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Tuesday, April 27, 2010

FIN 630_online_quiz8

INVESTMENT ANALYSIS AND PORTFOLIO MANAGEMENT

FIN630

QUIZ

1) The sensitivity of a coupon bond price to a change in its yield:

a)  Is directly related to the bond's yield to maturity 

b)  Is inversely related to the bond's yield to maturity 

c)  Is greater for increases in yield to maturity than it is for decreases in yield

to maturity 

d)  Is constant regardless of whether the yield to maturity increases or

decreases

 

2) The rate of return anticipated on a bond if it is held until the maturity date

is known as:

a)  Discount rate

b)  Interest free rate

c)  Return on equity

d)  Yield to maturity

 

3) The possibility that a bond issuer will be unable to make interest or

principal payments when they are due is known as:

a)  Reinvestment risk

b)  Default risk

c)  Interest rate risk

d)  Liquidity risk

 

4) Nominal interest rate is the function of real rate of interest and ____.

a)  Expected inflation premium

b)  Risk-free rate of return

c)  Required risk premium

d)  Compensation for the actual rate of inflation

 

5) Bond prices are expressed as a percentage of:

a)  Discount value

b)  Par value

c)  Future value

d)  Intrinsic value

 

6) Which of the following is TRUE regarding bond duration?

a)  Duration is directly related to coupon yield

b)  Duration decreases with maturity

c)  Duration is greater than maturity for zero coupon bonds

d)  Duration is shorter than maturity for all bonds except zero coupon bonds

 

7) Which of the following measures deviation of a bond's price-yield curve

from a straight line?

a)  Bond duration

b)  Bond convexity

c)  Bond valuation

d)  All of the given options

8) Which of the following bond will have the longest duration?

a)  5-year, 10 percent coupon bond 

b)  5-year, 15 percent coupon bond 

c)  10-year, zero coupon bond 

d)  10-year, 10 percent coupon bond 

 

9) Which of the following bonds have the lowest ratings?

a)  Convertible bonds

b)  Junk bonds

c)  Municipal bonds

d)  Government bonds

 

10) Which of the following equation is FALSE?

a)  Total risk = general risk + specific risk

b)  Total risk = market risk + issuer risk

c)  Total risk = systematic risk + nonsystematic risk

d)  Total risk = un-diversified risk + equity risk

 

11) Bond horizon premium is the difference between:

a)  Long- and short-term government securities

b)  Stock and risk-free returns

c)  Equity and shot-term government securities

d)  None of the given options

 

12) Which of the following measures the compound growth rate over time?

a)  Geometric mean

b)  Standard deviation

c)  Arithmetic mean

d)  Correlation coefficient

 

13) Which of the following is an asset pricing model commonly used in the

finance industry to measure risk and return of a stock?

a)  Single Index Model

b)  Capital Asset Pricing Model

c)  Binomial Options Pricing Model

d)  Dividend Discount Model

 

14) Which of the following statement is TRUE regarding efficient frontier?

a)  It is an upward sloping curved line

b)  It is a downward sloping curved line

c)  It is an upward sloping straight line 

d)  It is a downward sloping straight line

 

15) What is another name for optimal portfolio?

a)  Business portfolio

b)  Market portfolio

c)  Mutual fund portfolio

d)  Systematic portfolio

 

16) Which of the following is FALSE regarding separation theorem?

a)  The firm's investment decision is independent of the preferences of the

owner

b)  The investment decision is dependent of the financing decision

c)  Risky portfolios are not tailored to each individual's taste

d)  It is possible to separate investment decisions from financial decisions

 

17) When Beta <1.0, what does it indicates?

a)  Security is more risky than the market

b)  Security is less risky than the market

c)  Security is as risky as the market

d)  Security is not risky at all

 

18) The concept that two identical assets  cannot be sold at different prices is

associated with which of the following theory?

a)  Prospect Theory

b)  Modern Portfolio Theory

c)  Dow Theory

d)  Arbitrage Pricing Theory

 

19) Which of the following is the only way to protect investors from

nonsystematic risk?

a)  Sector rotation

b)  Securitization

c)  Diversification

d)  Risk aversion

 

20) Total risk of a security is calculated as:

a)  TR = CFt + (PE - PB)/ PB

b)  TR = (1 + IF) + (PE - PB)/ PB

c)  TRIA = (1 + TR) – 1/ (1 + IF)

d)  TR = CFt / (PE - PB) + PB

FIN 630_online_quiz7

INVESTMENT ANALYSIS AND PORTFOLIO MANAGEMENT

FIN630

Quiz:

1) The most economic function of stock exchange is to:

a)  Safeguard the interest of investors

b)  Help in the capital formation in the country

c)  Provides facilities for speculation

d)  Provide a ready market for old securities

 

2) People with a high discount rate will require: 

a)  A higher interest rate to entice them to save

b)  Investment options with longer maturities

c)  A lower interest rate to entice them to save

d)  A constant ROI

 

