Chapter One
ff 1
Understanding
ff
Investments
,File: ch01: Understanding Investments
ff ff ff
Multiple Choice ff
1. Which of the following is the best definition of wealth?
ff ff ff ff ff ff ff ff ff
a. The sum of all current and future income
ff ff ff ff ff ff ff
b. The total of all assets and all income
ff ff ff ff ff ff ff
c. The total of assets and income less any liabilities
ff ff ff ff ff ff ff ff
d. The sum of current income and the present value of future income
ff ff ff ff ff ff ff ff ff ff ff
Ans: dff
Difficulty: Moderate ff
Ref: Establishing a Framework for Investors
ff ff ff ff ff
2. Gold coins would be classified as:
ff ff ff ff ff
a. real assets. ff
b. indirect assets. ff
c. personal assets. ff
d. financial assets. ff
Ans: aff
Difficulty:
ff
Easy
ff
Ref: Establishing a Framework for Investors
ff ff ff ff ff
3. Technically, investments include: ff ff
a. only financial assets. ff ff
b. only marketable assets. ff ff
c. financial and real assets that are marketable or non-marketable.
ff ff ff ff ff ff ff ff
d. only financial and real assets that are marketable.
ff ff ff ff ff ff ff
Ans: cff
Difficulty:
ff
Easy
ff
Ref: Establishing a Framework for Investors
ff ff ff ff ff
4. The retirement plans that guarantee retirees a set amount of money each
ff ff ff ff ff ff ff ff ff ff ff
month are known as:
ff ff ff ff
a. 401(k) plans. ff
b. self-directed plans. ff
c. defined-benefit plans. ff
d. defined-contribution plans. ff
Chapter One ff 2
Understanding
ff
Investments
,Ans: cff
Difficulty: Moderate ff
Ref: Establishing a Framework for Investors
ff ff ff ff ff
5. The investment professionals that arrange the sale of new securities
ff ff ff ff ff ff ff ff ff
are called:
ff ff
a. arbitragers.
b. traders.
c. investment bankers. ff
d. specialists.
Ans: cff
Difficulty: Moderate ff
Ref: The Importance of Studying Investments
ff ff ff ff ff
6. Another name for stockbrokers is: ff ff ff ff
a. specialists.
b. financial advisors. ff
c. security analysts. ff
d. portfolio managers. ff
Ans: bff
Difficulty: Moderate ff
Ref: The Importance of Studying Investments
ff ff ff ff ff
7. Investment professionals who take companies public, arrange mergers and
ff ff ff ff ff ff ff ff
acquisitions, and participate in municipal bond issues are:
ff ff ff ff ff ff ff ff
a. registered representatives. ff
b. security analysts. ff
c. investment bankers. ff
d. portfolio managers. ff
Ans: cff
Difficulty: Moderate ff
Ref: The Importance of Studying Investments
ff ff ff ff ff
8. One reason for the declining importance of pension funds is the:
ff ff ff ff ff ff ff ff ff ff
a. decrease in pension benefits for workers. ff ff ff ff ff
b. downsizing of U.S. companies. ff ff ff
c. large number of conversions into self-directed plans.
ff ff ff ff ff ff
d. increasing number of federal regulations that restrict pension fund portfolios.
ff ff ff ff ff ff ff ff ff
Ans: cff
Difficulty: Difficult ff
Ref: The Importance of Studying Investments
ff ff ff ff ff
Chapter One ff 3
Understanding
ff
Investments
, 9. Most financial advisors are registered with the Securities and Exchange
ff ff ff ff ff ff ff ff ff
Commission as:
ff ff
a. registered representatives. ff
b. registered investment advisors. ff ff
c. registered financial planners. ff ff
d. registered securities consultants. ff ff
Ans: b ff
Difficulty: Moderate ff
Ref: The Importance of Studying Investments
ff ff ff ff ff
10. A Chartered Financial Analyst designation is a(n)
ff ff ff ff ff ff
a. SEC-approved and awarded designation. ff ff ff
b. certification of a successful investing record. ff ff ff ff ff
c. professional designation awarded for meeting recognized standards of conduct
ff ff ff ff ff ff ff ff
and competency.
ff ff
d. professional designation awarded by the brokerage industry. ff ff ff ff ff ff
Ans: c ff
Difficulty:
ff
Easy
ff
Ref: The Importance of Studying Investments
ff ff ff ff ff
11. Underlying all investments is the tradeoff between: ff ff ff ff ff ff
a. expected return and actual return. ff ff ff ff
b. low risk and high risk.
ff ff ff ff
c. actual return and high risk. ff ff ff ff
d. expected return and risk. ff ff ff
Ans: d ff
Difficulty: Moderate ff
Ref: Understanding the Investment Decision Process
ff ff ff ff ff
12. Which of the following investment areas relies heavily on mathematical
ff ff ff ff ff ff ff ff ff
and statistical models?
