Investment Analysis Exam Questions https://quizplus.com/study-set/3309 25 Chapters 1900 Verified Questions
Investment Analysis Exam Questions Course Introduction Investment Analysis explores the fundamental concepts and techniques used to evaluate investment opportunities and make informed financial decisions. The course covers topics such as risk and return, asset valuation, portfolio theory, security analysis, and the functioning of capital markets. Students learn how to assess various investment vehicles—including stocks, bonds, mutual funds, and alternative assets—using both quantitative and qualitative methods. Additionally, the course emphasizes the development of analytical skills for constructing and managing investment portfolios, as well as understanding the impact of economic factors and market trends on investment performance.
Recommended Textbook Financial Markets and Institutions 11th Edition by Jeff Madura
Available Study Resources on Quizplus 25 Chapters 1900 Verified Questions 1900 Flashcards Source URL: https://quizplus.com/study-set/3309
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Chapter 1: Role of Financial Markets and Institutions Available Study Resources on Quizplus for this Chatper 94 Verified Questions 94 Flashcards Source URL: https://quizplus.com/quiz/65685
Sample Questions Q1) A common use of funds for ____ is investment in stocks and businesses, while their main use of funds is providing loans to households and businesses. A)savings institutions B)commercial banks C)mutual funds D)finance companies Answer: C Q2) A broker executes securities transactions between two parties and charges a fee reflected in the bid-ask spread. A)True B)False Answer: True Q3) ____ are classified as a depository institution. A)Credit unions B)Pension funds C)Finance companies D)Securities firms Answer: A To view all questions and flashcards with answers, click on the resource link above. Page 3
Chapter 2: Determination of Interest Rates Available Study Resources on Quizplus for this Chatper 70 Verified Questions 70 Flashcards Source URL: https://quizplus.com/quiz/65684
Sample Questions Q1) The supply of loanable funds in the U.S. is partly determined by the monetary policy implemented by the Federal Reserve System. A)True B)False Answer: True Q2) According to the loanable funds theory, market interest rates are determined by the factors that control the supply of and demand for loanable funds. A)True B)False Answer: True Q3) To forecast interest rates using the Fisher effect, the real interest rate for an upcoming period can be forecasted by subtracting the expected inflation rate over that period from the nominal interest rate quoted for that period. A)True B)False Answer: True To view all questions and flashcards with answers, click on the resource link above.
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Chapter 3: Structure of Interest Rates Available Study Resources on Quizplus for this Chatper 82 Verified Questions 82 Flashcards Source URL: https://quizplus.com/quiz/65683
Sample Questions Q1) The annualized yield on a three-year security is 13 percent; the annualized two-year interest rate is 12 percent, while the one-year interest rate is 9 percent. The forward rate two years ahead is ____ percent. A)1.8 B)9.0 C)15.0 D)none of the above Answer: C Q2) Assume that annualized yields of short-term and long-term securities are equal. If investors suddenly believe interest rates will increase, their actions may cause the yield curve to A)become inverted. B)become flat. C)become upward sloping. D)be unaffected. Answer: C Q3) The higher a bond rating, the lower the perceived default risk. A)True B)False Answer: True To view all questions and flashcards with answers, click on the resource link above. Page 5
Chapter 4: Functions of the Fed Available Study Resources on Quizplus for this Chatper 64 Verified Questions 64 Flashcards Source URL: https://quizplus.com/quiz/65682
Sample Questions Q1) The Board of Governors is composed of A)seven members appointed by the President of the United States. B)the 12 presidents of Fed district banks. C)the Federal Open Market Committee, plus the Federal Advisory Council. D)the Federal Open Market Committee, plus the President of the United States. Q2) Which of the following is not an activity of Fed district banks? A)clearing checks B)replacing old currency C)providing loans to depository institutions D)acting as an intermediary to match up lenders and borrowers in the stock market Q3) The ____ is directly responsible for controlling money supply growth. A)Federal Advisory Council B)FOMC C)Board of Governors D)President of the United States Q4) To increase the money supply, the Fed may increase the reserve requirement ratio. A)True B)False To view all questions and flashcards with answers, click on the resource link above. Page 6
Chapter 5: Monetary Policy Available Study Resources on Quizplus for this Chatper 66 Verified Questions 66 Flashcards Source URL: https://quizplus.com/quiz/65681