3) The dividend-discount model indicates  that the current market price of a

stock rises if: 

a)  The interest rate rises

b)  The growth rate of dividends rises

c)  The current dividend is higher

d)  All of the above are correct

 

4) The efficient market hypothesis suggests that ______________. 

a)  No investors can earn excess returns persistently over time 

b)  No investors can earn positive returns persistently over time 

c)  No investors can earn excess returns at any point in time 

d)  No investors can earn positive returns at any point in time

 

5) ________ is a measure of the volatility of stock prices or returns.

a)  ROR

b)  Beta

c)  ROI

d)  Risk premium

 

6) ______ is a basket of stocks that tracks a particular sector, investment style,

geographical area, or the market as a whole.

a)  Exchange traded fund 

b)  Open-end fund

c)  Closed-end fund

d)  Unit investment trust

 

7) The 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 ________.

a)  Discounted value

b)  Present value

c)  Future cash flow value

d)  Net asset value

 

8) Financial assets:

a)  Contribute to the country's productive capacity both directly and indirectly 

b)  Do not contribute to the country's productive capacity either directly or

indirectly 

c)  Directly contribute to the country's productive capacity

d)  Indirectly contribute to the country's productive capacity

  

9) The primary purpose of the liquidity ratios is to determine: 

a)  How much working capital is tied up in inventory

b)  The relative level of short-term debt

c)  How well a firm is able to pay off short-term obligations

d)  All of the given options

 

10)  The intrinsic value of a stock  is the ______________ of future net cash

flows. 

a)  Sum value

b)  Present value 

c)  Investment value 

d)  Future value

 

FIN 630_online_quiz6

INVESTMENT ANALYSIS AND PORTFOLIO MANAGEMENT

FIN630

Quiz:

 

1) Which of the following types of orders would normally have the most rapid execution?

a)  Market order  

b)  Limit order  

c)  Good-till-canceled order  

d)  Stop order  

 

2) Which of the following statements regarding short sales is not true?

a)  Short sales are done with the expectation that prices will rise.  

b)  Short sales can be executed only on an uptrend.

c)  Short sales are all done on margin.  

d)  Short sales may be executed by both individuals and market makers.  

 

3) The price at which a security dealer sells a security is known as:

a)  Bid Price

b)  Offer Price

c)  Market Price

d)  Order Price

 

4) More investors may be using technical analysis now than in earlier periods because:

a)  There is now more empirical evidence supporting technical analysis.  

b)  The Internet makes more data available to track stock prices.  

c)  More investors are able to understand the quantitative calculations of technical

analysis.   

d)  More business schools are now teaching technical analysis.  

5) Which of the following is true regarding the Dow Theory?

a)  The Dow Theory was developed by the publisher of Forbes magazine.  

b)  The Dow Theory is primarily a fundamental analysis tool.  

c)  The Dow Theory identified three movements in security prices.  

d)  Dow Theory is a notion that computer  algorithms can be taught to look for

optimum patterns.

 

6) Which of the following would be considered the most bullish indicator?

a)  A price increase

b)  A price increase with small volume  

c)  A price increase on heavy trading  

d)  No change in price but an increase in volume  

 

7) Which are the two ratio areas that are of the greatest concern to stockholders?

a)  Liquidity and profitability  

b)  Liquidity and leverage  

c)  Profitability and activity  

d)  Profitability and leverage  

 

8) When might a high return on equity not be desirable?

a)  If the firm were not able to sustain the high return on equity  

b)  If the firm were in the rapid growth cycle of the life cycle  

c)  If the firm had a large amount of debt financing 

d)  If the firm did not have as high a return on assets

 

9) In order for any dividend valuation model to reflect a valid stock price for a company, 

a)  The company must pay dividends 

b)  The dividend growth rate must remain constant. 

c)  The required rate of return (discount rate) must remain constant. 

d)  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?

a)  Market order  

b)  Limit order  

c)  Stop order  

d)  Good-till-canceled order  

 

FIN 630_online_quiz5

INVESTMENT ANALYSIS AND PORTFOLIO MANAGEMENT

FIN630

 

1. Which of the following stage should be avoided by investors who are interested in    

    capital gains?

a.  Pioneering stage

b.  Expansion stage

c.  Stabilization stage

d.  Decline stage 

 

2. Which of the following is NOT true about Expansion stage?

a.  Marketplace is full of competitors

b.  Firm operations more stable, dependable

c.  Financial policies firmly established

d.  Dividends often become payable

 

3. Which of the following industry is NOT sensitive to business cycle and price changes?

a.  Growth industry

b.  Cyclical industry

c.  Defensive industry

d.  Interest sensitive industry

4. Which of the following is EXCLUDED from Porter's competitive factors?

a.  Bargaining power of buyers

b.  Rivalry between existing competitors

c.  Substitute products or services

d.  Changes in the economy

 

5. Which of the following is NOT one of the components of ROA?

a.  Net income margin

b.  Turnover

 c.  Leverage

d.  Sales

 

6. All of the following are characteristics of  Earnings per share EXCEPT?

a.  It is calculated by dividing Net income over number of shares outstanding

b.  Earnings per share is a ratio, which is used for share price evaluation

c.  Earnings per share relate income with ownership.

d.  It is based on future forecasted data.   