ff ff ff
a. Security analysis ff
b. Portfolio management ff
c. Institutional investing ff
d. Retirement planning ff
Ans: b ff
Difficulty: Moderate ff
Ref: Understanding the Investment Decision Process
ff ff ff ff ff
Chapter One ff 4
Understanding
ff
Investments
ff 1
Understanding
ff
Investments
,File: ch01: Understanding Investments
ff ff ff
Multiple Choice ff
1. Which of the following is the best definition of wealth?
ff ff ff ff ff ff ff ff ff
a. The sum of all current and future income
ff ff ff ff ff ff ff
b. The total of all assets and all income
ff ff ff ff ff ff ff
c. The total of assets and income less any liabilities
ff ff ff ff ff ff ff ff
d. The sum of current income and the present value of future income
ff ff ff ff ff ff ff ff ff ff ff
Ans: dff
Difficulty: Moderate ff
Ref: Establishing a Framework for Investors
ff ff ff ff ff
2. Gold coins would be classified as:
ff ff ff ff ff
a. real assets. ff
b. indirect assets. ff
c. personal assets. ff
d. financial assets. ff
Ans: aff
Difficulty:
ff
Easy
ff
Ref: Establishing a Framework for Investors
ff ff ff ff ff
3. Technically, investments include: ff ff
a. only financial assets. ff ff
b. only marketable assets. ff ff
c. financial and real assets that are marketable or non-marketable.
ff ff ff ff ff ff ff ff
d. only financial and real assets that are marketable.
ff ff ff ff ff ff ff
Ans: cff
Difficulty:
ff
Easy
ff
Ref: Establishing a Framework for Investors
ff ff ff ff ff
4. The retirement plans that guarantee retirees a set amount of money each
ff ff ff ff ff ff ff ff ff ff ff
month are known as:
ff ff ff ff
a. 401(k) plans. ff
b. self-directed plans. ff
c. defined-benefit plans. ff
d. defined-contribution plans. ff
Chapter One ff 2
Understanding
ff
Investments
,Ans: cff
Difficulty: Moderate ff
Ref: Establishing a Framework for Investors
ff ff ff ff ff
5. The investment professionals that arrange the sale of new securities
ff ff ff ff ff ff ff ff ff
are called:
ff ff
a. arbitragers.
b. traders.
c. investment bankers. ff
d. specialists.
Ans: cff
Difficulty: Moderate ff
Ref: The Importance of Studying Investments
ff ff ff ff ff
6. Another name for stockbrokers is: ff ff ff ff
a. specialists.
b. financial advisors. ff
c. security analysts. ff
d. portfolio managers. ff
Ans: bff
Difficulty: Moderate ff
Ref: The Importance of Studying Investments
ff ff ff ff ff
7. Investment professionals who take companies public, arrange mergers and
ff ff ff ff ff ff ff ff
acquisitions, and participate in municipal bond issues are:
ff ff ff ff ff ff ff ff
a. registered representatives. ff
b. security analysts. ff
c. investment bankers. ff
d. portfolio managers. ff
Ans: cff
Difficulty: Moderate ff
Ref: The Importance of Studying Investments
ff ff ff ff ff
8. One reason for the declining importance of pension funds is the:
ff ff ff ff ff ff ff ff ff ff
a. decrease in pension benefits for workers. ff ff ff ff ff
b. downsizing of U.S. companies. ff ff ff
c. large number of conversions into self-directed plans.
ff ff ff ff ff ff
d. increasing number of federal regulations that restrict pension fund portfolios.
ff ff ff ff ff ff ff ff ff
Ans: cff
Difficulty: Difficult ff
Ref: The Importance of Studying Investments
ff ff ff ff ff
Chapter One ff 3
Understanding
ff
Investments
, 9. Most financial advisors are registered with the Securities and Exchange
ff ff ff ff ff ff ff ff ff
Commission as:
ff ff
a. registered representatives. ff
b. registered investment advisors. ff ff
c. registered financial planners. ff ff
d. registered securities consultants. ff ff
Ans: b ff
Difficulty: Moderate ff
Ref: The Importance of Studying Investments
ff ff ff ff ff
10. A Chartered Financial Analyst designation is a(n)
ff ff ff ff ff ff
a. SEC-approved and awarded designation. ff ff ff
b. certification of a successful investing record. ff ff ff ff ff
c. professional designation awarded for meeting recognized standards of conduct
ff ff ff ff ff ff ff ff
and competency.
ff ff
d. professional designation awarded by the brokerage industry. ff ff ff ff ff ff
Ans: c ff
Difficulty:
ff
Easy
ff
Ref: The Importance of Studying Investments
ff ff ff ff ff
11. Underlying all investments is the tradeoff between: ff ff ff ff ff ff
a. expected return and actual return. ff ff ff ff
b. low risk and high risk.
ff ff ff ff
c. actual return and high risk. ff ff ff ff
d. expected return and risk. ff ff ff
Ans: d ff
Difficulty: Moderate ff
Ref: Understanding the Investment Decision Process
ff ff ff ff ff
12. Which of the following investment areas relies heavily on mathematical
ff ff ff ff ff ff ff ff ff
and statistical models?
ff ff ff
a. Security analysis ff
b. Portfolio management ff
c. Institutional investing ff
d. Retirement planning ff
Ans: b ff
Difficulty: Moderate ff
Ref: Understanding the Investment Decision Process
ff ff ff ff ff
Chapter One ff 4
Understanding
ff
Investments
