Question No: 1
Which one of the following financial instruments represents an ownership share in a corporation?
Common stock
Bond
Prefer red stock
Term Finance certificates
Question No: 2
There are ____ broad categories of financial assets
2
3
4
5
Three broad categories of financial assets, viz stocks bonds and cash Stocks refer to equity and equity related instruments Bonds are debt instruments that have a maturity of more than one year Cash represents bank deposits and debt instruments that have a maturity of less than one year
Question No: 3
Shares of McDonald Corporation are an example of a (n):
Standardized financial instrument
Non-standardized financial instrument since their prices can differ over time
Standardized financial liability instrument
Open-end investment
Question No: 4
_____________ promotes investment education and ethical behavior among those involved in the investment business
Licensed International Financial Analyst (LIFA)
Securities Investor Protection Corporation (SIPC)
Chartered Financial Analyst Institute (CFAI)
Securities and Exchange Commission (SEC)
Question No: 5
Which of the following function removes the fear of buying or selling at rip off price?
Fair pricing function
Continuous pricing function
Economic function
Exchange function
Question No: 6
The trading of listed securities in the NASDAQ market is known as:
Primary market
Third market
Secondary market
Fourth market
Question No: 7
Stocks of well-established companies that have stable earnings and no extensive liabilities are known as _______
Growth stocks
Income stocks
Defensive stocks
Blue chip stocks
Question No: 8
Which of the following statement regarding short sales is NOT true?
Short sales are done with the expectation that prices will rise
Short sales can be executed only on an uptrend
Short sales are all done on margin
Short sales may be executed by both individuals and market makers
Question No: 9
Companies that have capitalization amounts between $500 million and $2billion are known as _________
Small cap companies
Mid cap companies
Growth companies
Large cap companies
Question No: 10
A procedure for valuing the price of a stock by using predicted dividends and discounting them back to present value is known as
Capital Asset Pricing Model
Dividend Discount Model
The Residual Earning Model
None of the given options
Question No: 11
In bar chart, which color indicates share prices are going up?
Black
White
Blue
Red
Question No: 12
In candlestick chart, what does white body candle depict?
Prices are moving down
Prices are moving up
Prices are constant
Prices are fluctuating
Question No: 13
On Balance Volume technique of technical analysis was developed by:
Charles Dow
Joseph Granville
John Bollinger
Welles Wilder
Question No: 14
Which of the following is relevant to market breadth?
Specialist inventory
Advance/declining ratio
Fundamental analysis
Ticker tape
Question No: 15
The Elliot Wave Theory is based on repeating ___________ waves cycle
4
5
7
8
Question No: 16
Which of the following is correct formula for calculating short interest ratio?
Average shares sold short / Average daily trading volume
Total shares sold short / Average daily trading volume
None of the given options
Total shares sold short / Total daily trading volume
Question No: 17
ABC Furniture’s worth $51 million What is another term for this?
Book value
Earning per share
Market value
Cost per share
The book value of a company is generally considered its net worth; the book value per share would be the net worth of a company divided by the number of shares outstanding
Question No: 18
Which of the following is TRUE regarding price per 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: 19
When inflation and interest rates are low, Price per Earning (P/E) ratio tends to be:
High
Low
Minimum
Average
P/E ratios are generally depressed when the interest rates and the rates of inflation are high, such as around 1980-81 P/E ratios tend to be high when inflation and interest rates are low, such as the period of the mid –to-late-1990s
Question No: 20
Which of the following industry is sensitive to business cycle and price changes?
Growth industry
Cyclical industry
Defensive industry
Interest sensitive industry
Question No: 21
Which of the following items will reduce stockholders’ equity?
Purchase of equipment
Purchase of supplies
Receiving a loan
Payment of salaries
uestion No: 22
Mutual funds pool the funds of savers and can be used to buy
Shares in mutual savings banks only
A variety of financial instruments
Shares in the Federal Reserve System
None of the given options
Question No: 23
Which of the following is defined as an investment company whose capitalization constantly changes as new shares are sold and outstanding shares are redeemed?
