Midterm 1

Name____________________________________

Date____________________________________

1
The net wealth of the aggregate economy is equal to the sum of
A) all real assets.
B) all financial assets.
C) all physical assets.
D) all real and financial assets.
E) none of the above

2
Asset allocation refers to ____________.
A) choosing which securities to hold based on their valuation
B) investing only in "safe" securities
C) the allocation of assets into broad asset classes
D) bottom-up analysis
E) all of the above

3
The Sarbanes-Oxley Act ____________.
A) requires corporations to have more independent directors
B) requires the firm's CFO to personally vouch for the firm's accounting statements
C) prohibits auditing firms from providing other services to clients
D) A and B are correct.
E) A, B, and C are correct.

4
Financial intermediaries differ from other businesses in that both their assets and their liabilities are mostly
A) illiquid.
B) owned by government.
C) real.
D) financial.
E) regulated.

5
Although derivatives can be used as speculative instruments, businesses most often use them to
A) hedge.
B) offset debt.
C) appease stockholders.
D) attract customers.
E) enhance their balance sheets.

6
During the period between 2000 and 2002, a large number of scandals were uncovered. Most of these scandals were related to
1) Manipulation of financial data to misrepresent the actual condition of the firm.
II) Misleading and overly optimistic research reports produced by analysts.
III) Allocating IPOs to executives as a quid pro quo for personal favors.
IV) Greenmail.
A) II, III, and IV
B) I, II, and IV
C) II and IV
D) I, III, and IV
E) I, II, and III

7
Financial assets
A) contribute to the country's productive capacity both directly and indirectly. B) do not contribute to the country's productive