Sample Questions Q1) According to the theory of rational expectations, higher inflationary expectations encourage businesses and households to reduce their demand for loanable funds. A)True B)False Q2) Which of the following is not a reason that a stimulative monetary policy may be ineffective? A)The effects of a stimulative policy may be disrupted by expectations of inflation. B)Retirees who rely on interest income may restrict their spending C)Lending institutions may increase their standards for borrowers, so some potential borrowers may not qualify for loans. D)Higher interest rates encourage individuals to increase their savings. Q3) A passive monetary policy adjusts money supply automatically in response to economic conditions. A)True B)False Q4) The Fed needs the approval of the presidential administration to make decisions. A)True B)False To view all questions and flashcards with answers, click on the resource link above. Page 7
Chapter 6: Money Markets Available Study Resources on Quizplus for this Chatper 78 Verified Questions 78 Flashcards Source URL: https://quizplus.com/quiz/65680
Sample Questions Q1) An investor, purchases a six-month (182-day) T-bill with a $10,000 par value for $9,700. If the Treasury bill is held to maturity, the annualized yield is ____ percent. A)6.02 B)1.54 C)1.50 D)6.20 E)none of the above Q2) Most repo transactions use government securities. A)True B)False Q3) At a given point in time, the actual price paid for a three-month Treasury bill is A)usually equal to the par value. B)more than the price paid for a six-month Treasury bill. C)equal to the price paid for a six-month Treasury bill. D)none of the above Q4) Money market securities are must have a maturity of three months or less. A)True B)False To view all questions and flashcards with answers, click on the resource link above. Page 8
Chapter 7: Bond Markets Available Study Resources on Quizplus for this Chatper 87 Verified Questions 87 Flashcards Source URL: https://quizplus.com/quiz/65679
Sample Questions Q1) Investors in Treasury notes and bonds receive ____ interest payments from the Treasury. A)annual B)semiannual C)quarterly D)monthly Q2) Which of the following is not true regarding zero-coupon bonds? A)They are issued at a deep discount from par value. B)Investors are taxed annually on the amount of interest earned, even though the interest will not be received until maturity. C)The issuing firm is permitted to deduct the amortized discount as interest expense for federal income tax purposes, even though it does not pay interest. D)Zero-coupon bonds are purchased mainly for tax-exempt investment account, such as pension funds and individual retirement accounts. E)all of the above are true Q3) Corporate bonds are more standardized than stocks. A)True B)False To view all questions and flashcards with answers, click on the resource link above. Page 9
Chapter 8: Bond Valuation and Risk Available Study Resources on Quizplus for this Chatper 90 Verified Questions 90 Flashcards Source URL: https://quizplus.com/quiz/65678
Sample Questions Q1) If analysts expect that the demand for loanable funds will increase, and the supply of loanable funds will decrease, they would most likely expect interest rates to ____ and prices of existing bonds to ____. A)increase; increase B)increase; decrease C)decrease; decrease D)decrease; increase Q2) A bond with a $1,000 par value has an 8 percent annual coupon rate. It will mature in 4 years, and annual coupon payments are made at the end of each year. Present annual yields on similar bonds are 6 percent. What should be the current price? A)$1,069.31 B)$1,000.00 C)$9712 D)$927.66 E)none of the above Q3) The market price of a bond is partly determined by the timing of the payments made to bondholders. A)True B)False To view all questions and flashcards with answers, click on the resource link above. Page 10
Chapter 9: Mortgage Markets Available Study Resources on Quizplus for this Chatper 66 Verified Questions 66 Flashcards Source URL: https://quizplus.com/quiz/65677
Sample Questions Q1) Fannie Mae and Freddie Mac experienced financial problems during the credit crisis because they: A)were unwilling to finance new mortgages. B)invested heavily in balloon mortgages. C)invested only in prime mortgages that offered very low returns. D)invested heavily in subprime mortgages. Q2) A __________ is a privately negotiated contract that protects investors against the risk of default on particular debt securities such as mortgage-backed securities. A)default insurance contract B)default risk swap C)credit default swap D)collateralized debt obligation Q3) Some adjustable-rate mortgages (ARMs) contain an option clause that allows mortgage holders to switch to a fixed-rate mortgage within a specified period. A)True B)False To view all questions and flashcards with answers, click on the resource link above.
