Question 1

In 2018, ____________ was the most significant asset of U.S. households in terms of total value.

Accepted Answer

A)   real estate
B)   mutual fund shares
C)   debt securities
D)   life insurance reserves
E)   pension reservesF) All of the above
G) C) and E)

Question 2

The value of a derivative security

Accepted Answer

A)   depends on the value of the related security.
B)   is unable to be calculated.
C)   is unrelated to the value of the related security.
D)   has been enhanced due to the recent misuse and negative publicity regarding these instruments.
E)   is worthless today.F) A) and B)
G) A) and E)

Question 3

Financial assets

Accepted Answer

A)   directly contribute to the country's productive capacity.
B)   indirectly contribute to the country's productive capacity.
C)   contribute to the country's productive capacity, both directly and indirectly.
D)   do not contribute to the country's productive capacity, either directly or indirectly.
E)   are of no value to anyone.F) A) and E)
G) All of the above

Question 4

_______ are examples of financial intermediaries.

Accepted Answer

A)   Commercial banks
B)   Insurance companies
C)   Investment companies
D)   Credit unions
E)   All of the optionsF) B) and C)
G) A) and E)

Question 5

In 2018, ____________ was(were)  the least significant financial asset(s)  of U.S. nonfinancial businesses in terms of total value.

Accepted Answer

A)   cash and deposits
B)   trade credit
C)   trade debt
D)   inventory
E)   marketable securitiesF) C) and D)
G) A) and D)

Question 6

________ were designed to concentrate the credit risk of a bundle of loans on one class of investor, leaving the other investors in the pool relatively protected from that risk.

Accepted Answer

A)   Stocks
B)   Bonds
C)   Derivatives
D)   Collateralized debt obligations
E)   All of the optionsF) A) and B)
G) A) and C)

Question 7

A debt security pays

Accepted Answer

A)   a fixed level of income for the life of the owner.
B)   a variable level of income for owners on a fixed income.
C)   a fixed or variable income stream at the option of the owner.
D)   a fixed stream of income or a stream of income that is determined according to a specified formula for the life of the security.E) A) and D)
F) B) and C)

Question 8

In 2018, which of the following financial assets make up the second highest proportion of the financial assets held by U.S. households?

Accepted Answer

A)   Corporate equity
B)   Life insurance reserves
C)   Mutual fund shares
D)   Debt securities
E)   Personal trustsF) B) and E)
G) All of the above

Question 9

The largest component of domestic net worth in 2018 was

Accepted Answer

A)   nonresidential real estate.
B)   residential real estate.
C)   inventories.
D)   consumer durables.
E)   equipment and software.F) C) and D)
G) D) and E)

Question 10

In 2018, ____________ was the most significant real asset of U.S. households in terms of total value.

Accepted Answer

A)   consumer durables
B)   automobiles
C)   real estate
D)   mutual fund shares
E)   bank loansF) A) and D)
G) C) and D)

Question 11

Although derivatives can be used as speculative instruments, businesses most often use them to

Accepted Answer

A)   attract customers.
B)   appease stockholders.
C)   offset debt.
D)   hedge risks.
E)   enhance their balance sheets.F) B) and E)
G) A) and B)

Question 12

________ are, in essence, an insurance contract against the default of one or more borrowers.

Accepted Answer

A)   Credit default swaps
B)   CMOs
C)   ETFs
D)   Collateralized debt obligations
E)   All of the optionsF) B) and C)
G) C) and D)

Question 13

In 2018, ____________ were the most significant liability of U.S. households in terms of total value.

Accepted Answer

A)   credit cards
B)   mortgages
C)   bank loans
D)   student loans
E)   other forms of debtF) A) and B)
G) A) and C)

Question 14

Corporate shareholders are best protected from incompetent management decisions by

Accepted Answer

A)   the ability to engage in proxy fights.
B)   management's control of pecuniary rewards.
C)   the ability to call shareholder meetings.
D)   the threat of takeover by other firms.
E)   one-share/one-vote election rules.F) C) and E)
G) B) and D)

Question 15

Mortgage-backed securities were created when ________ began buying mortgage loans from originators and bundling them into large pools that could be traded like any other financial asset.

Accepted Answer

A)   GNMA
B)   FNMA
C)   FHLMC
D)   FNMA and FHLMC
E)   GNMA and FNMAF) B) and D)
G) A) and C)

Question 16

Until 1999, the ________ Act(s)  prohibited banks in the United States from both accepting deposits and underwriting securities.

