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1.Financial assets A) B) C) D) E) directly contribute to the country's productive ca pacity indirectly contribute to the country's productive capacity contribute to the country's productive ca pacity both directly and indirectly do not contribute to the country's productive capacity either directly or indirectly are of no value to anyone 2. Which of the following are characteristics of preferred stock? I) It pays its holder a fixed amount of income each year, at the discretion of its managers II) It gives its holder voting power in the firm. III) Its dividends are usually cumulative IV) Failure to pay dividends may result in bankruptcy proceedings A) 1,1", and IV B) 1,I1, and ll C) and II D) I, II, and IV E) , II, I, and M 3. Which of the following statements is (are) true? I) Risk-averse investors reject investments that are fair games II) Risk-neutral investors judge risky investments only by the expected returns I1I) Risk-averse investors judge investments only by their riskiness IV).Risk-loving investors will not engage in fair games A) only B) Il ony C) and Il only D) Il and IIl only E) i, Ill, and only 4. The riskiness of individual assets A) B) C) should be considered for the asset in isolation. should be considered in the context of the effect on overall portfolio volatility combined with the riskiness of other individual assets (in the proportions these assets constitute of the entire portfolio) should be the relevant risk measure band C. none of the above D) E)

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