Question No: 1 (Marks: 1) – Please choose one
__________ are those stocks whose results are tied with the overall state of the national economy.
► Growth stocks
► Income stocks
► Cyclical stocks
► Blue chip stocks
Question No: 2 (Marks: 1) – Please choose one
Companies that have capitalization amounts between $500 million and $2billion are known as _________.
► Small cap companies
► Mid cap companies
► Growth companies
► Large cap companies
Ref: Slide (Lecture#6)
• Mid-cap stocks: Capitalization between $500 million and $2billion. Question No: 3 (Marks: 1) – Please choose one
Current ratio is also known as:
► Working capital ratio
► Acid test ratio
► Debt coverage ratio
► Dividend yield ratio
Question No: 4 ( Marks: 1 ) – Please choose one
Which of the following is a basket of stocks that tracks a particular sector, investment style, geographical area, or the market as a whole?
► Exchange traded fund
► Open-end fund
► Closed-end fund
► Unit investment trust
Question No: 5 ( Marks: 1 ) – Please choose one
Positive abnormal returns for corporate insiders constitute a violation of:
► Weak form efficiency
► Semi-strong form efficiency
► Strong-form efficiency
► Weak and strong form of efficiency
Question No: 6 ( Marks: 1 ) – Please choose one
Which of the following states that investors with loss will increase their risk tolerance in future transactions?
► Loss aversion
► Prospect theory
► Illusion of control
► Anchoring
Question No: 7 ( Marks: 1 ) – Please choose one
Which of the following equity market indicator is composed of 30 blue-chip stocks?
► NYSE Composite Index
► Dow-Jones Industrial Average
► NASDAQ Composite Index
► Standard & Poor’s 500 Index
Question No: 8 ( Marks: 1 ) – Please choose one
Which of the following is NOT included in money market securities?
► Treasury Bill
► Certificate of deposit
► Commercial paper
► Future
Question No: 9 ( Marks: 1 ) – Please choose one
LSE captures _____________ of the market capitalization.
► 45%
► 50%
► 53%
► 66%
Question No: 10 ( Marks: 1 ) – Please choose one
The estimated percentage change in the value of a bond derived from the duration rule:
► Is less than the actual price change when the yield decreases
► Is less than the actual price change when the yield increases
► Is greater than the actual price change when the yield decreases
► Is always greater than the actual price change
Question No: 11 ( Marks: 1 ) – Please choose one
Which of the following bonds are characterized by high yields and high risks?
► Junk bonds
► Convertible bonds
► Municipal bonds
► Government bonds
Question No: 12 ( Marks: 1 ) – Please choose one
Systematic risk is also known as:
► Market risk
► General risk
► Un-diversifiable risk
► All of the given options
Question No: 13 ( Marks: 1 ) – Please choose one
Which of the following is the only way to protect investors from nonsystematic risk?
► Sector rotation
► Securitization
► Diversification
► Risk aversion
Question No: 14 ( Marks: 1 ) – Please choose one
If correlation coefficient (rmn) between two securities is -1.0, what does it represents?
► There is a positive relationship between security m and n
► There is a negative relationship between security m and n
► There is no relationship between security m and n
► The given data is not sufficient to arrive at any result
Question No: 15 ( Marks: 1 ) – Please choose one
Which of the following measure has values in the interval of [+1, -1]?
► Correlation coefficient
► Covariance
► Regression
► Standard deviation
Question No: 16 ( Marks: 1 ) – Please choose one
Who was the developer of CAPM?
► Gerald Appel
► Markowitz
► Joseph Granville
► John Bollinger
Question No: 17 ( Marks: 1 ) – Please choose one
The average value of beta for all stocks in the market is:
► 0.5
► 1.0
► 1.5
► 2.0
Question No: 18 ( Marks: 1 ) – Please choose one
Which of the following involves dividing an investment portfolio among different financial assets?
► Securitization
► Sector rotation
► Asset allocation
► Risk aversion
Question No: 19 ( Marks: 1 ) – Please choose one
Which of the following are regulated by Commodity Futures Trading Commission (CFTC)?
► Options
► Futures
► Swaps
► Forwards
Question No: 20 ( Marks: 1 ) – Please choose one
Which of the following is defined as a market for the immediate sale and delivery of assets?
► Laissez-faire market
► Future market
► Spot market
► Forward market
Question No: 21 ( Marks: 1 ) – Please choose one
Which of the following statement is FALSE regarding forward contracts?
► Forward contracts are traded on over- the-counter market
► There is no surety/guarantee of the trade settlement
► There are no pre determined standards in future contracts
► Forward contracts involve a process known as marking to market
Question No: 22 ( Marks: 1 ) – Please choose one
Program trading calls for which of the following?
► Computerized trigger points for trades
► The use of short hedge position
► The use of only call option
► The use of long hedge position
Question No: 23 ( Marks: 1 ) – Please choose one
S & P 500 future stock index closes at $ 275 and spot price is $ 230. What is its basis?
