Financial Investment Exam 1 Practical Questions. Pt1

Which type of fund generally has the lowest average expense ratio?

Indexed funds

All but which one of the following indices is value weighted?

DJIA - Dow Jones Industrial Average

Mutual funds that hold both equities and fixed-income securities in relatively stable proportions are called __________.

balanced funds

Commodity and derivative markets allow firms to adjust their __________.

exposure to various business risks

Which of the following is not a type of managed investment company?

Unit Investment Trusts

__________ have become the main way for investors to speculate in precious metals.

Exchange-traded funds

__________ is not a derivative security.

A share of common stock.

The New York Stock Exchange is a good example of __________.

an auction market

The Standard & Poor's 500 is __________ weighted index.

a value

The efficient market hypothesis suggests that __________.

passive portfolio management strategies are the most appropriate investment strategies.

__________ represents an ownership share in a corporation.

Common stock

The yield on tax-exempt bonds is __________.

less than the yield on taxable bonds

The greatest percentage of mutual fund assets are invested in __________.

equity funds.

Which of the following is NOT a true statement regarding municipal bonds?

A municipal bond is a debt obligation issued by the federal government.

The purchase of a futures contract gives the buyer __________.

the obligation to buy an item at a specified price

Commercial paper is a short-term security issued by __________ to raise funds.

large well-known companies

Which of the following funds invest specifically in stocks of fast-growing companies?

Growth equity funds

Which of the following is not a characteristic of a money market instrument?

Maturity greater than 1 year

The process of polling potential investors regarding their interest in a forthcoming initial public offering (IPO) is called __________.

book building.

The value of a derivative security __________.

depends on the value of another related security

Underwriting is one of the services provided by __________.

Investment bankers

An individual who goes short in a futures position has the __________.

obligation to deliver the underlying commodity at contract maturity

The bid price of a Treasury bill is __________.

the price at which the dealer in Treasury bills is willing to buy the bill

__________ portfolio management calls for holding diversified portfolios without spending effort or resources attempting to improve investment performance through security analysis.

Passive

An investor in a T-bill earns interest by __________.

buying the bill at a discount from the face value to be received at maturity

Net asset value is defined as __________.

market value of assets minus liabilities divided by shares outstanding

When the market is more optimistic about a firm, its share price will __________; as a result, it will need to issue __________ shares to raise funds that are needed.

rise; fewer

Which type of fund is often priced at a significant discount to net asset value?

Closed-end fund

Which of the following is NOT an example of a financial intermediary?

IBM

Investors who want to liquidate their holdings in a closed-end fund may sell their shares __________.

on the open market

In securities markets, there should be a risk-return trade-off with higher-risk assets having __________ expected returns than lower-risk assets.

higher

Security selection refers to __________.

choosing specific securities within each asset class

_________ are examples of financial intermediaries.

All of the choices are correct

Initial public offerings (IPOs) are usually __________ relative to the levels at which their prices stabilize after they begin trading in the secondary market.

underpriced

A fund that invests in securities worldwide, including the United States of America, is called __________.

a global fund

Which of the following is NOT a typical characteristic of common stock ownership?

Unlimited liability

The most marketable money market securities are __________.

Treasury bills

The primary market where new security issues are offered to the public is a good example of __________.

a brokered market

Financial institutions that specialize in assisting corporations in primary market transactions are called __________.

Investment bankers

In a __________ underwriting arrangement, the underwriter assumes the full risk that shares may not be sold to the public at the stipulated offering price.

firm-commitment