$1.$ Which of the following is a characteristic of inflation?

a$.$ Economic contraction

b$.$General decline in prices

c$.$Shrinking money supply

d$.$General rise in prices

$2.$If an investor simply sought the highest return, they would invest only in stocks. Why might an investor diversify away from stocks only?

a$.$Bonds offer equal return to stocks but with lower risk.

b$.$Stocks are not always available to purchase.

c$.$A mix of bonds and stocks normally provides the highest return.

d$.$Investing in stocks only is the highest$-$risk strategy.

$3.$There are thousands of publicly traded stocks trading on exchanges. Indexes are measurement tools used to determine how the market performs during a particular period. Which of the following indexes would be the best measure of the total stock market?

a$.$Dow Jones Industrial Average

b$.$NASDAQ Composite

c$.$Wilshire US Small Cap

d$.$S&P $500$

$4.$Why would a securities issuer choose to use the shelf registration process?

a$.$It takes less time to complete an issuance than with the standard process.

b$.$Its disclosure requirements are less extensive.

c$.$It does not require the securities$\text{'}$ interest payments to be reported to the IRS.

d$.$ It makes taxes on the issue more favorable.

$5.$It is conceivable for a stock investor to gain as much as $50\%$ in one year or lose $50\%$ in one year.

a$.$ True

b$.$False

$6.$Why would a company typically choose to source external financing by issuing bonds rather than stock?

a$.$Bonds are simpler to issue.

b$.$Bonds have longer maturity dates than stock.

c$.$Companies pay taxes on the proceeds from stock issues.

d$.$Bonds are a cheaper funding source.

$7.$ Capital market instruments are all equity securities$.$

a$.$True

b$.$False