LECTURE 5: Corporate Stocks and Bonds

What is the primary goal of investment management?

• A. To maximize profits at all costs

• B. To handle financial assets and other investments

• C. To avoid any form of risk

• D. To focus only on short-term gains

Which of the following is NOT a type of institutional investor?

• A. Pension funds

• B. Individual investors

• C. Insurance companies

• D. Hedge funds

Which type of investment objective is focused on meeting a particular cash flow stream?

• A. Nonliability-driven objectives

• B. Liability-driven objectives

• C. Benchmark objectives

• D. Tactical objectives

What is the primary function of a benchmark in investment management?

• A. To measure risk levels

• B. To set investment policy

• C. To compare portfolio performance

• D. To select asset classes

What is the first major activity in the investment management process?

• A. Establishing an investment policy

• B. Selecting a portfolio strategy

• C. Constructing and monitoring a portfolio

• D. Setting investment objectives

Which type of asset allocation is characterized by active strategies that seek to enhance performance by opportunistically shifting the asset mix?

• A. Policy asset allocation

• B. Dynamic asset allocation

• C. Tactical asset allocation

• D. Long-term asset allocation

What are the four major traditional asset classes mentioned in the lecture?

• A. Real estate, commodities, foreign securities, bonds

• B. Common stocks, bonds, cash equivalents, real estate

• C. Mutual funds, stocks, bonds, precious metals

• D. Equities, fixed income, derivatives, collectibles

Which financial instrument represents ownership in a corporation?

• A. Bond

• B. Stock

• C. Treasury bill

• D. Certificate of deposit

Which of the following best describes a bond?

• A. A security that represents ownership in a corporation

• B. A fixed income instrument that represents a loan made by an investor to a borrower

• C. An equity instrument with no fixed maturity date

• D. A liquid, low-risk investment that can be quickly converted into cash

What distinguishes stocks from bonds in terms of ownership and repayment priority?

• A. Stocks represent debt, while bonds represent equity

• B. Stocks have higher repayment priority than bonds in liquidation

• C. Bonds have higher repayment priority than stocks in liquidation

• D. Stocks and bonds have equal repayment priority in liquidation