FIN 335 UPDATED ALL ANSWERS AND QUESTIONS
SET A+
✔✔14. A company that owns income-producing real estate such as an apartment
complex or a retail shopping center is called a(n):
A. REIT.
B. SIPC.
C. REEF.
D. EAR.
E. SPIC. - ✔✔A. REIT.
✔✔15. An investor who has a resource constraint:
A. pays no income taxes.
B. has insufficient funds to purchase a security.
C. has a relatively high marginal tax rate.
D. has only one source of income.
E. will only invest in socially acceptable securities. - ✔✔B. has insufficient funds to
purchase a security.
✔✔16. To be considered liquid, a security must:
A. be held in a cash account.
B. pay dividends.
,C. be able to be sold on short notice.
D. be held for less than one year.
E. be able to be sold quickly with little, if any, price concession.
See Section 2.1 - ✔✔E. be able to be sold quickly with little, if any, price concession.
✔✔17. Wythe is trying to decide whether he wants to purchase shares in General
Motors, Ford, or Honda, all of which are auto manufacturers. Wythe is making a(n)
_____ decision.
A. security selection
B. tax-advantaged
C. risk aversion
D. active strategy
E. asset allocation - ✔✔A. security selection
✔✔18. Brooke has decided to invest 55 percent of her money in large company stocks,
40 percent in small company stocks, and 5 percent in cash. This is a(n) _____ decision.
A. market timing
B. security selection
C. tax-advantaged
D. active strategy
E. asset allocation - ✔✔E. asset allocation
✔✔19. Kay plans to retire in two years and wishes to liquidate her account at that time.
Kay has a _____ constraint.
A. resource
B. horizon
C. liquidity
D. tax
, E. special circumstances - ✔✔B. horizon
✔✔20. The SIPC:
A. guarantees investors against any loss related to an investment account held at a
brokerage firm.
B. guarantees cash balances held in brokerage accounts up to $500,000.
C. is an agency of the federal government.
D. protects private brokerage firms from bankruptcy.
E. protects investors from missing assets when a brokerage firm closes. - ✔✔E.
protects investors from missing assets when a brokerage firm closes.
✔✔21. The determination of which individual stocks to purchase within a particular
asset class is referred to as:
A. security selection.
B. asset allocation.
C. security analysis.
D. market timing.
E. market selection. - ✔✔A. security selection.
✔✔22. An investor who follows a fully active strategy will:
A. move money between asset classes as well as try to select the best performers in
each class.
B. move money between asset classes but will not be concerned about which individual
securities are owned.
C. focus on picking individual stocks only.
D. maintain a relatively constant mix of asset classes while continually buying and
selling individual securities.
E. concentrate solely on asset allocation to maximize potential returns. - ✔✔A. move
money between asset classes as well as try to select the best performers in each class.
SET A+
✔✔14. A company that owns income-producing real estate such as an apartment
complex or a retail shopping center is called a(n):
A. REIT.
B. SIPC.
C. REEF.
D. EAR.
E. SPIC. - ✔✔A. REIT.
✔✔15. An investor who has a resource constraint:
A. pays no income taxes.
B. has insufficient funds to purchase a security.
C. has a relatively high marginal tax rate.
D. has only one source of income.
E. will only invest in socially acceptable securities. - ✔✔B. has insufficient funds to
purchase a security.
✔✔16. To be considered liquid, a security must:
A. be held in a cash account.
B. pay dividends.
,C. be able to be sold on short notice.
D. be held for less than one year.
E. be able to be sold quickly with little, if any, price concession.
See Section 2.1 - ✔✔E. be able to be sold quickly with little, if any, price concession.
✔✔17. Wythe is trying to decide whether he wants to purchase shares in General
Motors, Ford, or Honda, all of which are auto manufacturers. Wythe is making a(n)
_____ decision.
A. security selection
B. tax-advantaged
C. risk aversion
D. active strategy
E. asset allocation - ✔✔A. security selection
✔✔18. Brooke has decided to invest 55 percent of her money in large company stocks,
40 percent in small company stocks, and 5 percent in cash. This is a(n) _____ decision.
A. market timing
B. security selection
C. tax-advantaged
D. active strategy
E. asset allocation - ✔✔E. asset allocation
✔✔19. Kay plans to retire in two years and wishes to liquidate her account at that time.
Kay has a _____ constraint.
A. resource
B. horizon
C. liquidity
D. tax
, E. special circumstances - ✔✔B. horizon
✔✔20. The SIPC:
A. guarantees investors against any loss related to an investment account held at a
brokerage firm.
B. guarantees cash balances held in brokerage accounts up to $500,000.
C. is an agency of the federal government.
D. protects private brokerage firms from bankruptcy.
E. protects investors from missing assets when a brokerage firm closes. - ✔✔E.
protects investors from missing assets when a brokerage firm closes.
✔✔21. The determination of which individual stocks to purchase within a particular
asset class is referred to as:
A. security selection.
B. asset allocation.
C. security analysis.
D. market timing.
E. market selection. - ✔✔A. security selection.
✔✔22. An investor who follows a fully active strategy will:
A. move money between asset classes as well as try to select the best performers in
each class.
B. move money between asset classes but will not be concerned about which individual
securities are owned.
C. focus on picking individual stocks only.
D. maintain a relatively constant mix of asset classes while continually buying and
selling individual securities.
E. concentrate solely on asset allocation to maximize potential returns. - ✔✔A. move
money between asset classes as well as try to select the best performers in each class.