Unit investment trust
Closed-end investment company
Exchange traded fund company
Open-end investment company
uestion No: 24
Which of the following is defined as the total market value of securities in an investment company’s portfolio divided by the number of investing company fund shares currently outstanding?
Discounted value
Present value
Future cash flow value
Net asset value
Question No: 25
Which of the following would be considered as the most bullish indicator?
A price decrease with heavy volume
A price increase with small volume
A price increase on heavy trading
No change in price but an increase in volume
uestion No: 26
Stocks can be purchased for a combination of cash and borrowed funds in:
Margin account
Cash account
IRA account
Option account
Question No: 27
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: 28
The use of the earnings multiplier model requires the use of forecast company earnings How do investors obtain forecasts of company earnings?
Public companies are required to issue forecasts of quarterly earnings, going out three years
Securities analysts develop and publish earnings forecasts, based on their understanding of the company, its industry, and the overall economy
Securities analysts develop and publish earnings forecasts, based on sophisticated statistical techniques
Because these earnings will be announced in the future, no one can forecast them
uestion No: 29
Which of the following is an intangible asset with an identifiable useful life?
Patent
Timber
Goodwill
Trademark
n No: 30
Which of the following categories is NOT a financial statement element?
Cash flow
Contributed capital
Assets
Distributions
_________ provides an automatic execution of limit orders up to 1,099 shares at the best bid or offer
SuperDOT
NASDAQ
Auction market
NYSE direct
2
The trading of listed securities in the NASDAQ market is known as:
Primary market
Third market
Secondary market
Fourth market
3
A self-regulatory body that licenses brokers and generally oversees the trading practices of Over the counter(OTC) securities is known as __________
Securities and Exchange Commission (SEC)
National Association of Security Dealers (NASD)
Initial Public Offering (IPO)
Offered for Sale (OFS)
Companies that have historically paid a larger than average percentage of their profit as dividend to their shareholders is known as:
Blue chip companies
Cyclical companies
Growth companies
Income companies
Question No: 5
Which of the following is suitable for analyzing short term investments?
Horizontal analysis
Fundamental analysis
Technical analysis
Ratio analysis
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: 7
A good time is characterized by which of following situation?
Market prices moving above the moving average
Market prices moving below the moving average
Market prices exactly same as moving average
None of the given options
uestion No: 8
Which of the following statement is FALSE about Elliot Wave Theory?
It made extensive use of Fibonacci series
It is based on repeating 8 waves’ cycles
It identified three movements in security prices
It was proposed by RN Elliot
Question No: 9
Which of the following depicts ratio of share price to stockholder equity?
Debt coverage ratio
Price-to-sales ratio
Price-to-market value ratio
Price-to-book value ratio
On which of the following financial statements, revenues and expenses can be found?
Balance sheet
Income statement
Statement of cash flows
Statement of changes in equity
tion No: 11
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: 12
Which of the following is defined as an investment strategy that involves ongoing buying and selling actions by the investors?
Make or Bu y strategy
Active strategy
Passive strategy
Buy-and-Hold strategy
Question No: 13
Which of the following is an example of brokerage fee charged by a stockbroker?
Margin profit
Insurance premium
Transaction cost
Capital expenditure
Question No: 14
Which of the following would be considered as the most bullish indicator?
A price decrease with heavy volume
A price increase with small volume
A price increase on heavy trading
No change in price but an increase in volume
Question No: 15
Financial securities with a maturity of less than a year from their original issue date are
sold in which of following market?
Money market
Bond market
Equity market
Derivative market
Question No: 16
_____________ enables market participants to get accurate and up-to-date price information
Fair pricing function
Continuous pricing function
Economic function
Exchange function
Question No: 17
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: 18
An investor will purchase shares of companies in the development stage for:
Current income
Current income and capital gains
Passive losses to offset other income
Capital gains only
Question No: 19
Which of the following industry is NOT sensitive to business cycle and price changes?
Defensive industry
Interest sensitive industry
Growth industry
Cyclical industry
Which of the following categories is NOT a financial statement element?
Cash flow
Contributed capital
Assets
Distributions
Which of the following statement about a security is true, if it’s beta > 10?
