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19
1.5 Learning Goal 5
1) U.S. Treasury Bills mature in 1 year or less.
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: Previous Edition
Learning Goal: Learning Goal 5
2) Liquidity is the ability to convert an investment into cash quickly with little or no loss of
value.
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: Previous Edition
Learning Goal: Learning Goal 5
3) Short-term investments generally provide liquidity, safety, and a high rate of return.
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: Previous Edition
Learning Goal: Learning Goal 5
4) Money market accounts, certificates of deposit, bonds and commercial paper are all forms of
short-term investment vehicles.
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: Previous Edition
Learning Goal: Learning Goal 5
20
5) The primary risk associated with a short-term investment is
A) purchasing power risk.
B) default risk.
C) interest rate risk.
D) economic risk.
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: Previous Edition
Learning Goal: Learning Goal 5
6) Short-term investments
I. provide liquidity.
II. fill an important part of most investment programs.
III. provide a high rate of return with low risk.
IV. provide resources for emergencies.
A) I and IV only
B) II and IV only
C) I, II and IV only
D) I, II, III and IV
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: Previous Edition
Learning Goal: Learning Goal 5
7) Federal insurance protects passbook savings accounts and money market deposit accounts
(MMDAs) up to
A) $100,000.
B) $150,000.
C) $250,000.
D) $1,000,000.
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: Previous Edition
Learning Goal: Learning Goal 5
21
8) Beginning in 2010, the amount protected by the Federal Deposit Insurance Corporation in
non-interest bearing checking accounts is
A) zero.
B) $100,000.
C) unlimited.
D) $250,000.
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: Previous Edition
Learning Goal: Learning Goal 5
9) Since 2010, the interest rate on passbook accounts and certificates of deposit has
A) been less than the rate of inflation.
B) has closely tracked the rate of inflation.
C) exceeded the rate of inflation by 1.5% on average.
D) fluctuated widely.
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: New Question
Learning Goal: Learning Goal 5
10) Which one of the following has the lowest level of risk?
A) commercial paper
B) money market mutual fund account
C) banker's acceptance
D) U.S. Treasury bill
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: Previous Edition
Learning Goal: Learning Goal 5
22
Copyright © 2017 Pearson Education, Inc.
1.6 Learning Goal 6
1) Certified Financial Planners typically manage institutional portfolios.
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: New Question
Learning Goal: Learning Goal 6
2) A major goal of corporate financial management is to increase the value of the firm to
investors.
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: Previous Edition
Learning Goal: Learning Goal 6
3) Stringent regulations and vigorous enforcement have all but eliminated unethical behavior
by financial professionals in recent years.
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: Previous Edition
Learning Goal: Learning Goal 6
4) Insurance companies invest the premiums and fees collected from customers in order to
neutralize the risks assumed from their clients.
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: Previous Edition
Learning Goal: Learning Goal 6
23
5) Chartered Financial Analyst (CFA) is a degree offered by several prestigious business
schools.
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: Previous Edition
Learning Goal: Learning Goal 6
6) Typical responsibilities of financial professionals in a corporate setting include
I. managing cash and short-term investments.
II. evaluating investment opportunities.
III. working one on one with individuals to formulate plans for reaching their financial goals.
IV. interacting with financial markets to find sources of external financing such as debt and
equity.
A) I and IV only
B) I, II and IV only
C) II, III and IV only
D) I, II, III and IV
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: Previous Edition
Learning Goal: Learning Goal 6
24
7) Jobs in which of the following fields require an understanding of the investment
environment?
I. commercial banking
II. corporate finance
III. financial planning
IV. insurance
A) I and IV only
B) I, II and IV only
C) II, III and IV only
D) I, II, III and IV
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: Previous Edition
Learning Goal: Learning Goal 6
8) A major function of investment banking firms is
A) providing loans to investors.
B) providing financial planning services to wealthy individuals.
C) assisting businesses when they issue stocks and bonds.
D) developing investment strategies to neutralize risk.
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: Previous Edition
Learning Goal: Learning Goal 6
9) Which of the following has set an outstanding example of ethical behavior in the financial
professions?
A) Bernard Madoff of Madoff Securities
B) Hank Greenberg of AIG
C) Ramalinga Raju of Satyam Computers
D) none of the above
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: Previous Edition
Learning Goal: Learning Goal 6
25
10) In the U.S., the most prestigious designation for financial planners is
A) CFP.
B) CPA.
C) ING.
D) SIPC.
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: Previous Edition
Learning Goal: Learning Goal 6
11) Briefly describe three different career paths that require a strong background in
investments.
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: Previous Edition
Learning Goal: Learning Goal 6
