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Foundations of Financial Markets and Institutions, 4e (Fabozzi/Modigliani/Jones) Chapter 9 Properties and

Pricing of Financial Assets
Multiple Choice Questions
1 Properties of Financial Assets
1) Which of the below is NOT one of the eleven properties of financial assets?
A) moneyness
B) multiplicity and denomination
C) reversibility
D) cash flow
Answer: B
Comment: The eleven properties of financial assets are (1) moneyness, (2) divisibility and denomination, (3)
reversibility, (4) cash flow, (5) term to maturity, (6) convertibility, (7) currency, (8) liquidity, (9) return predictability, (10)
complexity, and (11) tax status. Diff: 2
Topic: 9.1 Properties of Financial Assets
Objective: 9.1 the many key properties of financial assets: moneyness; divisibility and denomination;
reversibility; cash flow and return; term to maturity; convertibility; currency; liquidity; return predictability or risk;
complexity; and tax status
2) Which of the below is NOT one of the eleven properties of financial assets?
A) convertibility
B) currency
C) liquidity predictability
D) tax status
Answer: C

(2) divisibility and denomination (these are only ONE property and not TWO). return predictability or risk.1 the many key properties of financial assets: moneyness. currency. (4) cash flow. complexity. (3) reversibility. Diff: 2 Topic: 9. and (11) tax status. return predictability or risk. and denomination Answer: D Comment: The 11 properties of financial assets are (1) moneyness. complexity. and tax status B) convertibility. (7) currency. (3) reversibility. reversibility. liquidity. (9) return predictability. liquidity C) liquidity. (5) term to maturity. reversibility. (10) complexity. (2) divisibility and denomination. . Diff: 2 Topic: 9. and (11) tax status. term to maturity. term to maturity. (10) complexity. currency. liquidity. reversibility. (8) liquidity. divisibility and denomination. (8) liquidity.1 Properties of Financial Assets Objective: 9. complexity. and tax status 4) Which of the below statements is TRUE? A) "Near money" is a financial asset that is used as a medium of exchange or in settlement of transactions.Comment: The eleven properties of financial assets are (1) moneyness. divisibility and denomination. cash flow and return. and tax status 1 3) Which of the below are THREE of the eleven properties of financial assets? A) return predictability.1 Properties of Financial Assets Objective: 9. and cash flow D) money.1 the many key properties of financial assets: moneyness. currency. convertibility. (9) return predictability. (5) term to maturity. (7) currency. (6) convertibility. cash flow and return. (4) cash flow. (6) convertibility. divisibility. convertibility.

return predictability or risk. C) "Near money" is very close to "money" in that it can be transformed into money at little cost. government called a Treasury bill. in the case of the United States. complexity.S. In the United States. currency. currency. and tax status 2 5) ________ relates to the minimum size in which a financial asset can be liquidated and exchanged for money. cash flow and return. reversibility. money consists of currency and a very few forms of deposits that permit check writing. includes (i) time and savings deposits and (ii) a security issued by the U. Answer: C Comment: Money is a financial asset that is used as a medium of exchange or in settlement of transactions.1 the many key properties of financial assets: moneyness. government called a Treasury bill. delay. complexity. cash flow and return. in the case of the United States. D) "Faraway money".B) In the United States. money consists of currency and all forms of deposits that permit check writing. or risk. convertibility. Diff: 2 Topic: 9. term to maturity. divisibility and denomination. liquidity. includes (i) time and savings deposits and (ii) a security issued by the U.1 Properties of Financial Assets Objective: 9. term to maturity. reversibility. and tax status . convertibility. liquidity. return predictability or risk. A) Reversibility B) Denomination C) Convertibility D) Divisibility Answer: D Diff: 1 Topic: 9.1 Properties of Financial Assets Objective: 9. divisibility and denomination. "Near money".1 the many key properties of financial assets: moneyness.S.

cash flow and return. divisibility and denomination. incurring a loss C) lesser the variability. Consequently. convertibility.1 Properties of Financial Assets . incurring no loss or gain Answer: A Comment: The greater the variability. liquidity. reversibility is also referred to as turnaround cost or round-trip cost. incurring a loss B) lesser the variability. incurring a large gain D) greater the variability. C) one-way cost D) turnaround cost Answer: D Comment: Reversibility refers to the cost of investing in a financial asset and then getting out of it and back into cash again.1 Properties of Financial Assets Objective: 9. the greater the probability of the market maker incurring a loss in excess of a stated bound between the time of buying and reselling the financial asset. return predictability or risk. A) the cost of investing in a financial asset and then getting out of it but not back into cash again. Diff: 2 Topic: 9.1 the many key properties of financial assets: moneyness. term to maturity. reversibility.6) Reversibility is referred to as ________. B) the cost of investing in a financial asset instead of investing in cash. A) greater the variability. currency. the greater the probability of the market maker ________ in excess of a stated bound between the time of buying and reselling the financial asset. complexity. and tax status 7) The ________. Diff: 2 Topic: 9.

complexity.1 Properties of Financial Assets . convertibility. and tax status 3 8) The return that an investor will realize by holding a financial asset depends on all the ________ that the financial asset will pay its owners. in that it is a major determinant of their value. liquidity. complexity. return predictability or risk. cash flow and return. and tax status 9) Return ________ is a basic property of financial assets.Objective: 9. convertibility. reversibility. cash flow and return. reversibility. divisibility and denomination. this includes dividends on shares and coupon payments on bonds. term to maturity.1 the many key properties of financial assets: moneyness. A) convertibility B) divisibility C) predictability D) complexity Answer: C Diff: 1 Topic: 9. liquidity. return predictability or risk.1 Properties of Financial Assets Objective: 9. term to maturity.1 the many key properties of financial assets: moneyness. A) stock distributions B) cash distributions C) cash convertibility D) liquid inventories Answer: B Diff: 1 Topic: 9. currency. currency. divisibility and denomination.

and so represents a combination of simpler assets. convertibility. and tax status 10) A ________ asset is one that provides options for the issuer or the investor.1 the many key properties of financial assets: moneyness.1 the many key properties of financial assets: moneyness. cash flow and return. or both. return predictability or risk. and tax status 4 . A) complex B) taxable C) predictable and divisible D) liquid Answer: A Diff: 1 Topic: 9. currency. liquidity. term to maturity. convertibility.1 Properties of Financial Assets Objective: 9. liquidity. reversibility. divisibility and denomination. term to maturity. complexity. complexity. currency. divisibility and denomination.Objective: 9. reversibility. return predictability or risk. cash flow and return.