TEST BANK
CAPITAL MARKETS: INSTITUTIONS AND INSTRUMENTS
FABOZZI/MODIGLIANI
Chapter 1
INTRODUCTION
MULTIPLE CHOICE
1. Which one of the following are examples of financial assets?
[E]
2. Financial assets are referred to as debt instruments in the case of:
[E]
3. Financial assets represent a residual claim in the case of:
[E]
4. The process of valuing financial assets does not include:
5. Which of the following risks are associated with realizing the expected cash flows?
[E]
6. The principal economic functions of financial assets include:
[M]
7. Which of the following are properties of financial assets?
[E]
8. The length of time between the date the instrument was issued and is scheduled to make
final payment is called:
[E]
9. The price discovery process is an economic function, which refers to:
8
10. Common stock issued by Digital Equipment Corporation is traded in which of the
following markets?
[M]
11. When an issuer sells a new financial asset to the public, it is sold in the:
[E]
12. Financial assets that are bought and sold amongst investors are traded in the:
[E]
13. Securities with a maturity of less than one year are traded in the:
[E]
14. Which of the following is not a factor in the integration of financial markets throughout
the world?
15. Securities of issuers not domiciled in the country are traded in which market(s)?
[M]
16. Which of the following statements is incorrect?
[D]
17. Two basic types of derivative instruments are:
[E]
18. The bid-ask spread:
[M]
19. The risk attached to financial assets whose cash flows are not denominated in U.S. dollars
is called:
10
20. Securities traded in the external market are distinguished by:
TRUE/FALSE
1. Financial assets, financial instruments, or securities are intangible assets.
[E]
2. The value of any financial asset is the present value of the expected cash flows.
[E]
3. The financial markets in the U.S. and other major industrialized countries have shifted
from being dominated by retail investors to being dominated by institutional investors.
[M]
4. The Yankee market is the foreign market of the U.S. where the securities of issuers not
domiciled in the U.S. are traded.
[M]
5. The ownership of tangible assets is financed by the issuance of either debt or equity
instruments.
ESSAY QUESTIONS
1. Explain the different ways to classify financial markets and give an example of each.
Key Issues:
2. Describe the properties of financial assets that determine or influence their attractiveness
to different classes of investors.
Key Issues:
3. Distinguish between the role and function of financial assets and financial markets.
Key Issues: