FINN 3222 EXAM 1 UPDATED ACTUAL QUESTIONS AND CORRECT ANSWERS

FINN 3222 EXAM 1 UPDATED ACTUAL QUESTIONS AND
CORRECT ANSWERS

Question:
1. investment portfolio
Answer:
The collection of investments you personally hold, including stocks, bonds, debt, money market accounts,
and savings accounts.

Question:
2. Asset Allocation
Answer:
allocation of an investment portfolio across broad asset classes

Question:
3. security selection
Answer:
choice of specific securities within each asset class. I.e. individual stocks

Question:
4. top-down approach
Answer:
start with asset allocation and end with security selection Generally more diversified More passive strategy
that reduces transaction costs and management fees May overlook undervalued securities and miss market
timing opportunities

Question:
5. bottom-up approach
Answer:
starts with security selection and pays little attention to asset allocation May identify undervalued
securities and earn excess return based on market timing High management fees due to frequent
transactions Flawed if timing is wrong

Question:
6. Money Market
Answer:
market in which money is lent for periods of less than a year. T-Bills, CDs, Commercial Papers,
Eurodollars, etc

Question:
7. Capital Market Securities
Answer:
facilitate the sale of long-term securities by deficit units to surplus units. Fixed income securities, Equities
(preferred and common stock) and Derivatives (Futures, options, etc.)