Security is more risky than the market
Security is less risky than market
Security is exactly as risky as market
It is not possible to predict riskiness of a security by beta
A bad time in market will persist when the market prices move:
Above the moving average
Below the moving average
Exactly same as moving average
Firstly up then down the moving average
What does price earning ratio indicate?
It indicates how many interest payments could be made with a firm’s earnings
It indicates how much investors pay for Rs1 earning of the company
It indicates the percentage of earnings paid to shareholders
It indicates the per share profit available for distribution to the shareholders
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: 25
Which of the following stock’s price move in opposite direction to that of interest rates?
Growth stock
Value stock
Interest sensitive stock
Defensive stock
Question No: 26
Which of the following is NOT a component of ROA?
Turnover
Leverage
Sales
Net income margin
Which of the following statement about the types of the orders is LEAST accurate?
Market orders are orders to buy or sell at the best price available
Limit orders are orders to buy or sell at or away from the market price
A stop buy order is used to protect a short position in a security and is placed below
the current market price
Limit order must specify a price and a time limit
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
Which of the following is NOT a fixed income security?
Bonds
Preferred stock
Saving deposits
Options
________ are qualified and regulated professionals who trade shares and other securities through market makers on behalf of investors
Stock brokers
Members
Specialists
Day traders
A self-regulatory body that licenses brokers and generally oversees the trading practices of Over the counter(OTC) securities is known as __________
Securities and Exchange Commission (SEC)
National Association of Security Dealers (NASD)
Initial Public Offering (IPO)
Offered for Sale (OFS)
__________ is a temporary restriction on program trading in a particular security or
market, usually to reduce dramatic price movements
SuperDot
NYSE direct
Trading curb
Ticker tape
Question No: 5
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: 6
In candlestick chart, what does white body candle depict?
Prices are moving down
Prices are moving up
Prices are constant
Prices are fluctuating
Which of the following is a popular price pattern?
Double ups
Head and shoulders
Triangles
Resistance and support
Question No: 8
Primary trend in Dow Theory is known as __________
Wave
Triangle
Tide
Rounded bottom
Question No: 9
The primary purpose of the liquidity ratios is to determine:
The amount of earnings paid to shareholders
The amount of working capital tied up in inventory
The ability of a firm to pay off short-term obligations
The relative level of short-term debt
Question No: 10
Which of the following statement is TRUE regarding earning per share?
It represents the company’s current obligation
It represents the ability of a company to repay its current liabilities
It represents per share profit available for distribution to the shareholders
It represents the percentage of earnings paid to shareholders
Which of the following industries is LEAST sensitive to changes in the business cycle?
Manufactures of business plant and equipment
Machine tools and special equipment, such as for pollution control
Industries specializing in high technology
A refrigerators manufacturing company
Which of the following industry tend to be composed of relatively volatile and risky
stocks?
Defensive industries
Interest sensitive industries
Growth industries
Cyclical industries
Question No: 13
Which of the following is defined as an unmanaged, fixed-income security portfolio put
together by a sponsor and handled by an independent trustee?
Unit investment trust
Closed-end investment
Open-end investment
Money market fund
Question No: 14
____________ are financial intermediaries that hold a portfolio of securities on behalf of
their shareholders
Banking companies
Growth companies
Value companies
Investment companies
Question No: 15
Which of the following statement about a security is true, if its beta < 10?
Security is more risky than the market
Security is less risky than market
Security is exactly as risky as market
It is not possible to predict riskiness of a security by beta
Which of the following would be considered as the most bullish indicator?
A price decrease with heavy volume
A price increase with small volume
A price increase on heavy trading
No change in price but an increase in volume
Which of the following is NOT an asset?
Accounts payable
Equipment
Supplies
Cash
Which of the following statement about a security is true, if it’s beta > 10?
Security is more risky than the market
Security is less risky than market
Security is exactly as risky as market
It is not possible to predict riskiness of a security by beta
Which of the following is NOT a requirement for an efficient market?
Stock prices incorporate all information
All known information be reflected in prices
The adjustments occur very quickly
Each adjustment be perfect
Which of the following allows you to specify the most you are willing to pay when
buying or the least you are willing to accept when selling?
Limit order
Market order
Stop order
Good till cancelled order
Question No: 21
In a candlestick chart, what does black body candle depict?
