Chapter 3 Self-Quiz

* not completed

. The __________ heuristic is the tendency people have to place inordinate weight on easily recalled events and memorable personal experiences in their deliberations.

Representativeness correct incorrect

salience correct incorrect

availability correct incorrect

anchoring correct incorrect

bias correct incorrect

* not completed

. Arthur Levitt, chairman of the Securities and Exchange Commission, thinks that what is at stake when companies begin to engage in managing their earnings?

Millions of U.S. companies' dollars correct incorrect

Nothing correct incorrect

The credibility of the U.S. financial reporting system correct incorrect

A financial "civil war" correct incorrect

All of the above correct incorrect

* not completed

. What is the term for a financial asset that should have been recognized in one financial

period but instead was put aside for use in a period of loss? correct incorrect

Cookie-jar reserves correct incorrect

Derivatives correct incorrect

Stash-pile reserves correct incorrect

The closet correct incorrect

A company's back pocket correct incorrect

* not completed

. Thomas Fischer, former managing partner for the Milwaukee office of Arthur

Andersen, blames the recent increase in corporate scandals on what he calls: correct incorrect

Flying under the radar correct incorrect

False delusions correct incorrect

Renewed economic pressures correct incorrect

Social and economic blow-off correct incorrect

Social and economic blindness correct incorrect

* not completed

. What reason do Frederick and Hoffman offer in favor of restricting investors?

The intention is to protect their interests and prevent them from harm. correct incorrect

The intention is to make a profit. correct incorrect

The intention is to allow the market to be free. correct incorrect

The intention is to allow the investors to be free. correct incorrect

Both (c) and (d) correct incorrect

* not completed

. What reason do Frederick and Hoffman offer against restricting investors?

Investors who are not expert may not understand the choices they must make. correct incorrect

It is hard to learn to be an expert investor. correct incorrect

It is hard to know what is in someone else's best interest. correct incorrect

It is good for the market if some people lose a lot of money on risky investments. correct incorrect

Investors have a right not to be harmed. correct incorrect

* not completed

. Frederick and Hoffman argue that, just as with prescription drugs, at-risk investors

should be required by law to: correct incorrect

Prove their need before "taking their medicine" correct incorrect

Prove their ability to pay correct incorrect

Carry appropriate insurance correct incorrect

Engage the services of an expert correct incorrect

Both (b) and (d) correct incorrect

* not completed

. Financial markets are vulnerable to all of the following EXCEPT:

Unfair trading practices correct incorrect

Self-regulation correct incorrect

Contractual difficulties correct incorrect

Unfair conditions correct incorrect

The financial markets are not vulnerable to any of the above correct incorrect

* not completed

. According to Boatright, despite the fact that financial decision making is typically

limited to the financial factors of risk and return over time, ethics must consider what? correct incorrect

The fact that financial activity takes place in a small economic, but large social, setting correct incorrect

How the money makes it back to the investor as quickly as is fair to the company correct incorrect

The ethical treatment of the consumers only correct incorrect

The ethical treatment of everyone affected by a decision correct incorrect

Both b and c correct incorrect

* not completed

. There are two principal harm-based arguments against insider trading. One is that the

practice is harmful to individual investors who have no insider access. The other is that: correct incorrect

Permitting insider trading would lead to more bankrupt companies and therefore the loss of jobs. correct incorrect

Permitting insider trading would weaken investor confidence. correct incorrect

Permitting insider trading would destroy the market quickly. correct incorrect

No one should have access to insider information because it is illegal. correct incorrect

People like Martha Stewart need to "go to jail once in a while." correct incorrect

* not completed

. Many of the recent problems in derivatives markets have been where?

China correct incorrect

California correct incorrect

New Mexico correct incorrect

Canada correct incorrect

Thailand correct incorrect

* not completed

. The type of derivatives that seem to be the most troublesome are:

Traditional derivatives correct incorrect

Derivative securities correct incorrect

Exchange-traded derivatives correct incorrect

Derivatives that are not traded on any exchange correct incorrect

All derivatives correct incorrect

* not completed

. Aristotle argues that ethical failures and unhappiness often result from:

Excess correct incorrect

Moderation correct incorrect

Virtue correct incorrect

Wealth correct incorrect

Liberality correct incorrect

* not completed

. Farrell compares derivatives to the black market because:

Derivatives are illegal, like black market sales. correct incorrect

Derivatives are profitable, like selling on the black market. correct incorrect

Derivatives are a way to avoid taxes and government regulations. correct incorrect

Both (b) and (c) correct incorrect

All of (a), (b), and (c) correct incorrect

* not completed

. What could cause the "doomsday scenario" that McDonald describes?