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Chapter 10: Stock Offerings and Investor Monitoring Available Study Resources on Quizplus for this Chatper 102 Verified Questions 102 Flashcards Source URL: https://quizplus.com/quiz/65676
Sample Questions Q1) A firm will typically attempt to sell shares from a secondary offering A)far below the prevailing market price. B)far above the prevailing market price. C)at the prevailing market price. D)at the offer price of the IPO. Q2) Listing stock on a foreign stock exchange A)enhances the stock's liquidity. B)may increase the firm's perceived financial standing. C)may protect a firm against hostile takeovers. D)all of the above Q3) There is strong evidence that IPOs of firms perform ____ on average over a period of a year or longer. A)well B)poorly C)very well relative to other firms in their industry D)none of the above Q4) As a result of the Sarbanes-Oxley Act, firms were able to reduce their costs of compiling and reporting financial information. A)True B)False Page 12 To view all questions and flashcards with answers, click on the resource link above.
Chapter 11: Stock Valuation and Risk Available Study Resources on Quizplus for this Chatper 94 Verified Questions 94 Flashcards Source URL: https://quizplus.com/quiz/65675
Sample Questions Q1) According to the capital asset pricing model, the required return by investors on a security is A)inversely related to the risk-free rate. B)inversely related to the firm's beta. C)inversely related to the market return. D)none of the above Q2) The dividend discount model states that the price of a stock should reflect the present value of the stock's future dividends. A)True B)False Q3) Holding other factors constant, an increase in the capital gains tax rate will: A)have more effect on the valuation of dividend-paying stocks than on stocks with high growth prospects. B)have less effect on the valuation of dividend-paying stocks than on stocks with high growth prospects. C)have no effect on the valuations of stocks. D)have the same effect on the valuation of dividend-paying stocks and stocks with high growth prospects. To view all questions and flashcards with answers, click on the resource link above. Page 13
Chapter 12: Market Microstructure and Strategies Available Study Resources on Quizplus for this Chatper 70 Verified Questions 70 Flashcards Source URL: https://quizplus.com/quiz/65674
Sample Questions Q1) A market order is an order to buy or sell a stock at the best possible price. A)True B)False Q2) Which of the following statements is incorrect with respect to Regulation Fair Disclosure (FD)? A)It required firms to disclose relevant information broadly to investors at the same time. B)It restricts firms from providing analysts with information that they could use before the market is aware of the information. C)It requires firms to announce a change in expected earnings to all investors and other interested parties at the same time. D)It prohibits firms from communicating with analysts after a news announcement is made to all investors. E)All of the above are correct with respect to Regulation FD. Q3) The SEC's Division of Market Regulation assesses possible violations of the SEC's regulations and can take action against individuals or firms. A)True B)False To view all questions and flashcards with answers, click on the resource link above.
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Chapter 13: Financial Futures Markets Available Study Resources on Quizplus for this Chatper 76 Verified Questions 76 Flashcards Source URL: https://quizplus.com/quiz/65673
Sample Questions Q1) ____ risk is the risk of losses as a result of inadequate management or controls. A)Basis B)Systemic C)Operational D)Prepayment Q2) Some specialized futures contracts are sold over the counter, whereas standardized financial futures contracts are traded on exchanges. A)True B)False Q3) ____ take positions in futures to reduce their exposure to future movements in interest rates or stock prices. A)Hedgers B)Day traders C)Position traders D)None of the above Q4) Financial futures contracts are rarely sold over the counter. A)True B)False To view all questions and flashcards with answers, click on the resource link above. Page 15
Chapter 14: Options Markets Available Study Resources on Quizplus for this Chatper 82 Verified Questions 82 Flashcards Source URL: https://quizplus.com/quiz/65672
Sample Questions Q1) The ____ is the most important exchange for trading options. A)New York Stock Exchange (NYSE) B)Chicago Board of Options Exchange (CBOE) C)Boston Options Exchange D)American Stock Exchange Q2) On an exchange, option trades can be executed A)by a floor broker. B)electronically. C)by a market maker. D)all of the above E)A and B only Q3) Backdating implies that CEO (or other executives) reset the date that their options were granted to a different date when the stock price was lower. A)True B)False Q4) An option with a higher exercise price has a higher call option premium and a lower put option premium. A)True B)False To view all questions and flashcards with answers, click on the resource link above. Page 16
Chapter 15: Swap Markets Available Study Resources on Quizplus for this Chatper 73 Verified Questions 73 Flashcards Source URL: https://quizplus.com/quiz/65671
Sample Questions Q1) Which of the following is not an advantage of having derivative securities such as swaps traded on an exchange instead of over the counter? A)more transparent pricing B)increased trading volume C)less standardarized contracts, allowing contracts to be tailored to the parties' specific needs D)more accurate information about the collateral backing a particular contract Q2) ____ risk in a swap is typically not overwhelming because the affected party can simply discontinue its payments to the other party. A)Basis B)Credit C)Sovereign D)None of the above Q3) If a large bank that has taken numerous swap positions and guaranteed many other swap positions fails, there could be several defaults on swap payments. A)True B)False To view all questions and flashcards with answers, click on the resource link above.
