Test Bank For Investments Analysis and Management 14th Edition Charles P Jones Gerald R Jensen 2
Test Bank For Investments Analysis and Management 14th Edition Charles P Jones Gerald R Jensen 2
Test Bank For Investments Analysis and Management 14th Edition Charles P Jones Gerald R Jensen 2
Ans: d
Difficulty: Moderate
Ref: Establishing a Framework for Investors
a. real assets.
b. indirect assets.
c. personal assets.
d. financial assets.
Ans: a
Difficulty: Easy
Ref: Establishing a Framework for Investors
Ans: c
Difficulty: Easy
Ref: Establishing a Framework for Investors
4. Retirement plans that guarantee a set amount of money each month are known as:
Chapter One 1
Understanding Investments
a. 401(k) plans.
b. self-directed plans.
c. defined-benefit plans.
d. defined-contribution plans.
Ans: c
Difficulty: Moderate
Ref: Establishing a Framework for Investors
5. The investment professionals that arrange the sale of new securities are
called:
a. arbitragers.
b. traders.
c. investment bankers.
d. specialists.
Ans: c
Difficulty: Moderate
Ref: The Importance of Studying Investments
a. specialists.
b. financial advisors.
c. security analysts.
d. portfolio managers.
Ans: b
Difficulty: Moderate
Ref: The Importance of Studying Investments
a. registered representatives.
b. security analysts.
c. investment bankers.
d. portfolio managers.
Ans: c
Difficulty: Moderate
Ref: The Importance of Studying Investments
Chapter One 2
Understanding Investments
c. large number of conversions into self-directed plans.
d. increasing number of federal regulations that restrict pension fund portfolios.
Ans: c
Difficulty: Difficult
Ref: The Importance of Studying Investments
9. Most financial advisors are registered with the Securities and Exchange
Commission as:
a. registered representatives.
b. registered investment advisors.
c. registered financial planners.
d. registered securities consultants.
Ans: b
Difficulty: Moderate
Ref: The Importance of Studying Investments
Ans: c
Difficulty: Easy
Ref: The Importance of Studying Investments
Ans: d
Difficulty: Moderate
Ref: Understanding the Investment Decision Process
12. Which of the following investment areas relies heavily on mathematical and
statistical models?
a. Security analysis
Chapter One 3
Understanding Investments
b. Portfolio management
c. Institutional investing
d. Retirement planning
Ans: b
Difficulty: Moderate
Ref: Understanding the Investment Decision Process
a. will assume more risk only if they are compensated by higher expected return.
b. will always invest in the investment with the lowest possible risk.
c. actively seek to minimize their risks.
d. avoid the stock market due to the high degree of risk.
Ans: a
Difficulty: Moderate
Ref: Understanding the Investment Decision Process
a. Gold
b. Equity in a house
c. High-grade corporate bond
d. U.S. Treasury security
Ans: d
Difficulty: Easy
Ref: Understanding the Investment Decision Process
Ans: b
Difficulty: Moderate
Ref: Understanding the Investment Decision Process
a. slopes upward.
b. slopes downward.
c. is flat.
d. is impossible to determine.
Chapter One 4
Understanding Investments
Ans: a
Difficulty: Moderate
Ref: Understanding the Investment Decision Process
Chapter One 5
Understanding Investments
17. International investing:
Ans: d
Difficulty: Moderate
Ref: Understanding the Investment Decision Process
Ans: d
Difficulty: Difficult
Ref: Understanding the Investment Decision Process
19. Which of the following statements concerning global stock market capitalization
is true?
a. The United States accounts for roughly 65 percent of stock market capitalization
worldwide.
b. The United States accounts for roughly 40 percent of stock market capitalization
worldwide.
c. The United States accounts for roughly 25 percent of stock market capitalization.
d. It is expected that the United States will increase its future percentage of global
stock market capitalization.
Ans: b
Difficulty: Moderate
Ref: Important Considerations in the Investment Decision Process for Today's Investor
Ans: b
Difficulty: Moderate
Ref: Important Considerations in the Investment Decision Process for Today's Investor
Chapter One 6
Understanding Investments
21. Which of the following statements is true regarding multi-national corporations?
a. Exxon Mobil earns the majority of its profits from its overseas operations.
b. Google currently derives the majority of its earnings from outside the U.S.
c. Wal-Mart earns the majority of its profits from outside the U.S.
d. Coca-Cola has no overseas operations and no earnings outside the U.S.
Ans: a
Difficulty: Difficult
Ref: Important Considerations in the Investment Decision Process for Today's Investor
Ans: b
Difficulty: Moderate
Ref: Important Considerations in the Investment Decision Process for Today's Investor
a. Investment banker
b. Security analyst
c. Stockbroker
d. Portfolio manager
Ans: d
Difficulty: Difficult
Ref: Important Considerations in the Investment Decision Process for Today's Investor
a. 0.0%.
b. the rate on the bonds of financially sound corporations.
c. the average of the last 3 years’ inflation rate.
d. the return on Treasury securities.
