Question No: 1 ( Marks: 1 ) – Please choose one
A procedure for valuing the price of a stock by using predicted dividends and discounting them back to present value is known as.
► Dividend Discount Model
► The Residual Earning Model
► None of the given options
► Capital Asset Pricing Model
Question No: 2 ( Marks: 1 ) – Please choose one
According to Dow Theory, primary trend is a:
►Short term trend
►Long term trend
► Medium term trend
► None of the given options
Question No: 3 ( Marks: 1 ) – Please choose one
Which of the following functions do mutual fund companies perform for their investors?
► Record keeping and administration
► Professional management
► Diversification and divisibility
► All of the given options
Question No: 4 ( Marks: 1 ) – Please choose one
The concept that it is impossible to “beat the market” because stock market efficiency causes existing share prices to always incorporate and reflect all relevant information refers to which of the following?
► Dow Theory
► Dividend discount model
► Efficient market hypothesis
► Prospect theory
Efficient Market Hypothesis – EMH Mean?
Question No: 5 ( Marks: 1 ) – Please choose one
Which of the following is the minimum expected rate of return needed to induce investment?
► Expected return
► Return on equity
► Required rate of return
► Return on assets
Question No: 6 ( Marks: 1 ) – Please choose one
In which of the following form of efficient market hypothesis security prices reflect only past stock information?
► Weak form
► Semi strong form
► Strong form
► Both weak and strong form
Question No: 7 ( Marks: 1 ) – Please choose one
Which of the following is a concept in economics, finance, and psychology related to the behavior of consumers and investors under uncertainty?
► Illusion of control
► Anchoring
► Mental accounting
► Risk Aversion
Question No: 8 ( Marks: 1 ) – Please choose one
Which of the following is an example of a non-marketable security?
► Treasury bill
► Negotiated CD
► U.S. Government savings bond
► Banker’s acceptance
Question No: 9 ( Marks: 1 ) VuSchool – Please choose one
Which of the following is defined as the interest rate stated on a bond, note or other fixed income security, expressed as a percentage of the principal?
► Interest free rate
► Coupon rate
► Discount rate
► Bank rate
Question No: 10 ( Marks: 1 ) – Please choose one
Which of the following is a measure of bond’s lifetime that accounts for the entire pattern of cash flows over the life of the bond?
► Duration
► Coupon
► Convexity
► Yield to maturity
Ref: A measure of a bond’s lifetime, stated in years, that accounts for the entire pattern (both size and timing) of the cash flows over the life of the bond http://www.flashcardmachine.com/fin-401.html
Bond Yields and Prices
Question No: 11 ( Marks: 1 ) – Please choose one
Which of the following factor contributes to the price volatility of a bond?
► Maturity
► Coupon
► Yield to maturity
► All of the given options
Question No: 12 ( Marks: 1 ) – Please choose one
Which of the following is defined as the point at which revenues equal costs?
► Yield to maturity
► Break-even
► Margin
► Leverage point
Question No: 13 ( Marks: 1 ) – Please choose one
Which of the following is rated as “‘BB” or lower because of its high default risk?
► Convertible bonds
► Municipal bonds
► Government bonds
► Junk bonds
Question No: 14 ( Marks: 1 ) – Please choose one
Bond horizon premium is the difference between which of the following types of securities?
► Long- and short-term government securities
► Stock and risk-free returns
► Equity and shot-term government securities
► None of the given options
Question No: 15 ( Marks: 1 ) – Please choose one
Which of the following statement is FALSE?
► Each portfolio asset has a weight which represents the percent of the total portfolio value
► Portfolio risk is not a weighted average of the risk of individual securities in the portfolio
► Portfolio risk is measured by variance or standard deviation of the portfolio’s return
► None of the given options
Question No: 16 ( Marks: 1 ) – Please choose one
Which of the following indicates that the returns on the two securities (m and n) tend to move in the same direction at the same time?
► rmn = +1.0
► rmn = -1.0
► rmn =0
► All of the given options
Question No: 17 ( Marks: 1 ) – Please choose one
Who was the developer of CAPM?
► Markowitz
► Joseph Granville
► John Bollinger
Question No: 18 ( Marks: 1 ) – Please choose one
Which of the following is a measure of securities volatility or systematic risk in comparison to the market as a whole?
► Beta
► Return on equity
► Liquidity
► Rate of return
Question No: 19 ( Marks: 1 ) – Please choose one
The ____________ gives the number of shares for which each convertible bond can be exchanged.
► Conversion ratio
► Current ratio
► P/E ratio
► Conversion premium
Question No: 20 ( Marks: 1 ) – Please choose one
The ____________ provides an unequivocal statement on the expected return-beta relationship for all assets, whereas the _____________ implies that this relationship holds for all but perhaps a small number of securities.
► APT, CAPM
► APT, OPM
► CAPM, APT
► CAPM, OPM
Question No: 21 ( 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: 22 ( Marks: 1 ) – Please choose one
Which of the following is the practice of using derivatives as building blocks to create specialized products?
► Financial engineering
► Risk management
► Income generation
► Portfolio management
Question No: 23 ( Marks: 1 ) – Please choose one
Which of the following is defined as an investment transaction that is intended to provide protection against a decline in the value of an asset?