Too many people investing in hedge funds correct incorrect

The secrets of hedge funds being broadcast on the media correct incorrect

Hedge fund managers getting too conservative correct incorrect

A sharp increase in interest rates correct incorrect

A sudden fall in interest rates correct incorrect

* not completed

. Fannie Mae, Ginnie Mae, and Freddie Mac were created to:

Provide free housing to low-income Americans correct incorrect

Provide government-guaranteed mortgages, helping more Americans own homes correct incorrect

Provide high-risk, high-return investment opportunities correct incorrect

Make money for the government correct incorrect

Provide tax relief for Americans who already owned their homes correct incorrect

* not completed

. Which of these is an example of a derivative?

In January, you sign a contract that you will buy a farmer's hay in August, and you fix the price at that time. correct incorrect

In January, you take an option on the hay, agreeing that you have the right to buy it in August, but not the obligation. correct incorrect

In January, you buy the farmer's land and hire the farmer to grow hay for you. correct incorrect

Both (a) and (b) are examples of derivatives. correct incorrect

All of (a), (b), and (c) are examples of derivatives. correct incorrect

* not completed

. Money has no value in itself; its value is rather a representation of mutual trust.

TRUE correct incorrect

FALSE correct incorrect

* not completed

. Many of today's most common basic types of business fraud have been around for centuries.

TRUE correct incorrect

FALSE correct incorrect

* not completed

. According to Loomis, high-up employees who commit accounting fraud plan out their schemes in great detail before perpetrating the act.

TRUE correct incorrect

FALSE correct incorrect

* not completed

. The dismantling of Arthur Andersen cost only 10,000 employees their jobs.

TRUE correct incorrect

FALSE correct incorrect

* not completed

. Paternalism is an argument used to justify restricting the investments of at-risk investors.

TRUE correct incorrect

FALSE correct incorrect

* not completed

. Frederick and Hoffman believe that some paternalistic acts are quite justified.

TRUE correct incorrect

FALSE correct incorrect

* not completed

. Moore argues that information is a valuable thing and can usefully be viewed as a type of property.

TRUE correct incorrect

FALSE correct incorrect

* not completed

. Moore argues that there is nothing wrong with insider trading.

TRUE correct incorrect

FALSE correct incorrect

* not completed

. Warren Buffett called derivatives "a financial weapon of mass destruction."

TRUE correct incorrect

FALSE correct incorrect

* not completed

. Farrell believes that derivatives could not have much effect on the world market.

TRUE correct incorrect

FALSE correct incorrect

* not completed

. Hedge funds require time and careful study, and therefore it is rather difficult to make any money quickly by investing in them.

TRUE correct incorrect

FALSE correct incorrect

* not completed

. In 2006, the total value of the stock market was higher than the economic output of the whole world.

TRUE correct incorrect

FALSE correct incorrect

* not completed

. The __________ heuristic is the tendency people have to place inordinate weight on easily recalled events and memorable personal experiences in their deliberations.

Representativeness correct incorrect

salience correct incorrect

availability correct incorrect

anchoring correct incorrect

bias correct incorrect

* not completed

. Arthur Levitt, chairman of the Securities and Exchange Commission, thinks that what is at stake when companies begin to engage in managing their earnings?

Millions of U.S. companies' dollars correct incorrect

Nothing correct incorrect

The credibility of the U.S. financial reporting system correct incorrect

A financial "civil war" correct incorrect

All of the above correct incorrect

* not completed

. What is the term for a financial asset that should have been recognized in one financial

period but instead was put aside for use in a period of loss? correct incorrect

Cookie-jar reserves correct incorrect

Derivatives correct incorrect

Stash-pile reserves correct incorrect

The closet correct incorrect

A company's back pocket correct incorrect

* not completed

. Thomas Fischer, former managing partner for the Milwaukee office of Arthur

Andersen, blames the recent increase in corporate scandals on what he calls: correct incorrect

Flying under the radar correct incorrect

False delusions correct incorrect

Renewed economic pressures correct incorrect

Social and economic blow-off correct incorrect

Social and economic blindness correct incorrect

* not completed

. What reason do Frederick and Hoffman offer in favor of restricting investors?

The intention is to protect their interests and prevent them from harm. correct incorrect

The intention is to make a profit. correct incorrect

The intention is to allow the market to be free. correct incorrect

The intention is to allow the investors to be free. correct incorrect

Both (c) and (d) correct incorrect

* not completed

. What reason do Frederick and Hoffman offer against restricting investors?

Investors who are not expert may not understand the choices they must make. correct incorrect

It is hard to learn to be an expert investor. correct incorrect

It is hard to know what is in someone else's best interest. correct incorrect

It is good for the market if some people lose a lot of money on risky investments. correct incorrect

Investors have a right not to be harmed. correct incorrect

* not completed

. Frederick and Hoffman argue that, just as with prescription drugs, at-risk investors

should be required by law to: correct incorrect

Prove their need before "taking their medicine" correct incorrect

Prove their ability to pay correct incorrect

Carry appropriate insurance correct incorrect

Engage the services of an expert correct incorrect

Both (b) and (d) correct incorrect

* not completed

. Financial markets are vulnerable to all of the following EXCEPT:

