Q41: Investors seeking to diversify are likely to find that their largest investment is in
- A. stocks
- B. bonds
- C. foreign securities
- D. their job
Answer
Answer D. their job
Q42: Workers who change jobs may wind up with lower pension benefits at retirement than otherwise identical workers who stay with the same employer, even if the employers have defined benefit plans with the same final-pay benefit formula. This is referred to as
- A. an accumulated benefit obligation
- B. an unfunded liability
- C. the portability problem
- D. indexation
Answer
Answer C. the portability problem
Q43: A remainder man is
- A. A stock broker who remained working on Wall Street after the 1987 crash
- B. One who receives the principal of a trust when it is dissolved
- C. One who receives interest and dividend income from a trust during their lifetime
- D. an employee of a trustee
Answer
Answer B. One who receives the principal of a trust when it is dissolved
Q44: A hedge fund pursuing a___strategy is attempting to exploit temporary misalignments in relative pricing
- A. directional
- B. non-directional
- C. stock or bond
- D. arbitrage or speculation
Answer
Answer B. non-directional
Q45: A hedge fund attempting to profit from a change in the spread between mortgages and Treasuries is using a___strategy
- A. market neutral
- B. directional
- C. relative value
- D. divergence
Answer
Answer C. relative value
Q46: ___refer to strategies aimed at attaining the established rate of return requirements while meeting expressed risk tolerance and applicable constraints
- A. Investment constraints
- B. Investment objectives
- C. Investment policies
- D. All of the above
Answer
Answer C. Investment policies
Q47: An important benefit of Keogh plans is that
- A. they are not taxable until funds are withdrawn as benefits
- B. they are protected against inflation
- C. they are automatically insured by the Federal government
- D. A and B
Answer
Answer A. they are not taxable until funds are withdrawn as benefits
Q48: One incorrect belief that is often cited as a reason for fully-funded pension funds to invest in equities is
- A. stocks provide a hedge against inflation
- B. bonds have lower returns
- C. stocks have higher risk
- D. stocks have higher returns
Answer
Answer A. stocks provide a hedge against inflation
Q49: A measure of asset utilization is
- A. sales divided by working capital
- B. return on equity capital
- C. return on total assets
- D. operating profit divided by sales
Answer
Answer C. return on total assets
Q50: Violation of a trend line means
- A. Moving away from the trend line
- B. Changing the direction
- C. Presentation of the trend line
- D. Cutting the rising trend line from above
Answer
Answer C. Presentation of the trend line
Q51: In the bull market
- A. The stock prices are increasing
- B. Each peak is higher than the previous peak
- C. Each bottom is higher than the previous bottom
- D. B and C
Answer
Answer D. B and C
Q52: Overbought region indicates
- A. More shares are sold
- B. The supply is more
- C. Potential fall in the price level
- D. Potential rise in the share price
Answer
Answer C. Potential fall in the price level
Q53: A growth industry is defined as
- A. An industry with 15% rate of growth per annum
- B. An industry where demand for its product is growing
- C. An industry with high capital investment
- D. An industry with average growth higher than the growth of economy
Answer
Answer D. An industry with average growth higher than the growth of economy
Q54: Mr. A is a daring portfolio manager. He wants to increase the return of his portfolio. He should choose stocks from
- A. Defensive industry
- B. Industry at growth stage
- C. Industry in the maturity period
- D. Industry with more export potential
Answer
Answer B. Industry at growth stage
Q55: The rise of dividend taxes affects
- A. Investor
- B. The corporate
- C. The stock market
- D. The financial institution
Answer
Answer D. The financial institution
Q56: Which of the following items might result in dilution of a corporate s earnings per share at present?
- A. Convertible bonds
- B. Warrants
- C. Stock options given as incentive to top executives
- D. All of the above
Answer
Answer C. Stock options given as incentive to top executives
Q57: In the stock market psychology
- A. Investors forget the past
- B. History repeats itself
- C. More faith in future prediction
- D. A and b
Answer
Answer B. History repeats itself
Q58: The growth in book value per share shows the
- A. Rise in the share prices
- B. Increase in the physical assets of the firm
- C. Increase in the net worth
- D. Growth in reserves
Answer
Answer D. Growth in reserves
Q59: A common stock pay-out ratio
- A. Is directly related to the company s growth rate
- B. Can be zero for a growth firm
- C. Measures the earnings of shares as a percentage of its market price
- D. Indicates the future cash dividends to be expected
Answer
Answer B. Can be zero for a growth firm
Q60: The price earnings ratio of a stock reflects
- A. The growth of the company
- B. The market mood for the company’s stock
- C. The earnings retained and invested in the company
- D. The dividend paid out for the company s stock
Answer
Answer B. The market mood for the company’s stock
Q61: The market value of the scrip is determined by
- A. The dividend declared by the company
- B. The present status of the stock market
- C. The number of floating shares
- D. The interaction of demand and supply
Answer
Answer D. The interaction of demand and supply
Q62: The “modified duration” used by practitioners is equal to the Macaulay duration
- A. times the change in interest rate
- B. times (one plus the bond’s yield to maturity)
- C. divided by (one plus the bond’s yield to maturity)
- D. divided by (one minus the bond’s yield to maturity)
Answer
Answer C. divided by (one plus the bond’s yield to maturity)
Q63: The interest-rate risk of a bond is
- A. the risk related to the possibility of bankruptcy of the bond’s issuer
- B. the risk that arises from the uncertainty of the bond’s return caused by changes in interest rates
- C. the unsystematic risk caused by factors unique in the bond
- D. A and B above
Answer
Answer B. the risk that arises from the uncertainty of the bond’s return caused by changes in interest rates
Q64: ___is the amount of money per common share that could be realized by breaking up the firm, selling the assets, repaying the debt, and distributing the remainder to shareholders
- A. Book value per share
- B. Liquidation value per share
- C. Market value per share
- D. Tobin’s Q
Answer
Answer B. Liquidation value per share
Q65: Indexing of bond portfolios is difficult because
- A. the number of bonds included in the major indexes is so large that it would be difficult to purchase them in the proper proportions
- B. many bonds are thinly traded so it is difficult to purchase them at a fair market price
- C. the composition of bond indexes is constantly changing
- D. all of the above
Answer
Answer D. all of the above
Q66: Contingent immunization
- A. is a mixed-active passive bond portfolio management strategy
- B. is a strategy whereby the portfolio may or may not be immunized
- C. is a strategy whereby if and when some trigger point value of the portfolio is reached, the portfolio is immunized to insure an minimum required return
- D. A, B and C
Answer
Answer D. A, B and C
Q67: A highly liquid security is a
- A. Mutual fund unit
- B. Treasury bill
- C. Share
- D. Commercial paper
Answer
Answer B. Treasury bill
Q68: Which of the following two bonds is more price sensitive to changes in interest rates? A par value bond, X, with 10 years-to-maturity and a 10% coupon rate or a zero-coupon bond, Y, with 10 years-to maturity and a 10% yield-to-maturity
- A. Bond Y because of the longer duration
- B. Bond X because of the longer time to maturity
- C. Bond X because of the higher yield to maturity
- D. Both have the same sensitivity because both have the same yield to maturity
Answer
Answer A. Bond Y because of the longer duration
Q69: You wish to earn a return of 10% on each of two stocks, C and D. Each of the stocks is expected to pay a dividend of $2 in the upcoming year. The expected growth rate of dividends is 9% for stock C and 10% for stock D. The intrinsic value of stock C___
- A. will be greater than the intrinsic value of stock D
- B. will be the same as the intrinsic value of stock D
- C. will be less than the intrinsic value of stock D
- D. cannot be calculated without knowing the rate of return on the market portfolio
Answer
Answer C. will be less than the intrinsic value of stock D
Q70: The goal of fundamental analysts is to find securities
- A. with high market capitalization rates
- B. with a positive present value of growth opportunities
- C. whose intrinsic value exceeds market price
- D. all of the above
Answer
Answer A. with high market capitalization rates
Q71: Many stock analysts assume that a mispriced stock will
- A. immediately returns to its intrinsic value
- B. gradually approach its intrinsic value over several years
- C. never returns to its intrinsic value
- D. return to its intrinsic value within a few days
Answer
Answer B. gradually approach its intrinsic value over several years
Q72: An investor is having their portfolio with the combination of stock and bonds in the ratio of 75:25. He is
- A. Risk averse
- B. Risk neutral
- C. A risk taker
- D. Active in portfolio management
Answer
Answer C. A risk taker
Q73: In the active approach the investor continuously studies
- A. Group related risk
- B. Market related risk
- C. Security specific risk
- D. All above
Answer
Answer D. All above
Q74: Diversification reduces
- A. Interest rate risk
- B. Market risk
- C. Unique risk
- D. Inflation risk
Answer
Answer C. Unique risk
Q75: Simple diversification means
- A. Purchase of more than 15 stocks
- B. Purchase of treasury bills
- C. Purchase of less than 15 stocks at random
- D. Purchase of large varieties of assets
Answer
Answer C. Purchase of less than 15 stocks at random
Q76: Hedge funds may invest or engage in
- A. distressed firms
- B. convertible bonds
- C. currency speculation
- D. All of the above
Answer
Answer D. All of the above
Q77: According to stock market psychology
- A. Investor forget the past
- B. history repeats itself
- C. More faith is placed in predictions of the future
- D. A & B
Answer
Answer B. history repeats itself
Q78: A support level exists at a
- A. A price fixed by the stock exchange brokers
- B. Price fixed by the regulatory authority of the stock exchanges
- C. A price where considerable demand is created
- D. Low price where stock would be available
Answer
Answer C. A price where considerable demand is created
Q79: the efficient frontier becomes a straight line through out because of the
- A. Introduction of risk-free assets
- B. introduction of lending
- C. introduction of lending and borrowing
- D. Introduction of borrowing
Answer
Answer C. introduction of lending and borrowing
Q80: On the capital market line lies
- A. All the efficient and inefficient portfolio
- B. Only the efficient portfolio
- C. All the efficient portfolio and securities
- D. All portfolio and securities
Answer
Answer B. Only the efficient portfolio