 

7. On which of the following financial statements would you expect to find assets, 

    liabilities, and stockholders' equity? 

a.  Balance sheet 

b.  Income statement 

c.  Statement of cash flows 

d.  Statement of changes in equity

8. Which of the following is an intangible asset with an identifiable useful life? 

a.  Patent 

b.  Timber 

c.  Goodwill 

d.  Trademark

 

9. On which of the following financial statements would you expect to find operating, 

    investing, and financing activities? 

a.  Balance sheet 

b.  Income statement 

c.  Statement of cash flows 

d.  Statement of changes in equity

 

10. Mutual funds are _______________ companies. 

a.  Private 

b.  Investment  

c.  Insurance

d.  Banking

 

11. Money market mutual fund is:

a.  A closed-end investment company 

b.  A unit investment company

c.  A directly investment in Treasury Bills 

d.  An exchange traded fund

 

12. Brokerage fee charged by a stockbroker is an example of:

a.  Margin profit

b.  Insurance premium

c.  Transaction cost

d.  Capital expenditure

 

13. Which of the following is defined as an investment strategy that involves ongoing 

      buying and selling actions by the investors?

a.  Active strategy

b.  Passive strategy

c.  Buy-and-hold strategy

d.  All of the given options

 

14. A form of the EMH which states that security prices fully reflect all public and 

      private information.

a.  Strong form efficiency

b.  Weak form efficiency

c.  Semi strong form efficiency

d.  None of the given options

 

15. The computation of the Dow Jones Industrial Average is known as a __________ 

       index. 

a.  Price-weighted 

b.  Market value 

c.  Equal-weighted 

d.  Volume weighted

 

16. The duration of a bond:

a.  Is less than maturity for bonds paying coupon interest 

b.  Is directly related to coupon yield

c.  Decreases with maturity

d.  Is greater than maturity for zero coupon bonds

 

17. Which of the following pay a specified cash flow over a specific period?

a.  Fixed income Securities

b.  Junk bonds

c.  Zero coupon bonds

d.  Convertible bonds

 

18. Which of the following is defined as the rate of return anticipated on a bond if it is 

       held until the maturity date?

  1. Discount rate

b.  Interest free rate

c.  Return on equity

d.  Yield to maturity

 

19. Which of the following measures the sensitivity of an asset's price to interest rat

       movements, expressed as a number of years?

a.  Duration

b.  Yield to maturity

c.  Convexity

d.  Immunization

20. Which of the following factor contributes to the price volatility of a bond?

a.  Maturity

b.  Coupon

c.  Yield to maturity

d.  All of the given options

 

FIN 630_online_quiz4

          Investment Analysis & Portfolio Management

FIN 630

                                                      

Quiz:

 

1) The three broad categories of financial assets are ____________.

a)  Money market securities, long-term debt and equity

b)  Corporate securities, derivatives and equity

c)  Debt, equity and derivatives

d)  All of the given options

 

2) Which of the following is excluded from the fixed income securities?

a)  Bonds

b)  Preferred stock

c)  Saving deposits

d)  Options

 

3) Financial securities with a maturity of less than a year from their original issue date 

    are  sold in the:

a)  Money market

b)  Bond market

c)  Equity market

d)  Derivative market

 The price at which a security dealer sells a security is known as:

a)  Bid price

b)  Offer price

c)  Market price

d)  Order price

 Lahore stock exchange is a:

a)  Primary market

b)  Secondary market

c)  Third market

d)  Fourth market

 The trading of listed securities in the NASDAQ market is known as:

a)  Primary market

b)  Secondary market

c)  Third market

d)  Fourth market

 ____________ is a professionally managed firm of collective investments that collect 

Money from many investors and invests in securities.

a)  Share

b)  Bond

c)  Treasury bill

d)  Mutual fund

8) Which type of order is often used by investors who have bought a security and want to   

     protect themselves from a falling price?

a)  Market order  

b)  Limit order  

c)  Stop order  

d)  Good-till-canceled order  

 

9) The percentage of the purchase price of securities that the investor must pay with his   

    or her own cash or margin able securities is known as:

a)  Initial margin

b)  Margin call

c)  Maintenance margin

d)  SPAN margin

 

10) Which of the following represents low-priced, speculative and risky securities?

a)  Income stocks

b)  Penny stocks

c)  Defensive stocks

d)  Cyclical stocks