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This set of Investment Management Multiple Choice Questions & Answers (MCQs) focuses on Investment Management Set 9

Q1 | A negatively sloped yield curve suggests that
  • Short-term rates exceed long-term rates, and the Federal Reserve is following a tight monetary policy
  • Short-term rates exceed long-term rates, and the Federal Reserve is following an easy monetary policy
  • Long-term rates exceed short-term rates, and the Federal Reserve is following a tight monetary policy
  • Long-term rates exceed short-term rates, and the Federal Reserve is following an easy monetary policy
Q2 | The market price of a bond depends on the
  • Coupon rate, and terms of the indenture
  • Coupon rate, and maturity date
  • Terms of the indenture, and maturity date
  • Coupon rate, terms of the indenture, and maturity date
Q3 | While bond prices fluctuate,
  • Yields are constant
  • Coupons are constant
  • The spread between yields is constant
  • Short-term bond prices fluctuate even more
Q4 | If interest rates rise, the price of preferred stock
  • Is not affected
  • Rises
  • Falls
  • May rise or fall
Q5 | Municipal government debt
  • Pays more interest than corporate debt
  • Is often purchased by individuals with high incomes
  • Is exempt from estate taxation
  • Is not subject to interest rate risk
Q6 | The use of financial leverage by a firm may be measured by the
  • Ratio of debt to total assets
  • Firm’s beta coefficient
  • Firm’s retention of earnings
  • Ratio of the price of the firm’s stock price to its earnings
Q7 | An example of a depreciable asset is
  • Land
  • Cash
  • Accounts receivable
  • Equipment
Q8 | As the debt ratio increases,
  • Fewer assets are debt-financed, and the ratio of debt-to-equity increases
  • Fewer assets are debt-financed, and the ratio of debt-to-equity decreases
  • More assets are debt-financed, and the ratio of debt-to-equity increases
  • More assets are debt-financed, and the ratio of debt-to-equity decreases
Q9 | Which of the following is not a characteristic of an exchange?
  • It requires one to be a member in order to be allowed to trade.
  • It allows securities to be listed on more than one exchange.
  • It provides liquidity to individuals who acquire securities in the primary market.
  • It allows exchange-listed issues to trade off the exchange floor with the aid of brokers.
Q10 | Which of the following is a false statement about the over-the-counter market?
  • Its market maker is called a dealer.
  • It is a telephone and computer-linked network for trading securities.
  • Larger issues of over-the-counter stocks are listed on the National Market System.
  • It only trades stocks of small firms.
Q11 | The exchange generating the largest volume in the United States is the:
  • American Stock Exchange
  • Chicago Stock Exchange
  • National Market System
  • New York Stock Exchange
Q12 | An example of a call market is the:
  • New York Stock Exchange
  • Hong Kong Stock Exchange
  • Pacific Stock Exchange
  • American Stock Exchange
Q13 | An order to buy or sell a specified quantity of a stock at a specified price or better is called a:
  • limit order
  • not-held order
  • market order
  • day order
Q14 | The bid-ask spread set by the market maker is determined by the:
  • fixed operating cost
  • likelihood of trading with those who have superior information
  • stock exchange
  • cost of financing the inventory of securities
Q15 | Which of the following is not an explanation often given for initial price offering under pricing?
  • Scalping
  • Appraisal cost
  • Information asymmetry
  • Private placement
Q16 | A _____________ is a person who acts as an intermediary between a buyer or seller in the market.
  • Dealer
  • Broker
  • floor broker
  • specialist
Q17 | Which of the following statements is false?
  • A bond issuer must pay periodic interest.
  • Bonds carry no corporate ownership privileges.
  • Bond prices remain fixed over time.
  • A bond is a financial contract.
Q18 | Which of the following statements is true?
  • Generally speaking, bonds are riskier than common stocks.
  • Low inflation is expected to have a negative effect on bond prices.
  • Bonds are usually less liquid than stocks.
  • A bondholder repays principal when the bond matures.
Q19 | Most bonds:
  • are interest-bearing obligations of governments or corporations.
  • give bondholders a voice in the affairs of the corporation.
  • are money market securities.
  • are floating-rate securities.
Q20 | Which of the following is not an advantage of investing in bonds?
  • Bonds are good sources of current income.
  • Bonds have unlimited profit potential.
  • Bond investments are relatively safe from large losses.
  • Bondholders receive their payments before shareholders can be compensated.
Q21 | Financial assets are also called:
  • tangible assets.
  • Securities
  • real assets.
  • physical assets.
Q22 | Which of the following types of assets represents ownership interest in a corporation?
  • Stocks
  • Bonds
  • Options
  • Futures
Q23 | Which of the following types of financial assets represents a creditor relationship with an entity?
  • Options
  • Futures
  • Stocks
  • Bonds
Q24 | Which of the following types of assets offers the highest expected return?
  • Long-term government bonds.
  • Options and futures.
  • Stocks
  • Long-term corporate bonds.
Q25 | Which of the following types of assets is least risky?
  • Stocks
  • Options and futures.
  • Long-term corporate bonds.
  • Short-term corporate bonds.