Prices are moving up
Prices are moving down
Prices are constant
Prices are fluctuating
Question No: 22
Which of the following is TRUE regarding the Dow Theory?
Dow Theory is primarily a fundamental analysis tool
Dow Theory was developed by the publisher of Forbes magazine
Dow Theory identified three movements in security prices
Dow Theory states that computer algorithms can be used to look for patterns
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
Which of the following situations implies an upward sloping curve?
Accelerating economic activity
Static economic activity
Slowing economic activity
A recession period
Question No: 25
Which of the following stock’s price move in opposite direction to that of interest rates?
Growth stock
Value stock
Interest sensitive stock
Defensive stock
Which of the following is NOT a component of ROA?
Turnover
Leverage
Sales
Net income margin
Which of the following statement about short selling is LEAST accurate?
The short seller must pay the lender of the stock any dividends paid by the company
The short seller is required to replace the borrowed securities within six months of a short sale
Proceeds from the short sale cannot be withdrawn from the account
The short seller hoped that the securities prices would decrease in the future
A stop buy order is MOST likely:
Used to limit the potential losses on a short sale
Executed if the market price is less than or equal to the specified level
An order to purchase a security if the price decreases to a specified level
An order that specifies only the time limit
Which of the following types of orders would normally have the most rapid execution?
Market order
Limit order
Good-till-canceled order
Stop order
Which of the following statements regarding short sales is not true?
Short sales are done with the expectation that prices will rise
Short sales can be executed only on an uptrend
Short sales are all done on margin
Short sales may be executed by both individuals and market makers
The price at which a security dealer sells a security is known as:
Bid Price
Offer Price
Market Price
Order Price
More investors may be using technical analysis now than in earlier periods because:
There is now more empirical evidence supporting technical analysis
The Internet makes more data available to track stock prices
More investors are able to understand the quantitative calculations of technical analysis
More business schools are now teaching technical analysis
5Which of the following is true regarding the Dow Theory?
The Dow Theory was developed by the publisher of Forbes magazine
The Dow Theory is primarily a fundamental analysis tool
The Dow Theory identified three movements in security prices
Dow Theory is a notion that computer algorithms can be taught to look for
optimum patterns
6Which of the following would be considered the most bullish indicator?
A price increase
A price increase with small volume
A price increase on heavy trading
No change in price but an increase in volume
7Which are the two ratio areas that are of the greatest concern to stockholders?
Liquidity and profitability
Liquidity and leverage
Profitability and activity
Profitability and leverage
8When might a high return on equity not be desirable?
If the firm were not able to sustain the high return on equity
If the firm were in the rapid growth cycle of the life cycle
If the firm had a large amount of debt financing
If the firm did not have as high a return on assets
9In order for any dividend valuation model to reflect a valid stock price for a company,
The company must pay dividends
The dividend growth rate must remain constant
The required rate of return (discount rate) must remain constant
The company should pay interim dividend
10) Which type of order is often used by investors who have bought a security and want to protect themselves from a falling price?
Market order
Limit order
Stop order
Good-till-canceled order
Shares of McDonald Corporation are an example of a (n):
Standardized financial instrument
Non-standardized financial instrument since their prices can differ over time
Standardized financial liability instrument
Open-end investment
Companies that have capitalization amounts between $500 million and $2billion are
known as
Small cap companies
Mid cap companies
Growth companies
Large cap companies
Which of the following is a popular price pattern?
Resistance and support
Double ups
Head and shoulders
Triangles
The Elliot Wave Theory is based on repeating ___________ waves cycle
4
5
7
8
Which one of following statement is true if intrinsic value of a security is lower then its current market price?
The security is being overvalued
The security is being undervalued
The security is correctly valued
No connection exists between security intrinsic value and market price
Question No: 11
If a company possess higher required rate of return, the justified P/E will be
Lower
Higher
Both will be same
None of given options
Which of the following stage is more important for the investors?
Pioneering stage
Expansion stage
Stabilization stage
Decline stage
Question No: 16
Which of the following stage should be avoided by investors who are interested in capital gains?
Pioneering stage
Expansion stage
Decline stage
Stabilization stage
Question No: 17
Which of the following industry is sensitive to business cycle and price changes?