Ans: d
Difficulty: Difficult
Ref: Important Considerations in the Investment Decision Process for Today's Investor
Chapter One 7
Understanding Investments
25. Which of the following is not a benefit of geographic diversification?
Ans: c
Difficulty: Difficult
Ref: Important Considerations in the Investment Decision Process for Today's Investor
Ans: c
Difficulty: Easy
Ref: The Importance of Studying Investments
27. Which of the following securities should have the highest expected return?
a. Corporate bonds
b. Large firm stocks
c. Small firm stocks
d. Private equity
Ans: d
Difficulty: Moderate
Ref: Understanding the Investment Decision Process
a. insider trading.
b. obstruction of justice.
c. manipulating stock prices.
d. participating in a Ponzi scheme.
Ans: b
Difficulty: Moderate
Ref: Ethics in Investing
Chapter One 8
Understanding Investments
True-False Questions
Ans: False
Difficulty: Moderate
Ref: The Importance of Studying Investments
Ans: False
Difficulty: Moderate
Ref: Understanding the Investment Decision Process
Ans: True
Difficulty: Easy
Ref: Understanding the Investment Decision Process
Ans: False
Difficulty: Easy
Ref: Understanding the Investment Decision Process
Ans: False
Difficulty: Difficult
Ref: Understanding the Investment Decision Process
Answer: False
Difficulty: Difficult
Ref: Understanding the Investment Decision Process
Answer: False
Difficulty: Difficult
Ref: Understanding the Investment Decision Process
Chapter One 9
Understanding Investments
8. Security analysts are typically employed only at brokerage houses.
Answer: False
Difficulty: Moderate
Ref: Importance of Studying Investments
Ans: False
Difficulty: Easy
Ref: Importance of Studying Investments
Ans: True
Difficulty: Easy
Ref: Importance of Studying Investments
Ans: False
Difficulty: Difficult
Ref: Important Considerations in the Investment Decision Process for Today's Investor
12. Most professionally-managed stock portfolios are able to outperform the overall
market on a consistent basis.
Ans: False
Difficulty: Easy
Ref: An Overall Perspective on Investing
13. Bond yields in some European countries have been negative in recent years.
Ans: True
Difficulty: Moderate
Ref: An Overall Perspective on Investing
14. Blockchain technology is the underlying process that enables the existence of
cryptocurrencies.
Ans: True
Difficulty: Moderate
Ref: A Perspective on Investing
Chapter One 10
Understanding Investments
Short-Answer Questions
1. Briefly explain the difference between expected returns and realized returns and
between ex ante returns and ex post returns.
Answer: Risk is the chance that the actual return on an investment will differ from
its expected return.
Difficulty: Moderate
Answer: They may include these items in their portfolios since risk-averse is not
the same thing as risk avoidance. Risk-averse investors would expect a
higher return from these assets as they are riskier than many other assets.
Difficulty: Moderate
Answer: Contrary to popular belief, she was not charged with insider trading but
obstruction of justice due to her efforts to hide her alleged insider trading.
Difficulty: Moderate
Chapter One 11
Understanding Investments
Critical Thinking/Essay Questions
1. What are some of the steps involved in valuing a company’s common stock?
Answer: The investor must evaluate the overall economy, industry and individual
company, since all have an impact on the value of the stock. In addition,
the expected return and appropriate risk must be estimated, based upon the
expected future cash flows of the company. And lastly, the efficiency of
stock markets must be considered and whether the current market value of
the stock is greater or less than its perceived economic value.
Difficulty: Difficult
2. What are some of the reasons driving so many individual investors to manage
their own investments today versus the conventional route of investing through a
financial advisor or stockbroker?
Answer: The emergence of the Internet has produced a host of online, discount
brokers offering ultra low-cost commissions, sometimes free trades, and
real-time quotes on stocks and bonds. There is also now a preponderance
of websites offering information on corporate news and SEC filings,
which helps investors become more self-sufficient if they so choose.
Also, extreme levels of market volatility seen in the last two decades have
eroded the wealth of many investors, including whatever portion was
being professionally managed by mutual funds or through financial
advisors. That begs the question of whether professional management or
advice is worth the cost in the face of such tremendous wealth erosion.
Many investors have decided to go out on their own, using a discount
broker.
Difficulty: Moderate
Answer: If he minimizes risk, then he will also minimize return. His retirement
fund will likely be much smaller than if he chose to take more risk over
the long run.
Difficulty: Moderate
Chapter One 12
Understanding Investments