Chapter 01 The Investment Environment Answer Key
Multiple Choice Questions
1.
The material wealth of a society is a function of
2.
_______ are real assets.
3.
The means by which individuals hold their claims on real assets in a well-developed
economy are
4.
_______ are financial assets.
5.
_________ financial asset(s).
6.
Financial assets
7.
In 2012, ____________ was the most significant real asset of U.S. households in terms
of total value.
8.
In 2012, ____________ was the least significant financial asset of U.S. households in
terms of total value.
9.
In 2012, ____________ was the most significant financial asset of U.S. households in
terms of total value.
10.
In 2012, ____________ was the most significant asset of U.S. households in terms of
total value.
11.
In 2012, ____________ was the most significant liability of U.S. households in terms of
total value.
12.
Which of the following financial assets made up the greatest proportion of the financial
assets held by U.S. households?
13.
In 2012 _______ of the assets of U.S. households were financial assets as opposed to
tangible assets.
14.
The largest component of domestic net worth in 2012 was
15.
The smallest component of domestic net worth in 2012 was
16.
The national net worth of the U.S. in 2012 was
17.
A fixed-income security pays
18.
A debt security pays
19.
Money market securities
20.
An example of a derivative security is
21.
The value of a derivative security
Topic: Asset Types
22.
Topic: Asset Types
Although derivatives can be used as speculative instruments, businesses most often
use them to
23.
Financial assets permit all of the following except
Difficulty: Intermediate
Topic: Assets
24.
The ____________ refers to the potential conflict between management and
shareholders.
25.
A disadvantage of using stock options to compensate managers is that
26.
Which of the following are mechanisms that have evolved to mitigate potential agency
problems?
I) Using the firm’s stock options for compensation
II) Hiring bickering family members as corporate spies
III) Boards of directors forcing out underperforming management
IV) Security analysts monitoring the firm closely
V) Takeover threats
27.
Corporate shareholders are best protected from incompetent management decisions
by
28.
Theoretically, takeovers should result in
Difficulty: Basic
Topic: Financial Management
29.
Topic: Financial Management
During the period between 2000 and 2002, a large number of scandals were
uncovered. Most of these scandals were related to
I) manipulation of financial data to misrepresent the actual condition of the firm.
II) misleading and overly optimistic research reports produced by analysts.
III) allocating IPOs to executives as a quid pro quo for personal favors.
IV) greenmail.