Financial Investment Exam 1 Practical Questions.

Initial margin requirements on stocks are set by the __________.

Federal Reserve

Which one of the following invests in a portfolio that is fixed for the life of the fund?

Unit investment trust

An official description of a mutual fund's planned investment policy can be found in the fund's __________.

prospectus

The over-the-counter securities market is a good example of __________.

a dealer market

__________ are mutual funds that vary the proportions of funds invested in particular market sectors according to the fund manager's forecast of the performance of that market sector.

Asset allocation funds

Which one of the following types of markets requires the greatest level of trading activity to be cost-effective?

Continuous auction market

An order to buy or sell a security at the current price is a __________.

market order

Which type of investment fund is known to invest in options and futures on a large scale?

Hedge funds

A contingent deferred sales load is commonly called a __________.

back-end load

__________blank are partnerships of investors with portfolios that are larger than most individual investors but are still too small to warrant managing on a separate basis.

Commingled funds

Real assets are __________.

assets used to produce goods and services

__________ portfolio construction starts with selecting attractively priced securities.

Bottom-up

A __________ is a private investment pool open only to wealthy or institutional investors that is exempt from SEC regulation and can therefore pursue more speculative policies than mutual funds.

hedge fund

Firms that specialize in helping companies raise capital by selling securities to the public are called __________.

investment banks

The difference between balanced funds and asset allocation funds is that __________.

balanced funds have relatively stable proportions of stocks and bonds while the proportions may vary dramatically for asset allocation funds

Deposits of commercial banks at the Federal Reserve are called __________.

federal funds

__________ are often called mutual funds

Open-end investment companies

The Vanguard 500 Index Fund tracks the performance of the S&P 500. To do so, the fund buys shares in each S&P 500 company __________.

in proportion to the market value weight of the firm's equity in the S&P 500

Which one of the following is a true statement regarding the Dow Jones Industrial Average?

It is a price-weighted average of 30 large industrial stocks.

When computing the bank discount yield, you would use __________ days in the year.

360

Mutual funds provide the following for their shareholders.

All of these choices are correct.

Accounting scandals can often be attributed to a concept in the study of finance known as the __________.

agency problem

Under SEC rules, the managers of certain funds are allowed to deduct charges for advertising, brokerage commissions, and other sales expenses directly from the fund assets rather than billing investors. These fees are known as __________.

12b-1 charges

The difference between the price at which a dealer is willing to buy and the price at which a dealer is willing to sell is called the __________.

bid-ask spread

Ownership of a put option entitles the owner to the __________blank to __________blank a specific stock, on or before a specific date, at a specific price.

right; sell

Specialized-sector funds concentrate their investments in __________.

securities issued by firms in a particular industry

Which of the following is not considered a money market investment?

Treasury note

The average maturity of fund investments in a money market mutual fund is __________.

slightly more than 1 month

The success of common stock investments depends on the success of __________.

the firm and its real assets

Eurodollars are __________.

dollar-denominated deposits at any foreign bank or foreign branch of an American bank

In a recent study, Malkiel found that evidence of persistence in the performance of mutual funds from the 1970s __________ in the 1980s.

virtually disappeared

The ratio of trading activity of a portfolio to the assets of the portfolio is called the __________.

portfolio turnover

A typical bond price quote includes all but which one of the following?

Dividend yield

The rate of interest on short-term loans among financial institutions is __________.

federal fund rate

Treasury bills are financial instruments issued by __________ to raise funds.

the federal government

__________ portfolio construction starts with asset allocation.

top-down

A __________ gives its holder the right to sell an asset for a specified exercise price on or before a specified expiration date.

put option

Maintenance requirements for margin accounts are set by __________.

brokerage firms

The term underwriting syndicate describes the __________.

investment banks that participate in the underwriting

The bulk of most initial public offerings (IPOs) of equity securities goes to __________.

institutional investors