Growth industry
Cyclical industry
Defensive industry
Interest sensitive industry
Question No: 18
Mutual funds pool the funds of savers and can be used to buy ____________
Shares in mutual savings banks only
A variety of financial instruments
Shares in the Federal Reserve System
None of the given options
Question No: 19
In an efficient financial market, there would be no ____________
Under/over priced securities
Financial intermediaries
Commissions
Taxes
An efficient market reflects which of the following information?
Past, current and inferred information
Future and past information
Past and current information
Current and inferred information
If stock advances are greater than declines by a wide margin, the market is perceived as
Healthy
Stable
Stronger because of the widespread movement
Weaker because of the widespread movement
Question No: 24
An over-the-counter market can be defined as:
A network of dealers connected electronically
An illegal secondary market for stocks used primarily by those attempting to evade taxes
A primary market for stocks
A form of centralized exchange
________ are qualified and regulated professionals who trade shares and other
securities through market makers on behalf of investors
Stock brokers
Members
Specialists
Day traders
Which of the following function removes the fear of buying or selling at rip off price?
Fair pricing function
Continuous pricing function
Economic function
Exchange function
Which function of capital market facilitates transfer of money from savers to borrowers?
Economic function
Fair pricing function
Exchange function
Continuous pricing function
___________ is a computerized device that relays financial information to investors
around the world, including the stock symbol, the latest price and the volume of securities as they are traded
SuperDot
NYSE Direct
Ticker tape
Trading Curb
Companies that have historically paid a larger than average percentage of their profit as dividend to their shareholders is known as:
Blue chip companies
Cyclical companies
Growth companies
Income companies
_________ think that supply and demand factors play the most important part
Ratio analysts
Technical analysts
Research analysts
Fundamental analysts
Value comes from utility; utility comes from a variety of sources
According to Dow Theory, primary trend is a:
Short term trend
Long term trend
Medium term trend
None of the given options
Which of the following statement is FALSE about Elliot Wave Theory?
It made extensive use of Fibonacci series
It is based on repeating 8 waves’ cycles
It identified three movements in security prices
It was proposed by RN Elliot
The idea of long term business cycle with a period of 50-60 years was proposed in which of the following theory?
Kondratev Wave Theory
Dow Theory
Elliot Wave Theory
None of the given options
Current ratio is also known as:
Working capital ratio
Acid test ratio
Debt coverage ratio
Dividend yield ratio
Question No: 11
A ratio that indicates the extent to which a firm could pay its current liabilities without relying on the sale of inventory is known as:
Current ratio
Quick ratio
Inventory turnover ratio
Debt coverage ratio
Question No: 12
Which of the following ratio depicts a firm’s ability to cover its short-term obligations?
Dividend yield ratio
Return on assets ratio
Debt coverage ratio
Current ratio
Which of the following ratios would NOT be used to draw a conclusion about a
company’s managerial effectiveness?
Return on investment
Return on equity
Net margin
Price-Earnings ratio
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
Which of the following is defined as an unmanaged, fixed-income security portfolio put together by a sponsor and handled by an independent trustee?
Unit investment trust
Closed-end investment
Open-end investment
Money market fund
Which of the following stocks would be expected to adversely impact during periods of high interest rates?
Consumer durable shocks
Interest-sensitive stocks
Capital goods stocks
Defensive stocks
If an investor wants to avoid transaction costs, which of the following strategy should he select?
Active strategy
Defensive strategy
Buy and hold strategy
Sector rotation
Question No: 18
Technical analysts ______________ fundamental analysis
Always incorporate
Does not deny the value of
Reject the value of
Have no connection with
Who was the grandfather of technical analysis?
Harry Markowitz
William Sharpe
Charles Dow
Benjamin Graham
Question No: 20
The direct trade between large institutional investors takes place in which of the
following market?
Primary market
Secondary market
Third market
Fourth market
Which of the following statement is TRUE about value investors?
They are patient
They seek rapidly growing companies
They are speculators
They seek slow growing companies
In point and figure chart, what does X indicates?