► Short hedge
► Long hedge
► Natural hedge
► Cross hedge
Question No: 24 ( Marks: 1 ) – Please choose one
In the formula, cost of asset= S2- (F2-F1), what does S2 indicate?
► Initial futures price
► Final asset price
► Final futures price
Question No: 25 ( Marks: 1 ) – Please choose one
S & P 500 future stock index closes at $ 300 and spot price is $ 325. What is its basis?
► -25
► -30
► 25
► 30
Basis = spot price -closing price
= 325-300
= 25
Question No: 26 ( Marks: 1 ) – Please choose one
Which of the following statement regarding hedging is TRUE?
► Hedging is adding securities to a portfolio to increase the overall return
► Hedging is a strategy used by investors to reduce the risk of a portfolio
► Hedging is a strategy used to increase both the risk and return of a portfolio
► Hedging is a strategy used to increase portfolio volatility
Question No: 27 ( Marks: 1 ) – Please choose one
Which of the following statement is FALSE regarding options?
► Option trading thrives under volatile pricing conditions and uncertainty
► Option contracts expire on the last Friday of the month
► Option contracts are adjusted for stock splits and stock dividends
► A put writer exposes himself to the risk of declining stock prices
Question No: 28 ( Marks: 1 ) – Please choose one
Who introduced Moving Average Convergence/Divergence (MACD)?
► Gerald Appel
► Joseph Granville
► John Bollinger
► Welles Wilder
Question No: 29 ( Marks: 1 ) – Please choose one
Which of the following is the reason stock prices behave the way they do at resistance lines?
► Many investors want to buy at this price
► Market makers resist moving prices lower than this price
► Many investors want to sell at this price
► Market makers support prices at this level
Question No: 30 ( 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: 31 ( Marks: 1 ) – Please choose one
Which of the following is defined as a standardized contract traded on a futures exchange, to buy or sell a certain underlying instrument at a certain date in the future, at a specified price?
► Option contract
► Forward contract
► Future contract
► Annuity contract
Question No: 32 ( Marks: 1 ) – Please choose one
Which of the following securities do NOT ensures ownership in a corporation?
► Bonds and common stock
► Bonds and preferred stock
► Preferred stock and common stock
► Common stock and derivatives
Question No: 33 ( Marks: 1 ) – Please choose one
Which of the following statement is TRUE about growth investors?
► They are patient
► They invest in large capitialization companies only
► They seeks rapidly growing companies
► They seeks slowly growing companies
Question No: 34 ( Marks: 1 ) – Please choose one
Which of the following is TRUE regarding price earning ratio?
► P/E=Earnings available to common stockholders/outstanding shares
► P/E=Market price per share/dividend per share
► P/E=Market price per share/earning per share
► P/E=Dividend per share/earning per share
Question No: 35 ( Marks: 1 ) – Please choose one
Which of the following statements about debt securities is MOST likely correct?
► Secured bonds are referred to as debentures.
► Like T-bills commercial paper is issued as a pure discount security.
► Bearer bonds are much popular in the United States.
► T-bills have maturities of less than one year and make explicit interest payments.
Question No: 36 ( Marks: 1 ) – Please choose one
Which of the following 5-year bond has the highest interest rate risk?
► A floating-rate bond
► A zero-coupon bond
► A 5% fixed-coupon bond
► A 10% fixed-coupon bond
Question No: 37 ( Marks: 1 ) – Please choose one
Which of the following statements regarding debentures is MOST accurate?
► Debentures are free from default risk if issued by federally related or government
sponsored entities
► Debentures are commonly issued by government sponsored entities such as Fannie and Freddie Mac
► Debentures may not be issued by government sponsored entities.
► Debentures are often called first mortgage bonds.
Question No: 38 ( Marks: 1 ) – Please choose one
A futures contract is LEAST likely:
► Exchange traded
► A contingent claim
► Adjusted for profits and losses daily
► A standardized instrument
Question No: 39 ( Marks: 1 ) – Please choose one
Which of the following is NOT a risk measure?
► Beta
► Standard deviation
► Variance
► Geometric mean
Question No: 40 ( Marks: 1 ) – Please choose one
Which of the following is LEAST likely an example of a portfolio constraint?
► Tax concern
► Liquidity needs
► Total return requirement of 15%
► Regularity requirement
Question No: 41 ( Marks: 1 ) – Please choose one
Which of the following statements regarding growth companies & growth stocks is LEAST accurate?
► A growth stock is one that earns above-average risk adjusted returns.
► A growth stock does not have to be the stock of a growth company.
► Management of the growth companies has the ability to choose projects with
above average returns.
► If growth opportunities are already incorporated into its prices, a growth company’s stock will earn above average returns.
Question No: 42 ( Marks: 1 ) – Please choose one
The top-down approach to security selection is LEAST likely to include:
► Analysis of the global & national economic environment
► Use of financial ratios & cash flow analysis to compare firms within the industry
► Determination of the stability of securities for an investor’s portfolio
► Identification of the industry effects of changes in demographics, lifestyles, politics etc