INVESTMENT ANALYSIS EXAM #1.
Built around real course units and objectives.
Active management - Answer: Attempting to identify mispriced securities or to forecast
broad market trends
Agency problems - Answer: Conflicts of interest between managers and stockholders
Asset allocation - Answer: Allocation of an investment portfolio across broad asset classes
Derivative securities - Answer: Securities providing payoffs that depend on the values of
other assets
Equity - Answer: An ownership share in a corporation
Financial assets - Answer: Claims on real assets or the income generated by them
Financial intermediaries - Answer: Institutions that connect borrowers and lenders by
accepting funds from lenders and loaning funds to borrowers
Fixed income securities - Answer: Pay a specified cash flow over a specific period
Investment - Answer: Commitment of current resources in the expectation of deriving
greater resources in the future
Investment bankers - Answer:
Investment companies - Answer: Firms managing funds for investors. An investment
company may manage several mutual funds
APPHIA – Crafted with Care and Precision for Academic Excellence. 1
, Passive management - Answer: Buying and holding a diversified portfolio without
attempting to identify mispriced securities
Primary market - Answer: A market in which new issues of securities are offered to the
public
Private equity - Answer: Investments in companies that are not traded on a stock exchange
Real assets - Answer: Assets used to produce goods and services
Risk return trade off - Answer: Assets with higher expected returns entail greater risk
Secondary market - Answer: Previously issued securities are traded among investors
Securitization - Answer: Pooling loans into standardized securities backed by those loans,
which can then be traded like any other security
Security analysis - Answer: Analysis of the values of securities
Venture capital - Answer: Money invested to finance a new firm
Call option - Answer: The right to buy an asset at a specified price on or before a specified
expiration date
Certificate of deposit - Answer: A bank time deposit
Commercial paper - Answer: Short term unsecured debt issued by large corporations
APPHIA – Crafted with Care and Precision for Academic Excellence. 2
Built around real course units and objectives.
Active management - Answer: Attempting to identify mispriced securities or to forecast
broad market trends
Agency problems - Answer: Conflicts of interest between managers and stockholders
Asset allocation - Answer: Allocation of an investment portfolio across broad asset classes
Derivative securities - Answer: Securities providing payoffs that depend on the values of
other assets
Equity - Answer: An ownership share in a corporation
Financial assets - Answer: Claims on real assets or the income generated by them
Financial intermediaries - Answer: Institutions that connect borrowers and lenders by
accepting funds from lenders and loaning funds to borrowers
Fixed income securities - Answer: Pay a specified cash flow over a specific period
Investment - Answer: Commitment of current resources in the expectation of deriving
greater resources in the future
Investment bankers - Answer:
Investment companies - Answer: Firms managing funds for investors. An investment
company may manage several mutual funds
APPHIA – Crafted with Care and Precision for Academic Excellence. 1
, Passive management - Answer: Buying and holding a diversified portfolio without
attempting to identify mispriced securities
Primary market - Answer: A market in which new issues of securities are offered to the
public
Private equity - Answer: Investments in companies that are not traded on a stock exchange
Real assets - Answer: Assets used to produce goods and services
Risk return trade off - Answer: Assets with higher expected returns entail greater risk
Secondary market - Answer: Previously issued securities are traded among investors
Securitization - Answer: Pooling loans into standardized securities backed by those loans,
which can then be traded like any other security
Security analysis - Answer: Analysis of the values of securities
Venture capital - Answer: Money invested to finance a new firm
Call option - Answer: The right to buy an asset at a specified price on or before a specified
expiration date
Certificate of deposit - Answer: A bank time deposit
Commercial paper - Answer: Short term unsecured debt issued by large corporations
APPHIA – Crafted with Care and Precision for Academic Excellence. 2