Unfair trading practices correct incorrect

Self-regulation correct incorrect

Contractual difficulties correct incorrect

Unfair conditions correct incorrect

The financial markets are not vulnerable to any of the above correct incorrect

* not completed

. According to Boatright, despite the fact that financial decision making is typically

limited to the financial factors of risk and return over time, ethics must consider what? correct incorrect

The fact that financial activity takes place in a small economic, but large social, setting correct incorrect

How the money makes it back to the investor as quickly as is fair to the company correct incorrect

The ethical treatment of the consumers only correct incorrect

The ethical treatment of everyone affected by a decision correct incorrect

Both b and c correct incorrect

* not completed

. There are two principal harm-based arguments against insider trading. One is that the

practice is harmful to individual investors who have no insider access. The other is that: correct incorrect

Permitting insider trading would lead to more bankrupt companies and therefore the loss of jobs. correct incorrect

Permitting insider trading would weaken investor confidence. correct incorrect

Permitting insider trading would destroy the market quickly. correct incorrect

No one should have access to insider information because it is illegal. correct incorrect

People like Martha Stewart need to "go to jail once in a while." correct incorrect

* not completed

. Many of the recent problems in derivatives markets have been where?

China correct incorrect

California correct incorrect

New Mexico correct incorrect

Canada correct incorrect

Thailand correct incorrect

* not completed

. The type of derivatives that seem to be the most troublesome are:

Traditional derivatives correct incorrect

Derivative securities correct incorrect

Exchange-traded derivatives correct incorrect

Derivatives that are not traded on any exchange correct incorrect

All derivatives correct incorrect

* not completed

. Aristotle argues that ethical failures and unhappiness often result from:

Excess correct incorrect

Moderation correct incorrect

Virtue correct incorrect

Wealth correct incorrect

Liberality correct incorrect

* not completed

. Farrell compares derivatives to the black market because:

Derivatives are illegal, like black market sales. correct incorrect

Derivatives are profitable, like selling on the black market. correct incorrect

Derivatives are a way to avoid taxes and government regulations. correct incorrect

Both (b) and (c) correct incorrect

All of (a), (b), and (c) correct incorrect

* not completed

. What could cause the "doomsday scenario" that McDonald describes?

Too many people investing in hedge funds correct incorrect

The secrets of hedge funds being broadcast on the media correct incorrect

Hedge fund managers getting too conservative correct incorrect

A sharp increase in interest rates correct incorrect

A sudden fall in interest rates correct incorrect

* not completed

. Fannie Mae, Ginnie Mae, and Freddie Mac were created to:

Provide free housing to low-income Americans correct incorrect

Provide government-guaranteed mortgages, helping more Americans own homes correct incorrect

Provide high-risk, high-return investment opportunities correct incorrect

Make money for the government correct incorrect

Provide tax relief for Americans who already owned their homes correct incorrect

* not completed

. Which of these is an example of a derivative?

In January, you sign a contract that you will buy a farmer's hay in August, and you fix the price at that time. correct incorrect

In January, you take an option on the hay, agreeing that you have the right to buy it in August, but not the obligation. correct incorrect

In January, you buy the farmer's land and hire the farmer to grow hay for you. correct incorrect

Both (a) and (b) are examples of derivatives. correct incorrect

All of (a), (b), and (c) are examples of derivatives. correct incorrect

* not completed

. Money has no value in itself; its value is rather a representation of mutual trust.

TRUE correct incorrect

FALSE correct incorrect

* not completed

. Many of today's most common basic types of business fraud have been around for centuries.

TRUE correct incorrect

FALSE correct incorrect

* not completed

. According to Loomis, high-up employees who commit accounting fraud plan out their schemes in great detail before perpetrating the act.

TRUE correct incorrect

FALSE correct incorrect

* not completed

. The dismantling of Arthur Andersen cost only 10,000 employees their jobs.

TRUE correct incorrect

FALSE correct incorrect

* not completed

. Paternalism is an argument used to justify restricting the investments of at-risk investors.

TRUE correct incorrect

FALSE correct incorrect

* not completed

. Frederick and Hoffman believe that some paternalistic acts are quite justified.

TRUE correct incorrect

FALSE correct incorrect

* not completed

. Moore argues that information is a valuable thing and can usefully be viewed as a type of property.

TRUE correct incorrect

FALSE correct incorrect

* not completed

. Moore argues that there is nothing wrong with insider trading.

TRUE correct incorrect

FALSE correct incorrect

* not completed

. Warren Buffett called derivatives "a financial weapon of mass destruction."

TRUE correct incorrect

FALSE correct incorrect

* not completed

. Farrell believes that derivatives could not have much effect on the world market.

TRUE correct incorrect

FALSE correct incorrect

* not completed

. Hedge funds require time and careful study, and therefore it is rather difficult to make any money quickly by investing in them.

TRUE correct incorrect

FALSE correct incorrect

* not completed

. In 2006, the total value of the stock market was higher than the economic output of the whole world.

TRUE correct incorrect

FALSE correct incorrect