Question 1

An annuity due is a set of

Answers:	equal, annual payments made at the end of the year
	equal, annual payments
	equal, annual payments made at the beginning of the year
	rising annual payments

Question 2

If interest rates rise,

Answers:	the future value of a dollar declines
	the present value of a dollar rises
	the present value of an annuity falls
	the future value of an annuity falls

Question 3

The Securities and Exchange Commission regulates

Answers:	trading in publicly held securities
	trading in privately held securities
	the margin requirement
	the amount a stock's price may change

Question 4

Efficient securities markets imply that

Answers:	investors cannot outperform the market
	investors cannot expect to outperform the market
	security prices are randomly determined
	there is little risk of loss over an extended investment horizon

Question 5

M-1 includes coins, currency, and ____.

Answers:	demand deposits
	savings accounts
	certificates of deposit
	time deposits

Question 6

The future value of a dollar

1.	decreases with compounding
2.	increases with compounding
3.	decreases with higher interest rates
4.	increases with higher interest rates

Answers:	1 and 3
	1 and 4
	2 and 3
	2 and 4

Question 7

Money serves as

Answers:	a substitute for equity
	a precaution against inflation
	a medium of exchange
	a risk-free liability

Question 8

An investor may place a limit order that

Answers:	limits the amount of commissions
	specifies when the stock will be purchased
	establishes the exchange on which the security is to be bought or sold
	states a price at which the investor seeks to buy or sell the stock

Question 9

In an efficient market, security prices

Answers:	adjust rapidly to new information
	adjust slowly to new information
	poorly value a firm's future prospects
	indicate that the firm is overvalued

Question 10

If an investor sells short, the individual

1.	sells borrowed securities
2.	sells securities from his or her portfolio
3.	anticipates a price increase
4.	anticipates a price decrease

Answers:	1 and 3
	1 and 4
	2 and 3
	2 and 4

Question 11

If a stock is initially offered to the public for $20 in an underwriting but the price immediately falls to $15,

1.	the firm received $20 a share
2.	the initial investors sustain a loss
3.	demand exceeded supply
4.	supply exceeded demand

Answers:	1, 2, and 3
	1, 2, and 4
	2 and 3
	2 and 4

Question 12

Which of the following is not part of the underwriting process?

Answers:	the prospectus
	the Federal Reserve
	the Securities and Exchange Commission
	the syndicate

Question 13

The regulation of securities markets

Answers:	discourages investing by requiring the registration of investors
	is enforced by the Federal Reserve
	protects investors from their own mistakes
	provides investors with information to make informed decisions

Question 14

The present value of a dollar

1.	increases with lower interest rates
2.	increases with higher interest rates
3.	increases with longer periods of time
4.	decreases with longer periods of time

Answers:	1 and 3
	1 and 4
	2 and 3
	2 and 4

Question 15

If the initial offer price is too low,

1.	supply will exceed demand
2.	demand will exceed supply
3.	the price of the security will rise
4.	the price of the security will decline

Answers:	1 and 3
	1 and 4
	2 and 3
	2 and 4

Question 16

Which is the largest if the interest rate is 10%?

Answers:	present value of $100 after five years
	present value of $100 annuity for five years
	future value of $100 annuity for five years
	future value of $100 after five years

Question 17

American Depository Receipts

1.	represent American securities traded abroad
2.	represent foreign stocks traded in the United States
3.	facilitate trading in foreign stocks
4.	facilitate trading in American securities

Answers:	1 and 3
	1 and 4
	2 and 3
	2 and 4

Question 18

Money market mutual funds invest in

Answers:	corporate bonds
	corporate stock
	federal government Treasury bills
	federal government Treasury bonds

Question 19

Which of the following is not a financial intermediary?

Answers:	New York Stock Exchange
	Washington Savings and Loan
	First National City Bank
	Merchants Savings Bank

Question 20

The assets of a typical commercial bank include

Answers:	commercial loans
	demand deposits
	common stock
	equity