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A __________ gives its holder the right to buy an asset for a specified exercise price on or before a specified expiration date.
call option
Financial intermediaries exist because small investors cannot efficiently __________.
All of the choices are correct
Ownership of a call option entitles the owner to the __________ to __________ a specific stock, on or before a specific date, at a specific price.
right; buy
In a market economy, capital resources are primarily allocated by __________.
financial markets
The __________ price is the price at which a dealer is willing to purchase a security.
bid
Advantages of investment companies to investors include all but which one of the following?
Guaranteed rates of return
Market signals will help to allocate capital efficiently only if investors are acting _______.
on accurate information
The top Morningstar mutual fund performance rating is __________.
5 stars
Methods of encouraging managers to act in shareholders' best interest include:
1. Threat of takeover.
2. Proxy fights for control of the board of directors.
3. Tying managers' compensation to stock price performance.
1, 2, and 3
The 2002 law designed to improve corporate governance is titled the _________.
Sarbanes-Oxley Act
A dollar-denominated deposit at a London bank is called __________.
eurodollars
The __________ price is the price at which a dealer is willing to sell a security.
ask
Mutual fund returns may be granted pass-through status if __________.
All of these options combined
Real assets in the economy include all but which one of the following?
Common stock
__________ fund is defined as one in which the fund charges a sales commission to either buy into or exit from the fund.
A load
The primary measurement unit used for assessing the value of one's stake in an investment company is __________.
net asset value
Money market securities are sometimes referred to as cash equivalents because they are __________.
safe, marketable, and offer low return
The bid-ask spread exists because of __________.
the need for dealers to cover expenses and make a profit
By June 2023, financial contracts in the U.S. replaced __________ with __________ for short-term interest rates.
LIBOR; SOFR
An example of a derivative security is __________.
a call option on Intel stock
Which of the following is a false statement regarding open-end mutual funds?
They offer investors a guaranteed rate of return.
Large well-known companies often issue their own short-term unsecured debt notes directly to the public, rather than borrowing from banks; their notes are called __________.
commercial paper
Which of the following result in a taxable event for investors in mutual funds?
1. Short-term capital gain distributions from the fund
2. Dividend distributions from the fund
3. Long-term capital gain distributions from the fund
1, 2, and 3 only
__________ funds stand ready to redeem or issue shares at their net asset value.
Open-end
Money market securities are characterized by:
1. Maturity less than 1 year
2. Safety of the principal investment
3. Low rates of return
1, 2 , and 3
Which of the following is not a money market instrument?
Preferred stock
An intermediary that pools and manages funds for many investors is called __________.
an Investment company
Transactions that do not involve the original issue of securities take place in __________.
Secondary markets
In a perfectly efficient market the best investment strategy is probably __________.
a passive strategy
A bond that has no collateral is called a __________.
debenture
Which of the following is an example of an agency problem?
All of the options are examples of agency problems.
__________ is not a money market instrument.
A Treasury bond
The NAV of which funds is fixed at $1 per share?
Money market funds
The __________ is the most important dealer market in the United States, and the __________ is the most important auction market.
Nasdaq; NYSE
Which of the following is not a nickname for an agency associated with the mortgage markets?
Sallie Mae
Treasury notes have initial maturities between __________ years.
1 and 10
__________ is (are) real assets.
Production equipment
Investors who want to liquidate their holdings in a unit investment trust may sell their shares __________.
back to the trustee at net asset value
Purchases of new issues of stock take place __________.
in the primary market
Asset allocation refers to __________.
the allocation of the investment portfolio across broad asset classes
