Test Bank Fundamentals of Investing, 14th Edition by Scott B. Smart, Lawrence J. Gitman, Michael D. Joehnk Chapter 1-15

Fundamentals of Investing, 14e (Smart/Zutter)
Chapter 1 The Investment Environment


1.1 Learning Goal 1


1) A non-interest bearing checking account is still considered an investment.
Answer: FALSE
Learning Outcome: F-12 Discuss the implications of systematic risk in financial markets and its
role in shaping investment choices
AACSB: Analytical thinking
Question Status: Previous Edition
Learning Goal: Learning Goal 1


2) Land and buildings are examples of real property investments.
Answer: TRUE
Learning Outcome: F-12 Discuss the implications of systematic risk in financial markets and its
role in shaping investment choices
AACSB: Analytical thinking
Question Status: Previous Edition
Learning Goal: Learning Goal 1


3) Since 1900, the average return on stocks has exceeded the average return on savings
accounts by more than 6 percentage points.
Answer: TRUE
Learning Outcome: F-12 Discuss the implications of systematic risk in financial markets and its
role in shaping investment choices
AACSB: Analytical thinking
Question Status: Previous Edition
Learning Goal: Learning Goal 1


4) A United States Savings Bond is an example of an investment as defined in the text.

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,Answer: TRUE
Learning Outcome: F-12 Discuss the implications of systematic risk in financial markets and its
role in shaping investment choices
AACSB: Analytical thinking
Question Status: Previous Edition
Learning Goal: Learning Goal 1


5) Most sources of investment information are in print format, expensive, and difficult to
access.
Answer: FALSE
Learning Outcome: F-12 Discuss the implications of systematic risk in financial markets and its
role in shaping investment choices
AACSB: Analytical thinking
Question Status: Previous Edition
Learning Goal: Learning Goal 1
6) Which of the following is NOT an investment as defined in the text?
A) a certificate of deposit issued by a bank
B) a new automobile
C) a United States Saving Bond
D) a mutual fund held in a retirement account
Answer: B
Learning Outcome: F-12 Discuss the implications of systematic risk in financial markets and its
role in shaping investment choices
AACSB: Analytical thinking
Question Status: Previous Edition
Learning Goal: Learning Goal 1


7) Stocks are a(n) ________ investment representing ________ of a business.
A) direct; ownership
B) direct; debt
C) indirect; ownership

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,D) indirect; debt
Answer: A
Learning Outcome: F-12 Discuss the implications of systematic risk in financial markets and its
role in shaping investment choices
AACSB: Analytical thinking
Question Status: Previous Edition
Learning Goal: Learning Goal 1


8) An exchange traded fund that invests in the stocks of large corporations is an example of
A) direct investment.
B) indirect investment.
C) derivative investment.
D) tangible investment.
Answer: B
Learning Outcome: F-12 Discuss the implications of systematic risk in financial markets and its
role in shaping investment choices
AACSB: Analytical thinking
Question Status: Previous Edition
Learning Goal: Learning Goal 1


9) Which of the following has declined in recent years?
A) direct ownership of stock by individual investors
B) the percentage of foreign stocks held in typical portfolios
C) institutional ownership of common stocks
D) the timeliness of information available to investors
Answer: A
Learning Outcome: F-12 Discuss the implications of systematic risk in financial markets and its
role in shaping investment choices
AACSB: Analytical thinking
Question Status: Previous Edition
Learning Goal: Learning Goal 1

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, 10) Which of the following has increased in recent years?
A) direct ownership of stock by individual investors
B) the percentage of domestic stocks held in typical portfolios
C) institutional ownership of common stocks
D) indirect ownership of stocks through mutual funds and ETFs.
Answer: D
Learning Outcome: F-12 Discuss the implications of systematic risk in financial markets and its
role in shaping investment choices
AACSB: Analytical thinking
Question Status: New Question
Learning Goal: Learning Goal 1


11) Debt represents funds loaned in exchange for
A) dividend income and the repayment of the loan principal.
B) dividend income and an ownership interest in the firm.
C) interest income and a partial ownership interest in the firm.
D) interest income and the repayment of the loan principal.
Answer: D
Learning Outcome: F-12 Discuss the implications of systematic risk in financial markets and its
role in shaping investment choices
AACSB: Analytical thinking
Question Status: Previous Edition
Learning Goal: Learning Goal 1


1.2 Learning Goal 2


1) Institutional investors manage money for businesses and nonprofit organizations, but not for
individuals.
Answer: FALSE
Learning Outcome: F-01 Describe the different financial markets and the role of the financial

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