Market price is going up
Market price is going down
Market price remains constant
Market price is fluctuating
Which of the following statement about a security is true, if it’s beta > 10?
Security is more risky than the market
Security is less risky than market
Security is exactly as risky as market
It is not possible to predict riskiness of a security by beta
Which of the following is a characteristic of line chart?
It is efficient in showing more details
It is simplest and most familiar chart
It show the highest degree of accuracy
It can be used for comparing three values
Question No: 25
In a candlestick chart, what does black body candle depict?
Prices are moving up
Prices are moving down
Prices are constant
Prices are fluctuating
Who has introduced the On Balance Volume technique of technical analysis?
Charles Dow
Joseph Granville
John Bollinger
Welles Wilder
Which of the following is calculated by dividing gross profit by net sales?
Gross margin
Operating margin
Net margin
Profit margin
Question No: 28
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
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: 30
Which of the following situations implies an upward sloping curve?
Accelerating economic activity
Static economic activity
Slowing economic activity
A recession period
Which of the following statement about short selling is LEAST accurate?
The short seller must pay the lender of the stock any dividends paid by the company
The short seller is required to replace the borrowed securities within six months of a
short sale
Proceeds from the short sale cannot be withdrawn from the account
The short seller hoped that the securities prices would decrease in the future
Question No: 2
A stop buy order is MOST likely:
Used to limit the potential losses on a short sale
Executed if the market price is less than or equal to the specified level
An order to purchase a security if the price decreases to a specified level
An order that specifies only the time limit
The primary purpose of the liquidity ratios is to determine:
The amount of earnings paid to shareholders
The amount of working capital tied up in inventory
The ability of a firm to pay off short-term obligations
The relative level of short-term debt
__________ is a temporary restriction on program trading in a particular security or
market, usually to reduce dramatic price movements
SuperDot
NYSE direct
Trading curb
Ticker tape
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
In candlestick chart, what does white body candle depict?
Prices are moving down
Prices are moving up
Prices are constant
Prices are fluctuating
Which of the following is a popular price pattern?
Double ups
Head and shoulders
Triangles
Resistance and support
Primary trend in Dow Theory is known as __________
Wave
Triangle
Tide
Rounded bottom
________ are qualified and regulated professionals who trade shares and other securities through market makers on behalf of investors
Stock brokers
Members
Specialists
Day traders
Question No: 10
Which of the following statement is TRUE regarding earning per share?
It represents the company’s current obligation
It represents the ability of a company to repay its current liabilities
It represents per share profit available for distribution to the shareholders
It represents the percentage of earnings paid to shareholders
Which of the following industries is LEAST sensitive to changes in the business cycle?
Manufactures of business plant and equipment
Machine tools and special equipment, such as for pollution control
Industries specializing in high technology
A refrigerators manufacturing company
Which of the following is NOT a fixed income security?
Bonds
Preferred stock
Saving deposits
Options
Which of the following is defined as an unmanaged, fixed-income security portfolio put together by a sponsor and handled by an independent trustee?
Unit investment trust
Closed-end investment
Open-end investment
Money market fund
____________ are financial intermediaries that hold a portfolio of securities on behalf of their shareholders
Banking companies
Growth companies
Value companies
Investment companies
Which of the following statement about a security is true, if its beta < 10?
Security is more risky than the market
Security is less risky than market
Security is exactly as risky as market
It is not possible to predict riskiness of a security by beta
Which of the following would be considered as the most bullish indicator ?
A price decrease with heavy volume
A price increase with small volume
A price increase on heavy trading
No change in price but an increase in volume
Question No: 17
A self-regulatory body that licenses brokers and generally oversees the trading practices of Over the counter(OTC) securities is known as __________
Securities and Exchange Commission (SEC)
National Association of Security Dealers (NASD)
Initial Public Offering (IPO)
Offered for Sale (OFS)
Which of the following industry tend to be composed of relatively volatile and risky
stocks?
Defensive industries
Interest sensitive industries
Growth industries
Cyclical industries
Which of the following is NOT a requirement for an efficient market?
Stock prices incorporate all information
All known information be reflected in prices
The adjustments occur very quickly
Each adjustment be perfect
Which of the following allows you to specify the most you are willing to pay when
buying or the least you are willing to accept when selling?
Limit order
Market order
Stop order
Good till cancelled order
In a candlestick chart, what does black body candle depict?
Prices are moving up
Prices are moving down
Prices are constant
Prices are fluctuating
Which of the following is TRUE regarding the Dow Theory?
Dow Theory is primarily a fundamental analysis tool
Dow Theory was developed by the publisher of Forbes magazine
Dow Theory identified three movements in security prices
Dow Theory states that computer algorithms can be used to look for patterns
Which of the following statement about a security is true, if it’s beta > 10?
Security is more risky than the market
Security is less risky than market
Security is exactly as risky as market
It is not possible to predict riskiness of a security by beta
Which of the following situations implies an upward sloping curve?
Accelerating economic activity
Static economic activity
Slowing economic activity
A recession period
Which of the following stock’s price move in opposite direction to that of interest rates?
Growth stock
Value stock
Interest sensitive stock
Defensive stock
Which of the following is NOT a component of ROA?
Turnover
Leverage
Sales
Net income margin
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
Which of the following is NOT an asset?
Accounts payable
Equipment
Supplies
Cash
For investment purposes:
Common stock is considered a fixed income security
Preferred stock is considered a fixed income security
Both are considered fixed income securities
Derivatives is considered fixed income securities
Arbitrage is the presence of a:
Fixed profit
Risky profit
Riskless profit
Maximizing profit
Current yield is:
Annual income divided by current price
Current income divided by current price
Annual income multiplied by current price
Current income multiplied by current price
Compounding refers to the:
Earning of interest on prospectively earned interest
Earning of interest on previously earned interest
Earning of interest on principal amount
B and C
The economic function of the capital markets:
Facilitating the inflow of capital from savers to borrowers
Facilitating the flow of capital form borrowers to savers
Facilitating the flow of capital from savers to borrowers
None of the above
The bond pricing relationship is customarily expressed in term of:
Annual periods
Semiannual periods
Quarterly periods
Monthly periods
The higher the coupon on the bond:
The lesser is its reinvestment rate risk
The higher is its reinvestment rate risk
The higher is its reinvestment rate of return
The lesser is its reinvestment rate of return
Companies usually pay dividends
Quarterly
Semiannually
Annually
Monthly
________________ usually expire within a few weeks of their issuance
Bonds
Preferred stock
Rights
Derivatives
Paying dividends reduces the amount in a firm’s
Reserves Account
Checking Account
Profit and loss Account
Saving Account
Which of the following stage should be avoided by investors who are interested in
capital gains?
Pioneering stage
Expansion stage
Stabilization stage
Decline stage
Which of the following is NOT true about Expansion stage?
Marketplace is full of competitors
Firm operations more stable, dependable
Financial policies firmly established
Dividends often become payable
Which of the following industry is NOT sensitive to business cycle and price changes?
Growth industry
Cyclical industry
Defensive industry
Interest sensitive industry
Which of the following is EXCLUDED from Porter’s competitive factors?
Bargaining power of buyers
Rivalry between existing competitors
Substitute products or services
Changes in the economy
Which of the following is NOT one of the components of ROA?
Net income margin
Turnover
Leverage
Sales
All of the following are characteristics of Earnings per share EXCEPT?
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 based on future forecasted data
On which of the following financial statements would you expect to find assets,
liabilities, and stockholders’ equity?
Balance sheet
Income statement
Statement of cash flows
Statement of changes in equity
Which of the following is an intangible asset with an identifiable useful life?
Patent
Timber
Goodwill
Trademark
On which of the following financial statements would you expect to find operating, investing, and financing activities?
Balance sheet
Income statement
Statement of cash flows
Statement of changes in equity
Mutual funds are _______________ companies
Private
Investment
Insurance
Banking
Money market mutual fund is:
A closed-end investment company
A unit investment company
A directly investment in Treasury Bills
An exchange traded fund
12 Brokerage fee charged by a stockbroker is an example of:
Margin profit
Insurance premium
Transaction cost
Capital expenditure
13 Which of the following is defined as an investment strategy that involves ongoing
buying and selling actions by the investors?
Active strategy
Passive strategy
Buy-and-hold strategy
All of the given options
14 A form of the EMH which states that security prices fully reflect all public and private information
Strong form efficiency
Weak form efficiency
Semi strong form efficiency
None of the given options
15 The computation of the Dow Jones Industrial Average is known as a __________
index
Price-weighted
Market value
Equal-weighted
Volume weighted
The three broad categories of financial assets are ____________
Money market securities, long-term debt and equity
Corporate securities, derivatives and equity
Debt, equity and derivatives
All of the given options
Which of the following is excluded from the fixed income securities?
Bonds
Preferred stock
Saving deposits
Options
3Financial securities with a maturity of less than a year from their original issue date are sold in the:
Money market
Bond market
Equity market
Derivative market
4The price at which a security dealer sells a security is known as:
Bid price
Offer price
Market price
Order price
5Lahore stock exchange is a:
Primary market
Secondary market
Third market
Fourth market
6The trading of listed securities in the NASDAQ market is known as:
Primary market
Secondary market
Third market
Fourth market
7____________ is a professionally managed firm of collective investments that collect money from man y investors and invests in securities
Share
Bond
Treasury bill
Mutual fund
8Which type of order is often used by investors who have bought a security and want to protect themselves from a falling price?
Market order
Limit order
Stop order
Good-till-canceled order
9The percentage of the purchase price of securities that the investor must pay with his or her own cash or marginable securities is known as:
Initial margin
Margin call
Maintenance margin
SPAN margin
10Which of the following represents low-priced, speculative and risky securities?
Income stocks
Penny stocks
Defensive stocks
cyclical stocks
The most economic function of stock exchange is to:
Safeguard the interest of investors
Help in the capital formation in the country
Provides facilities for speculation
Provide a ready market for old securities
People with a high discount rate will require:
A higher interest rate to entice them to save
Investment options with longer maturities
A lower interest rate to entice them to save
A constant ROI
3The dividend-discount model indicates that the current market price of a stock rises if:
The interest rate rises
The growth rate of dividends rises
The current dividend is higher
All of the above are correct
4The efficient market hypothesis suggests that ______________
No investors can earn excess returns persistently over time
No investors can earn positive returns persistently over time
No investors can earn excess returns at any point in time
No investors can earn positive returns at any point in time
5________ is a measure of the volatility of stock prices or returns
ROR
Beta
ROI
Risk premium
6______ 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
7The total market value of securities in an investment company’s portfolio
divided by the number of investing company fund shares currently out standing is known as ________
Discounted value
Present value
Future cash flow value
Net asset value
8Financial assets:
Contribute to the country’s productive capacity both directly and indirectly
Do not contribute to the country’s productive capacity either directly or indirectly
Directly contribute to the country’s productive capacity
Indirectly contribute to the country’s productive capacity
9The primary purpose of the liquidity ratios is to determine:
How much working capital is tied up in inventory
The relative level of short-term debt
How well a firm is able to pay off short-term obligations
All of the given options
10The intrinsic value of a stock is the ______________ of future net cash flows
Sum value
Present value
Investment value
Future value
1Which one of following statement is TRUE if intrinsic value of a security is higher then its current market price?
The security is being undervalued
The security is being overvalued
The security is correctly valued
None of given options
Stock is under- (over-) valued if intrinsic value is larger (smaller) than current market
price
2Which one of the following is correct formula for calculating gross margin?
Net Profit/Net Sales
Gross Profit/Net Sales
Net income/Net Sales
Gross Profit/credit Sales
3Which of the following is defined as a procedure for valuing the price of a stock by
using predicted dividends and discounting them back to present value?
Dividend Discount Model
Relative Strength Index
On Balance Volume
Bollinger bands
4Which one of the following is correct formula for calculating operating
margin?
Net Profit/Net Sales
Operating income/Net Sales
Net income/Net Sales
Operating income/credit sales
5Which of the following ratios are of more concern for the shareholders?
Liquidity and profitability
Profitability and leverage
Liquidity and leverage
Profitability and activity
6Which of the following ratios would not be used to draw a conclusion about a
company’s managerial effectiveness?
Price-Earnings Ratio
Net margin
Return on equity
Return on Investment