: Financial Assets
Learning Objective: 01-02 Distinguish between real assets and financial assets.
Bloom's: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
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3 Copyright © 2019 McGraw-Hill Education. All rights reserved.No reproduction or distribution without the prior written consent of McGraw-Hill Education.7) According to the Flow of Funds Accounts of the United States, the largest financial asset of U.S. households is ________.
- mutual fund shares
- corporate equity
- pension reserves
- deposits
Answer: C
Difficulty: 2 Medium
Topic: Real Assets versus Financial Assets
Learning Objective: 01-02 Distinguish between real assets and financial assets.
Bloom's: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
8) Active trading in markets and competition among securities analysts helps ensure that:
- Security prices approach informational efficiency.
- I only
- I and II only
- II and III only
- I, II, and III
II. Riskier securities are priced to offer higher potential returns.III. Investors are unlikely to be able to consistently find under- or overvalued securities.
Answer: D
Difficulty: 3 Hard
Topic: Financial Markets and the Economy
Learning Objective: 01-03 Explain the economic functions of financial markets and how various securities
Bloom's: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
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4 Copyright © 2019 McGraw-Hill Education. All rights reserved.No reproduction or distribution without the prior written consent of McGraw-Hill Education.9) The material wealth of society is determined by the economy's ________, which is a function of the economy's ________.
- investment bankers; financial assets
- investment bankers; real assets
- productive capacity; financial assets
- productive capacity; real assets
Answer: D
Difficulty: 2 Medium
Topic: Real Assets versus Financial Assets
Learning Objective: 01-02 Distinguish between real assets and financial assets.
Bloom's: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
10) Which of the following is not a money market security?
- U.S. Treasury bill
- 6-month maturity certificate of deposit
- common stock
- All of the options.
Answer: C
Difficulty: 2 Medium
Topic: Financial Assets
Learning Objective: 01-02 Distinguish between real assets and financial assets.
Bloom's: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
11) ________ assets generate net income to the economy, and ________ assets define allocation of income among investors.
- Financial, financial
- Financial, real
- Real, financial
- Real, real
Answer: C
Difficulty: 2 Medium
Topic: Real Assets versus Financial Assets
Learning Objective: 01-02 Distinguish between real assets and financial assets.
Bloom's: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
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