Accepted Answer

A)   Sarbanes-Oxley
B)   Glass-Steagall
C)   SEC
D)   Sarbanes-Oxley and SEC
E)   None of the optionsF) A) and B)
G) A) and C)

Question 17

An example of a derivative security is

Accepted Answer

A)   a common share of Microsoft.
B)   a call option on Intel stock.
C)   a commodity futures contract.
D)   a call option on Intel stock and a commodity futures contract.
E)   a common share of Microsoft and a call option on Intel stock.F) None of the above
G) D) and E)

Question 18

Which of the following is true about mortgage-backed securities? I)  They aggregate individual home mortgages into homogeneous pools.II)  The purchaser receives monthly interest and principal payments received from payments made on the pool.III)  The banks that originated the mortgages maintain ownership of them.IV)  The banks that originated the mortgages may continue to service them.

Accepted Answer

A)   II, III, and IV
B)   I, II, and IV
C)   II and IV
D)   I, III, and IV
E)   I, II, III, and IVF) C) and D)
G) None of the above

Question 19

Financial intermediaries exist because small investors cannot efficiently

Accepted Answer

A)   diversify their portfolios.
B)   assess credit risk of borrowers.
C)   advertise for needed investments.
D)   diversify their portfolios and assess credit risk of borrowers.
E)   All of the options.F) B) and C)
G) C) and E)

Exam 1: The Investment Environment

In 2018, ____________ was the most significant real asset of U.S. households in terms of total value.

Correct Answer
verified

Until 1999, the ________ Act(s) prohibited banks in the United States from both accepting deposits and underwriting securities.

Correct Answer
verified

Financial intermediaries exist because small investors cannot efficiently

Correct Answer
verified

________ were designed to concentrate the credit risk of a bundle of loans on one class of investor, leaving the other investors in the pool relatively protected from that risk.

Correct Answer
verified

In 2018, ____________ was(were) the least significant financial asset(s) of U.S. nonfinancial businesses in terms of total value.

Correct Answer
verified

Corporate shareholders are best protected from incompetent management decisions by

Correct Answer
verified

An example of a derivative security is

Correct Answer
verified

The largest component of domestic net worth in 2018 was

Correct Answer
verified

Mortgage-backed securities were created when ________ began buying mortgage loans from originators and bundling them into large pools that could be traded like any other financial asset.

Correct Answer
verified

In 2018, ____________ were the most significant liability of U.S. households in terms of total value.

Correct Answer
verified

Correct Answer
verified

_______ are examples of financial intermediaries.

Correct Answer
verified

Financial assets

Correct Answer
verified

In 2018, ____________ was the most significant asset of U.S. households in terms of total value.

Correct Answer
verified

In 2018, which of the following financial assets make up the second highest proportion of the financial assets held by U.S. households?

Correct Answer
verified

A debt security pays

Correct Answer
verified

Although derivatives can be used as speculative instruments, businesses most often use them to

Correct Answer
verified

________ are, in essence, an insurance contract against the default of one or more borrowers.

Correct Answer
verified

The value of a derivative security

Correct Answer
verified

Exam 1: The Investment Environment

In 2018, ____________ was the most significant real asset of U.S. households in terms of total value.

Correct AnswerverifiedShow Answer

Until 1999, the ________ Act(s) prohibited banks in the United States from both accepting deposits and underwriting securities.

Correct AnswerverifiedShow Answer

Financial intermediaries exist because small investors cannot efficiently

Correct AnswerverifiedShow Answer

________ were designed to concentrate the credit risk of a bundle of loans on one class of investor, leaving the other investors in the pool relatively protected from that risk.

Correct AnswerverifiedShow Answer

In 2018, ____________ was(were) the least significant financial asset(s) of U.S. nonfinancial businesses in terms of total value.

Correct AnswerverifiedShow Answer

Corporate shareholders are best protected from incompetent management decisions by

Correct AnswerverifiedShow Answer

An example of a derivative security is

Correct AnswerverifiedShow Answer

The largest component of domestic net worth in 2018 was

Correct AnswerverifiedShow Answer

Mortgage-backed securities were created when ________ began buying mortgage loans from originators and bundling them into large pools that could be traded like any other financial asset.

Correct AnswerverifiedShow Answer

In 2018, ____________ were the most significant liability of U.S. households in terms of total value.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

_______ are examples of financial intermediaries.

Correct AnswerverifiedShow Answer

Financial assets

Correct AnswerverifiedShow Answer

In 2018, ____________ was the most significant asset of U.S. households in terms of total value.

Correct AnswerverifiedShow Answer

In 2018, which of the following financial assets make up the second highest proportion of the financial assets held by U.S. households?

Correct AnswerverifiedShow Answer

A debt security pays

Correct AnswerverifiedShow Answer

Although derivatives can be used as speculative instruments, businesses most often use them to

Correct AnswerverifiedShow Answer

________ are, in essence, an insurance contract against the default of one or more borrowers.

Correct AnswerverifiedShow Answer

The value of a derivative security

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified