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
