Exam 1: Investments: Background and Issues

Suppose an investor is considering one of two investments which are identical in all respects except for risk. If the investor anticipates a fair return for the risk of the security they invest in they can expect to ________.

________ are examples of financial intermediaries.

Financial intermediaries exist because small investors cannot efficiently ________.

An example of a derivative security is ________.

Active trading in markets and competition among securities analysts helps ensure that ________. I. security prices approach informational efficiency II. riskier securities are priced to offer higher potential returns III. investors are unlikely to be able to consistently find under- or over-valued securities

Security selection refers to the ________.

Money Market securities are characterised by ________. I. maturity less than one year II. safety of the principal investment III. low rates of return

An investment advisor has decided to purchase gold, real estate, shares and bonds in equal amounts. This decision reflects which part of the investment process?

Accounting scandals can often be attributed to a particular concept in the study of finance known as the ________.

According to Australian household balance sheet, the largest liability of Australian households is ________.

The efficient markets hypothesis suggests that ________.

Real assets are ________.

Net worth represents ________ of the liabilities and net worth of Australian households.

In a perfectly efficient market the best investment strategy is probably a/an

________ portfolio construction starts with asset allocation.

________ are real assets.

An intermediary that pools and manages funds for many investors is called a/an ________.

The success of common share investments depends on the success of ________.

Surf City Software Company develops new surf forecasting software. It sells the software to Microsoft in exchange for 1000 common shares of Microsoft. Surf City Software has exchanged a ________ asset for a ________ asset in this transaction.

A ________ represents an ownership share in a corporation.