INVESTMENTS ANALYSIS AND MANAGEMENT 12TH EDITION BY CHARLES - Test Bank

Files: ch02, Chapter 2: Investment Alternatives

Multiple Choice Questions

1.         The largest single institutional owner of common stocks is:

a.         mutual funds.

b.         insurance companies.

c.         pension funds

d.         commercial banks

Ans: c

Difficulty: medium

Ref: Organizing Financial Assets

2.         Which of the following is not one of the characteristics of the primary nonmarketable financial assets owned by most individuals?

a.         high liquidity

b.         high return

c.         often issued by the U.S. government

d.         low risk

Ans: b

Difficulty: medium

Ref: Nonmarketable Financial Assets

3.         Savings accounts are ---------- but are not------------.

a.              negotiable; liquid.

b.              marketable; liquid.

c.              liquid; personal

d.              liquid; marketable

Ans: d

Difficulty: difficult

Ref: Nonmarketable Financial Assets

4.         Nonmarketable financial assets that protect against inflation include:

a.         Nonnegotiable certificates of deposit (CDs)

b.         Money market deposit accounts (MMDAs)

c.         Series EE US government savings bonds

d.         US government savings bonds, I bonds

Ans: d

Difficulty: medium

Ref: Nonmarketable Financial Assets

5.         Treasury bills are traded in the --------------------- .

a.              money market.

b.              capital market.

c.              government market.

d.              regulated market.

Ans: a

Difficulty: easy

Ref: Money Market Securities

6.      Which of the U.S. Treasury securities is always sold at a discount?

a.              Treasury bills

b.              Treasury notes

c.              Treasury bonds

d.              Treasury inflation protected securities (TIPS)

Ans: a

Difficulty: medium

Ref: Money Market Securities

7.         Which of the following statements regarding money market instruments is              not true?

a.              They tend to be highly marketable.

b.              They have maturities from 1 to 3 years.

c.              They tend to have a low probability of default.

d.              Their rates tend to move together.

Ans: b

Difficulty: medium

Ref: Money Market Securities

8.         Which of the following would not be considered a capital market security?

a.         a 20-year corporate bond

b.         a common stock

c.         a 6-month Treasury bill

d.         a mutual fund share

Ans: c

Difficulty: medium

Ref: Capital Market Securities

9.         The coupon rate is another name for the:

a.              market interest rate.

b.              current yield.

c.              stated interest rate.

d.              yield to maturity

Ans: c

Difficulty: easy

Ref: Fixed-Income Securities

10.       Zero-coupon bonds are similar to Treasury bills in that both:

a.         are issued exclusively by the U.S. Treasury

b.         are money-market securities

c.         are capital-market securities

d.         are sold at less than par

Ans: d

Difficulty: medium

Ref: Fixed-Income Securities

11.       Each point on a bond quote represents:

a.         $100

b.         1 percent of $100

c.         1 percent of $1000

d.         $1000

Ans: c

Difficulty: difficult