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Chapter 16: Foreign Exchange Derivative Markets Available Study Resources on Quizplus for this Chatper 75 Verified Questions 75 Flashcards Source URL: https://quizplus.com/quiz/65670
Sample Questions Q1) Fundamental forecasting has been found to be consistently superior to the other forecasting techniques. A)True B)False Q2) Currency futures contracts differ from forward contracts in that they A)are an obligation. B)are not an obligation. C)are standardized. D)can specify any amount and maturity date. Q3) In the Wall Street Journal, you observe that the British pound (£) is quoted for $1.65. The Australian dollar (A$) is quoted for $0.60. What is the value of the Australian dollar in British pounds? A)A$2.75 B)A$0.36 C)£2.75 D)£0.36 E)none of the above Q4) Direct intervention is always extremely effective. A)True B)False Page 18 To view all questions and flashcards with answers, click on the resource link above.
Chapter 17: Commercial Bank Operations Available Study Resources on Quizplus for this Chatper 72 Verified Questions 72 Flashcards Source URL: https://quizplus.com/quiz/65669
Sample Questions Q1) Commercial banks have expanded in recent years not only by acquiring other banks but also by acquiring other types of financial service firms. A)True B)False Q2) Obtaining funds through ____ is not a common source of funds for banks to satisfy a temporary deficiency of funds? A)issuing bonds B)the federal funds market C)repurchase agreements D)borrowing from the Federal Reserve Q3) The bank holding company structure allows more flexibility to borrow funds, issue stock, repurchase the company's own stock, and acquire other firms. A)True B)False Q4) Commercial banks can be a lender or a borrower when using repurchase agreements and loans in the federal funds market. A)True B)False To view all questions and flashcards with answers, click on the resource link above. Page 19
Chapter 18: Bank Regulation Available Study Resources on Quizplus for this Chatper 68 Verified Questions 68 Flashcards Source URL: https://quizplus.com/quiz/65668
Sample Questions Q1) Deposit insurance has a limit of: A)$10,000. B)$25,000. C)$100,000. D)$250,000. Q2) An "off-balance-sheet commitment" that provides the bank's guarantee on the financial obligations of a borrower to a specific party is a A)standby letter of credit. B)federal funds agreement. C)repurchase agreement. D)discount window agreement. Q3) In general, a bank defines its value-at-risk as the estimated potential loss from its traditional businesses that could result from adverse movements in market prices. A)True B)False Q4) Deposit insurance now covers all bank deposits without imposing any limit. A)True B)False To view all questions and flashcards with answers, click on the resource link above. Page 20
Chapter 19: Bank Management Available Study Resources on Quizplus for this Chatper 85 Verified Questions 85 Flashcards Source URL: https://quizplus.com/quiz/65667
Sample Questions Q1) Banks are more liquid as a result of securitization because it allows them to request repayment of the loan principal from the borrower upon demand. A)True B)False Q2) When cash outflows temporarily exceed cash inflows, banks are most likely to experience A)higher dividend payments. B)illiquidity. C)a negative duration on its assets. D)an excess of capital. Q3) Durango Bank has $2 million in rate-sensitive liabilities and $3 million in rate sensitive assets. Durango's gap is ____, and Durango is probably more concerned about a(n) ____ in interest rates. A)-$1 million; increase B)-$1 million; decrease C)$1 million; increase D)$1 million; decrease E)none of the above To view all questions and flashcards with answers, click on the resource link above. Page 21
Chapter 20: Bank Performance Available Study Resources on Quizplus for this Chatper 50 Verified Questions 50 Flashcards Source URL: https://quizplus.com/quiz/65666
Sample Questions Q1) Interest income generated from all assets is called A)net interest margin. B)the spread. C)gross interest income. D)net interest income. Q2) Banks offering ____ nontraditional services will incur ____ noninterest expenses and ____ noninterest income. A)fewer; higher; higher B)more; lower; higher C)more; higher; higher D)fewer; lower; higher E)none of the above Q3) If banks continue to offer new services (such as insurance or securities services), their noninterest income will decrease over time. A)True B)False To view all questions and flashcards with answers, click on the resource link above.
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Chapter 21: Thrift Operations Available Study Resources on Quizplus for this Chatper 78 Verified Questions 78 Flashcards Source URL: https://quizplus.com/quiz/65665
Sample Questions Q1) ____ are the primary asset of savings institutions. A)Mortgages B)Cash balances C)Investment securities D)Business loans Q2) Because credit unions ____ stock, they are technically owned by the ____. A)issue; depositors B)do not issue; depositors C)issue; stockholders D)do not issue; management Q3) Today, credit unions are regulated as to the A)types of services they can offer. B)rates they offer on deposits. C)maturity of residential loans they make. D)size of residential mortgage loans. Q4) To manage interest rate risk, a savings institution could use A)fixed-rate mortgages. B)currency options. C)interest rate futures contracts. D)letters of credit. Page 23 To view all questions and flashcards with answers, click on the resource link above.
Chapter 22: Finance Company Operations Available Study Resources on Quizplus for this Chatper 38 Verified Questions 38 Flashcards Source URL: https://quizplus.com/quiz/65664
Sample Questions Q1) If finance companies were confident about projections of ____ interest rates, they may consider using the funds obtained from issuing bonds to offer loans with ____ rates. A)declining; variable B)rising; fixed C)rising; variable D)A and B Q2) The most important risk for finance companies is ____ risk. A)settlement B)accounting C)credit D)exchange rate Q3) After interest rates increase, finance companies tend to use more long-term debt to lock in the cost of funds over an extended period of time. A)True B)False Q4) Finance companies are not subject to state regulations on intrastate business. A)True B)False To view all questions and flashcards with answers, click on the resource link above. Page 24
Chapter 23: Mutual Fund Operations Available Study Resources on Quizplus for this Chatper 105 Verified Questions 105 Flashcards Source URL: https://quizplus.com/quiz/65663
Sample Questions Q1) Mutual funds that include some non-U.S. stocks and U.S. stocks are called ____ funds. A)global B)foreign C)combined D)mixed Q2) Mutual funds composed of bonds that offer periodic coupon payments are A)income funds. B)specialty funds. C)dividend funds. D)growth funds. Q3) If investors sell their mutual fund shares after the net asset value of the fund increases, the return is called A)share price appreciation. B)capital gains distribution. C)dividends. D)split net asset value. Q4) Venture capital funds typically invest in stocks of publicly-traded companies. A)True B)False Page 25 To view all questions and flashcards with answers, click on the resource link above.
Chapter 24: Securities Operations Available Study Resources on Quizplus for this Chatper 59 Verified Questions 59 Flashcards Source URL: https://quizplus.com/quiz/65662
Sample Questions Q1) The SEC's Regulation Fair Disclosure (FD): A)requires firms to disclose any significant information to the SEC before making public announcements. B)requires firms to disclose any significant information to the Federal Reserve before releasing it to the public. C)requires firms to disclose any significant information simultaneously to all market participants. D)prohibits insiders at firms from trading on significant inside information. Q2) Which of the following is not an example of a securities firm that experienced financial problems as a result of taking on excessive risk when engaging in proprietary trading? A)Washington Mutual B)Société Générale C)Bear Stearns D)Barings Bank Q3) When a stock offering is based on a firm commitment, this means that the securities firm does not guarantee a price to the issuing corporation. A)True B)False To view all questions and flashcards with answers, click on the resource link above. Page 26
Chapter 25: Insurance and Pension Fund Operations Available Study Resources on Quizplus for this Chatper 76 Verified Questions 76 Flashcards Source URL: https://quizplus.com/quiz/65661
Sample Questions Q1) Which type of life insurance policy specifically accommodates the needs of people who need more insurance now than later? A)whole life B)term C)decreasing term D)universal life Q2) ____ represent the most popular asset of life insurance companies. A)Corporate bonds B)Treasury securities C)Corporate stock D)State and local bonds Q3) Property and casualty (PC) insurance differs from life insurance in all of the following ways, except A)PC policies often last one year or less, as opposed to the long-term or even permanent life insurance policies. B)PC insurance is more focused than life insurance. C)the amount of future compensation to be paid on PC insurance is more difficult to forecast than that paid on life insurance. D)All of the above are differences between PC and life insurance. To view all questions and flashcards with answers, click on the resource link above. Page 27