Question 1

Security analysis is most concerned with:
A) analysis of the overall securities market and its direction.
B) valuation and analysis of individual securities.
C) purchasing securities at the best price.
D) determination of the investor's required return.

Accepted Answer

Security analysis is the process of evaluating individual securities to determine their value and potential return.

Question 2

International investing:
A) is only practical for institutional investors.
B) increases the overall risk of a stock portfolio.
C) always leads to higher returns than a domestic portfolio.
D) can reduce risk due to increased diversification.

Accepted Answer

International investing can reduce risk through diversification, as it allows investors to spread their investments across different markets and economies, potentially offsetting losses in one area with gains in another.

Question 3

Technically, investments include:
A) only financial assets.
B) only marketable assets.
C) financial and real assets that are marketable or non-marketable.
D) only financial and real assets that are marketable.

Accepted Answer

Investments encompass both financial and real assets, and they can be either marketable or non-marketable.

Question 4

Underlying all investments is the tradeoff between:
A) expected return and actual return.
B) low risk and high risk.
C) actual return and high risk.
D) expected return and risk.

Accepted Answer

Investments involve balancing the potential for higher returns against the risk of losing money, hence the tradeoff between expected return and risk.

Question 5

Which of the following statements concerning global stock market capitalization is true?
A) The United States accounts for roughly 65 percent of stock market capitalization worldwide.
B) The United States accounts for roughly 40 percent of stock market capitalization worldwide.
C) The United States accounts for roughly 25 percent of stock market capitalization.
D) It is expected that the United States will increase its future percentage of global stock market capitalization.

Accepted Answer

The United States accounts for roughly 40 percent of global stock market capitalization, reflecting its significant but not majority share in the global market.

Question 6

In general, the ex ante risk-return tradeoff:
A) slopes upward.
B) slopes downward.
C) is flat.
D) is impossible to determine.

Accepted Answer

The ex ante risk-return tradeoff typically slopes upward, indicating that higher risk is associated with higher expected returns.

Question 7

Which of the following investment areas relies heavily on mathematical and statistical models?
A) Security analysis
B) Portfolio management
C) Institutional investing
D) Retirement planning

Accepted Answer

The answer of Which of the following investment areas relies...

Question 8

Gold coins would be classified as:
A) real assets.
B) indirect assets.
C) personal assets.
D) financial assets.

Accepted Answer

Gold coins are a type of real asset, which means they have intrinsic value and are not dependent on the performance of other assets.

Question 9

Regulation FD applies to disclosure between:
A) private companies and public officials.
B) public companies and investment professionals.
C) public companies and public officials.
D) private companies and investment professionals.

Accepted Answer

Regulation FD (Fair Disclosure) requires public companies to disclose material information to all investors at the same time, particularly focusing on preventing selective disclosure to investment professionals and analysts.

Question 10

Investment decision making traditionally consists of two steps:
A) investment banking and security analysis.
B) buying and selling.
C) risk and expected return.
D) security analysis and portfolio management.

Accepted Answer

Investment decision making traditionally involves security analysis to evaluate individual securities and portfolio management to construct and manage a collection of investments.

Question 11

Which of the following is the best definition of wealth?
A) The sum of all current and future income
B) The total of all assets and all income
C) The total of assets and income less any liabilities
D) The sum of current income and the present value of future income

Accepted Answer

The answer of Which of the following is the best...

Question 12

Most financial advisors are registered with the Securities and Exchange Commission as:
A) registered representatives.
B) registered investment advisors.
C) registered financial planners.
D) registered securities consultants.

Accepted Answer

Most financial advisors are registered with the Securities and Exchange Commission (SEC) as registered investment advisors (RIAs) if they manage a certain amount of assets or provide investment advice.

Question 13

Another name for stockbrokers is:
A) specialists.
B) financial advisors.
C) security analysts.
D) portfolio managers.

Accepted Answer

Stockbrokers are often referred to as financial advisors because they provide advice and services related to buying and selling stocks and other securities.

Question 14

The investment professionals that arrange the sale of new securities are called:
A) arbitragers.
B) traders.
C) investment bankers.
D) specialists.

Accepted Answer

Investment bankers are the professionals who arrange the sale of new securities.

Question 15

Most investors are risk averse, which means they:
A) will assume more risk only if they are compensated by higher expected return.
B) will always invest in the investment with the lowest possible risk.
C) actively seek to minimize their risks.
D) avoid the stock market due to the high degree of risk.

Accepted Answer

Risk-averse investors require higher expected returns to compensate for taking on additional risk, rather than avoiding risk entirely or always choosing the lowest risk option.

Question 16

Investment professionals who take companies public, arrange mergers and acquisitions, and participate in municipal bond issues are:
A) registered representatives.
B) security analysts.
C) investment bankers.
D) portfolio managers.

Accepted Answer

Investment bankers are professionals who help companies go public, arrange mergers and acquisitions, and participate in municipal bond issues.

Question 17

A Chartered Financial Analyst designation is a(n)
A) SEC-approved and awarded designation.
B) certification of a successful investing record.
C) professional designation awarded for meeting recognized standards of conduct and competency.
D) professional designation awarded by the brokerage industry.

Accepted Answer

The Chartered Financial Analyst (CFA) designation is a professional credential offered by the CFA Institute to finance and investment professionals who meet certain standards of conduct and competency.

Question 18

Retirement plans that guarantee a set amount of money each month are known as:
A) 401(k) plans.
B) self-directed plans.
C) defined-benefit plans.
D) defined-contribution plans.

Accepted Answer

Defined-benefit plans guarantee a specific monthly benefit at retirement, often based on salary and years of service.

Question 19

Which of the following would be considered a risk-free investment?
A) Gold
B) Equity in a house
C) High-grade corporate bond
D) U.S. Treasury security

Accepted Answer

U.S. Treasury securities are considered risk-free investments because they are backed by the full faith and credit of the U.S. government, which has a very low risk of default.

Question 20

One reason for the declining importance of pension funds is the:
A) decrease in pension benefits for workers.
B) downsizing of U.S. companies.
C) large number of conversions into self-directed plans.
D) increasing number of federal regulations that restrict pension fund portfolios.

Accepted Answer

The shift towards self-directed retirement plans, such as 401(k)s, has led to a decline in traditional pension funds as more employees manage their own retirement savings.

Quiz 1: Understanding Investments

Security analysis is most concerned with:

International investing:

Technically, investments include:

Underlying all investments is the tradeoff between:

Which of the following statements concerning global stock market capitalization is true?

In general, the ex ante risk-return tradeoff:

Which of the following investment areas relies heavily on mathematical and statistical models?

Gold coins would be classified as:

Regulation FD applies to disclosure between:

Investment decision making traditionally consists of two steps:

Which of the following is the best definition of wealth?

Most financial advisors are registered with the Securities and Exchange Commission as:

Another name for stockbrokers is:

The investment professionals that arrange the sale of new securities are called:

Most investors are risk averse, which means they:

Investment professionals who take companies public, arrange mergers and acquisitions, and participate in municipal bond issues are:

A Chartered Financial Analyst designation is a(n)

Retirement plans that guarantee a set amount of money each month are known as:

Which of the following would be considered a risk-free investment?

One reason for the declining importance of pension funds is the: