FIN 330 Investments Exam —
Comprehensive Exam Practice
Questions And Correct Answers
(Verified Answers) Plus Rationales 2027
Q&A | Instant Download Pdf
1. What is the primary objective of investing in a diversified portfolio?
A. Eliminate all investment risk
B. Maximize taxes owed
C. Reduce unsystematic risk
D. Guarantee a positive return
Answer: C. Reduce unsystematic risk
Rationale: Diversification reduces firm-specific or unsystematic risk because
poor performance by one security can be offset by better performance in
other securities.
,2. Which type of risk cannot be eliminated through diversification?
A. Business risk
B. Systematic risk
C. Firm-specific risk
D. Financial risk
Answer: B. Systematic risk
Rationale: Systematic risk affects the overall market and therefore cannot
be eliminated through diversification.
3. Which security represents ownership in a corporation?
A. Common stock
B. Corporate bond
C. Treasury bill
D. Certificate of deposit
Answer: A. Common stock
Rationale: Common stock represents an ownership claim on a corporation
and generally provides voting rights and potential dividend income.
,4. What is the difference between a stock's market price and its intrinsic
value most closely related to?
A. Investment valuation
B. Accounting depreciation
C. Tax liability
D. Operating leverage
Answer: A. Investment valuation
Rationale: Investment valuation involves estimating intrinsic value and
comparing it with the security's market price to identify potentially
attractive or unattractive investments.
5. Which market is primarily associated with the issuance of new
securities?
A. Secondary market
B. Primary market
C. Derivatives market
D. Foreign exchange market
Answer: B. Primary market
, Rationale: The primary market is where newly issued securities are sold to
investors, providing funds directly to the issuing organization.
6. Which market allows investors to trade securities that have already
been issued?
A. Primary market
B. Secondary market
C. Private placement market
D. Venture capital market
Answer: B. Secondary market
Rationale: The secondary market facilitates trading among investors after
securities have been initially issued.
7. Which of the following is generally considered a money market security?
A. Common stock
B. Treasury bill
C. 20-year corporate bond
D. Preferred stock
Answer: B. Treasury bill
Comprehensive Exam Practice
Questions And Correct Answers
(Verified Answers) Plus Rationales 2027
Q&A | Instant Download Pdf
1. What is the primary objective of investing in a diversified portfolio?
A. Eliminate all investment risk
B. Maximize taxes owed
C. Reduce unsystematic risk
D. Guarantee a positive return
Answer: C. Reduce unsystematic risk
Rationale: Diversification reduces firm-specific or unsystematic risk because
poor performance by one security can be offset by better performance in
other securities.
,2. Which type of risk cannot be eliminated through diversification?
A. Business risk
B. Systematic risk
C. Firm-specific risk
D. Financial risk
Answer: B. Systematic risk
Rationale: Systematic risk affects the overall market and therefore cannot
be eliminated through diversification.
3. Which security represents ownership in a corporation?
A. Common stock
B. Corporate bond
C. Treasury bill
D. Certificate of deposit
Answer: A. Common stock
Rationale: Common stock represents an ownership claim on a corporation
and generally provides voting rights and potential dividend income.
,4. What is the difference between a stock's market price and its intrinsic
value most closely related to?
A. Investment valuation
B. Accounting depreciation
C. Tax liability
D. Operating leverage
Answer: A. Investment valuation
Rationale: Investment valuation involves estimating intrinsic value and
comparing it with the security's market price to identify potentially
attractive or unattractive investments.
5. Which market is primarily associated with the issuance of new
securities?
A. Secondary market
B. Primary market
C. Derivatives market
D. Foreign exchange market
Answer: B. Primary market
, Rationale: The primary market is where newly issued securities are sold to
investors, providing funds directly to the issuing organization.
6. Which market allows investors to trade securities that have already
been issued?
A. Primary market
B. Secondary market
C. Private placement market
D. Venture capital market
Answer: B. Secondary market
Rationale: The secondary market facilitates trading among investors after
securities have been initially issued.
7. Which of the following is generally considered a money market security?
A. Common stock
B. Treasury bill
C. 20-year corporate bond
D. Preferred stock
Answer: B. Treasury bill