► 40
► 45
► 50
► 55
Question No: 24 ( Marks: 1 ) – Please choose one
The average price of a security or currency over a specified time period used to spot pricing trends by smoothing out the large fluctuations is known as:
► Moving Average
► Standard deviation
► Variance
► Beta
Question No: 25 ( Marks: 1 ) – Please choose one
Which of the formula is TRUE for calculating retained earnings?
► Retained Earnings = Net Earnings – Dividends
► Retained Earnings = Net Earnings + Long term debt
► Retained Earnings = Net Earnings + Short term debt
► Retained Earnings = Net Earnings + Dividend
Question No: 26 ( Marks: 1 ) – Please choose one
The Dow Jones Industrial Average (DJIA) is an example of which of the following index?
► Price weighting index
► Capitalization weighting index
► Volume based index
► Fixed income index
Question No: 27 ( Marks: 1 ) – Please choose one
Which of the following is a measure of the volatility of stock prices or returns?
► ROR
► Beta
► ROI
► Risk premium
Question No: 28 ( Marks: 1 ) – Please choose one
Active portfolio managers try to construct a risky portfolio with ______________.
► A higher Sharpe measure than a passive strategy
► A lower Sharpe measure than a passive strategy
► The same Sharpe measure as a passive strategy
► Very few securities
Question No: 29 ( Marks: 1 ) – Please choose one
Which of the following is the CORRECT formula for calculating the buying power of investors?
► Assets – liabilities
► Equity – debt
► Short term debt – long tem debt
► Current assets – current liabilities
Question No: 30 ( Marks: 1 ) – Please choose one
When a company’s market value is divided by sales, it is known as:
► Net income margin
► Price-to-market value ratio
► Price-to-book value ratio
► Price-to-sales ratio
Price-to-sales ratio
Question No: 31 ( Marks: 1 ) – Please choose one
Which of the following statements is FALSE about Earnings per Share?
► It is calculated by dividing Net income over number of shares outstanding.
► Earnings per share is a ratio, which is used for share price evaluation.
► Earnings per share relate income with ownership.
► It is a liquidity measure.
Question No: 32 ( Marks: 1 ) – Please choose one
Which form of the Efficient Market Hypothesis implies that an investor can achieve positive abnormal returns on average by using technical analysis?
► Strong form
► Weak form
► Semi-strong form
► None of the given options
Question No: 33 ( Marks: 1 ) – Please choose one
A straight-line would have convexity of:
► -1
► 0
► +1
► +2
Question No: 34 ( Marks: 1 ) – Please choose one
Bonds that are NOT contracted to make periodic payments are called:
► Deferred coupon bonds
► Eurobonds
► Corporate bonds
► Zero-coupon bonds
Question No: 35 ( Marks: 1 ) – Please choose one
Which of the following statements about exchange traded derivatives is LEAST accurate?
► They are liquid.
► They are standardized contracts.
► They carry significant default risk
► They have no credit risk.
Question No: 36 ( Marks: 1 ) – Please choose one
Which of the following is LEAST likely to a purpose served by the derivative markets?
► Arbitrage opportunities
► Price discovery
► Risk management
► Market efficiency
Question No: 37 ( Marks: 1 ) – Please choose one
The MOST likely reason derivative markets have flourished is that:
► Derivatives are easy to understand and use.
► Derivatives have relatively low transaction costs.
► The pricing of derivatives is relatively straightforward.
► Derivative markets are very strong all over the world.
Question No: 38 ( Marks: 1 ) – Please choose one
As the number of stocks in a portfolio increases, the portfolio’s systematic risk:
► Can increase or decrease
► Decrease at a decreasing rate
► Decrease at an increasing rate
► Increase at an increasing rate
Question No: 39 ( Marks: 1 ) – Please choose one
Which of the following is LEAST likely a component of an investor’s required rate of return on a stock?
► The real risk-free rate
► The expected inflation rate
► A growth premium
► A risk premium
Question No: 40 ( Marks: 1 ) – Please choose one
This industry is MOST likely in which phase (s) of its life cycle?
► Deceleration of growth and decline
► Stabilization and market maturity
► Mature growth
► Pioneering
Question No: 41 ( Marks: 1 ) – Please choose one
Which of the following statements regarding life cycle of an industry is MOST accurate?
► In the pioneering phase, profits are small or negative.
► In the mature growth phase, sales growth falls below normal for the first time.
► During the stabilization phase, growth rates are still above the growth rates in economy.
► The growth of the substitute products increases total market share & causes profits to increase in the deceleration phase.
Question No: 42 ( Marks: 1 ) – Please choose one
Which of the following is LEAST likely an assumption underlying technical analysis?
► The laws of the supply and demand drive stock prices.
► Stock prices move in trends that persist for long time periods.
► Shifts in supply and demand can be observed in market price behaviour
► Supply is driven by the rational behavior of the firms offering their shares while demand is driven by the irrational behaviors of the investors.