FINA 3315 MIDTERM QUESTIONS AND CORRECT DETAILED
ANSWERS (VERIFIED ANSWERS) ALREADY GRADED A+
In the real world, most of the assets available to investors
A. tend to be somewhat positively correlated.
B. tend to be either perfectly positively or perfectly negatively
correlated.
C. tend to be somewhat negatively correlated.
D. tend to be uncorrelated. Ans✓✓✓A. tend to be somewhat positively
correlated
A forum in which suppliers and demanders of funds make financial
transactions is called a financial
A. market.
B. bank.
C. institution.
D. instrument. Ans✓✓✓A. market.
If an investor does not respond to a margin call, the broker will
A. sell all of the investor's holdings and close their brokerage account.
B. notify the Federal Reserve so they can cover the call.
,C. sell enough of the investor's holdings that the margin account can be
closed.
D. sell some of the investor's holdings to cover the margin call.
Ans✓✓✓D. sell some of the investor's holdings to cover the margin call.
Traditional portfolio management
A. uses portfolio betas and standard deviations to minimize risk.
B. concentrates on only the most recent "hot" sectors of the market.
C. typically centers on interindustry diversification.
D. is based on statistical measures to develop the portfolio plan.
Ans✓✓✓C. typically centers on interindustry diversification.
Betas for actively traded stocks. are readily available from online
sources. T/F? Ans✓✓✓True
In addition to the Dow Jones Industrial Average, the Standard & Poors
500 and NASDAQ indexes are widely quoted measures of market
performance. T/F? Ans✓✓✓True
Exchange traded funds are
A. mutual funds that trade on the Big Board.
B. groups of securities that trade only on regional exchanges.
,C. baskets of securities that trade like a single stock.
D. index funds that trade on the NYSE. Ans✓✓✓C. baskets of securities
that trade like a single stock.
Which of the following securities represents direct ownership of a
business?
A. bonds
B. common stock
C. mutual fund shares
D. preferred stock Ans✓✓✓B. common stock
An individual investor who wishes to borrow money to buy stocks must
open a
A. margin account.
B. signature account.
C. joint account.
D. custodial account. Ans✓✓✓A. margin account.
Both modern portfolio theory and traditional portfolio management
result in diversified portfolios, but they take different approaches to
diversification. T/F? Ans✓✓✓True
, Which one of the following statements is correct about a good − 'til −
cancelled order?
A. The order will automatically renew unless cancelled by the customer.
B. The order will be cancelled at the end of the trading day if not
executed.
C. The order helps customers obtain a specific price without watching
the market continuously.
D. The order generally expires after six weeks. Ans✓✓✓C. The order
helps customers obtain a specific price without watching the market
continuously.
A stock's beta value is a measure of
A. total risk.
B. interest rate risk.
C. diversifiable risk.
D. systematic risk. Ans✓✓✓D. systematic risk.
The efficient frontier
A. includes all feasible sets of portfolios based on risk and return
characteristics.
B. represents the best attainable tradeoff between risk and return.
C. provides the highest level of risk for the lowest level of return.
ANSWERS (VERIFIED ANSWERS) ALREADY GRADED A+
In the real world, most of the assets available to investors
A. tend to be somewhat positively correlated.
B. tend to be either perfectly positively or perfectly negatively
correlated.
C. tend to be somewhat negatively correlated.
D. tend to be uncorrelated. Ans✓✓✓A. tend to be somewhat positively
correlated
A forum in which suppliers and demanders of funds make financial
transactions is called a financial
A. market.
B. bank.
C. institution.
D. instrument. Ans✓✓✓A. market.
If an investor does not respond to a margin call, the broker will
A. sell all of the investor's holdings and close their brokerage account.
B. notify the Federal Reserve so they can cover the call.
,C. sell enough of the investor's holdings that the margin account can be
closed.
D. sell some of the investor's holdings to cover the margin call.
Ans✓✓✓D. sell some of the investor's holdings to cover the margin call.
Traditional portfolio management
A. uses portfolio betas and standard deviations to minimize risk.
B. concentrates on only the most recent "hot" sectors of the market.
C. typically centers on interindustry diversification.
D. is based on statistical measures to develop the portfolio plan.
Ans✓✓✓C. typically centers on interindustry diversification.
Betas for actively traded stocks. are readily available from online
sources. T/F? Ans✓✓✓True
In addition to the Dow Jones Industrial Average, the Standard & Poors
500 and NASDAQ indexes are widely quoted measures of market
performance. T/F? Ans✓✓✓True
Exchange traded funds are
A. mutual funds that trade on the Big Board.
B. groups of securities that trade only on regional exchanges.
,C. baskets of securities that trade like a single stock.
D. index funds that trade on the NYSE. Ans✓✓✓C. baskets of securities
that trade like a single stock.
Which of the following securities represents direct ownership of a
business?
A. bonds
B. common stock
C. mutual fund shares
D. preferred stock Ans✓✓✓B. common stock
An individual investor who wishes to borrow money to buy stocks must
open a
A. margin account.
B. signature account.
C. joint account.
D. custodial account. Ans✓✓✓A. margin account.
Both modern portfolio theory and traditional portfolio management
result in diversified portfolios, but they take different approaches to
diversification. T/F? Ans✓✓✓True
, Which one of the following statements is correct about a good − 'til −
cancelled order?
A. The order will automatically renew unless cancelled by the customer.
B. The order will be cancelled at the end of the trading day if not
executed.
C. The order helps customers obtain a specific price without watching
the market continuously.
D. The order generally expires after six weeks. Ans✓✓✓C. The order
helps customers obtain a specific price without watching the market
continuously.
A stock's beta value is a measure of
A. total risk.
B. interest rate risk.
C. diversifiable risk.
D. systematic risk. Ans✓✓✓D. systematic risk.
The efficient frontier
A. includes all feasible sets of portfolios based on risk and return
characteristics.
B. represents the best attainable tradeoff between risk and return.
C. provides the highest level of risk for the lowest level of return.
