Fundamentals of Investment Management (McGraw-Hill/Irwin Series in Finance, Insurance and Real Esta) 10th Edition

Convertible bonds tend to pay better interest rates than straight bonds, since convertibles are of lower risk. Answer: FALSEConvertible bonds pay lower interest rates than straight bonds because of the convertibilityfactor. Investors are willing to take the lower rates in the hope of price appreciation through common stock performance. Answer: FALSEConvertible

The bond market is dominated by institutional investors. Answer: TRUEThe bond market is dominated by large institutional investors (insurance companies, banks, pension funds, mutual funds) even more than the stock market. Institutional investors account for 80-85% of the trading in key segments of the bond market. Answer: TRUEThe bond market is

Fiscal policy involves government spending and taxation policies. Answer: TRUE Fiscal policy can be described as the government's taxing and spending policies. Answer: TRUE Fiscal policy can be described as the government's taxing and spending policies. Answer: TRUE Fiscal policy can be described as the government's taxing and spending policies. A limited partnership

Points above the efficient frontier have superior risk-return characteristics to those along the efficient frontier, but are not part of the feasible set. Answer: TRUE Refer to Figure 17-4. The portfolios on the efficient frontier provide the best risk-return trade-off. That is, along this efficient frontier we can receive a

For a hedge to work, the futures contract must continue until actual delivery takes place. Answer: FALSEThe person who sells the contract does not need to have actual possession of the corn, nor does the purchaser of the contract need to plan on taking possession of the corn. Almost allcommodities

The premium of warrants tends to decrease as the stock price rises. Answer: TRUE The premium of a warrant tends to decrease as the stock price rises. Answer: TRUE The premium of a warrant tends to decrease as the stock price rises. Answer: TRUE The premium of a warrant tends to decrease

The greatest profit, and the greatest risk, arises from trying to identify an acquisition candidate before the announcement. Answer: TRUE While trying to guess an acquisition candidate before public announcement can be potentially profitable, it requires that an investor tie up large blocks of capital in betting on an event

Under-pricing of new stock issues helps ensure the investment banker that the issue will be fully subscribed to at the initial market price. Answer: TRUE The investment banker must be certain that the issue will be fully subscribed to at the initial public market price, or the banker (and others) will

An ascending term structure reflects the view that rates will increase in the future. Answer: TRUE Refer to Figure 12-2. In an ascending term structure pattern, interest rates increase with thelengthening of the maturity dates. When the term structure is in this posture, it is a general signal that interest

Various industries are so different that no common factors exist among them for purposes of analysis. Answer: FALSERefer to Figure 5-1. Figure 5-1 gives a top-down overview of the valuation process. This chart shows numerous factors used in the analysis of companies for valuation purposes. Answer: FALSERefer to Figure 5-1. Figure

The method of starting the stock valuation process with an analysis of the economy is referred to as the bottom-up approach. Answer: FALSEThe bottom-up approach starts with picking individual companies, then looks at the industry and economy to see if there is any reason an investment in a company should

The riskiness of an investment is measured by the dispersion of possible outcomes. Answer: TRUE Investment portfolios should be structured so that whether the economy is up or down, at least one of the investments prospers in the state of the economy at that time. An example: gold is up

An increase in assets is considered a source of funds. Answer: FALSERefer to Figure 8-1. An increase in assets is not considered a source of funds. Answer: FALSERefer to Figure 8-1. An increase in assets is not considered a source of funds. Answer: FALSE Refer to Figure 8-1. An increase in assets is

American depository receipts allow foreign stocks to be traded in the United States markets very similarly to U.S. stocks. Answer: TRUEAmerican depository receipts allow foreign stocks to be traded in the United States markets very similarly to U.S. stocks. Answer: TRUEAmerican depository receipts allow foreign stocks to be traded in the

The quantity theory of money states that as the supply of money increases relative to the demand for money, people will make adjustments in their portfolios of assets. First, they will buy bonds, stocks, and then real assets. Answer: TRUE The quantity theory of money holds that as the supply

In the last few years (since 2006), the trade deficit has increased dramatically. Answer: FALSERefer to Figure 5-4. The trade deficit has been improving since the 2006 bottom. Answer: FALSERefer to Figure 5-4. The trade deficit has been improving since the 2006 bottom. Answer: FALSE Refer to Figure 5-4. The trade deficit has

One way of maintaining growth when domestic markets have become saturated is to expand into markets overseas. Answer: TRUEMany companies in non-growth industries, like Nike and McDonald's, have found growth by expansion abroad. Answer: TRUEMany companies in non-growth industries, like Nike and McDonald's, have found growth by expansion abroad. Answer: TRUE Many companies

Even though Korea and China have markets bigger than some markets in developed countries, they are considered to be emerging markets because they have low per-capita gross domestic product. Answer: TRUE Korea and China are considered to be emerging markets because they have low per-capita gross domestic product. Answer: TRUE Korea and