Q1: Investment is the
- A. net additions made to the nation’s capital stocks
- B. persons commitment to buy a flat or house
- C. employment of funds on assets to earn returns
- D. employment of funds on goods and services that are used in production process
Answer
Answer C. employment of funds on assets to earn returns
Q2: Speculator is a person
- A. who evaluates the performance of the company
- B. who uses his own funds only
- C. who is willing to take high risk for high returns
- D. who considers here says and market behaviours
Answer
Answer C. who is willing to take high risk for high returns
Q3: Which one of the following is not a money market securities?
- A. Treasury bills
- B. National savings certificate
- C. Certificate of deposit
- D. Commercial paper
Answer
Answer B. National savings certificate
Q4: Commercial papers are
- A. unsecured promissory notes
- B. secured promissory notes
- C. sold at a premium
- D. Issued for a period of 1 to 2 years
Answer
Answer A. unsecured promissory notes
Q5: The underwriter has to take up
- A. the fixed portions of the issue capital
- B. the agreed portion of the unsubscribed part
- C. the agreed portion or can refuse if
- D. the unfixed portions of the issue capital
Answer
Answer B. the agreed portion of the unsubscribed part
Q6: An example of a derivative security is
- A. a common share of General Motors
- B. a call option on Mobil stock
- C. a commodity futures contract
- D. B and C
Answer
Answer D. B and C
Q7: Which of the following investment areas is heavily tied to work using mathematical and statistical models?
- A. Security analysis
- B. Portfolio management
- C. Institutional investing
- D. Retirement Planning
Answer
Answer A. Security analysis
Q8: Most investors are risk averse which means
- A. They will assume more risk only if they are compensated by higher expected return
- B. They will always invest in the investment with the lowest possible risk
- C. They will always invest in the investment with the lowest possible risk
- D. They avoid the stock market due to the high degree of risk
Answer
Answer C. They will always invest in the investment with the lowest possible risk
Q9: Which of the following would be considered a risk-free investment?
- A. Gold
- B. Equity in a house
- C. High-grade corporate bonds
- D. Treasury bills
Answer
Answer A. Gold
Q10: Are financial assets
- A. bonds
- B. Machines
- C. stocks
- D. A & C
Answer
Answer D. A & C
Q11: Investment decision making traditionally consists of two steps
- A. Investment banking and security analysis
- B. Buying and selling
- C. Risk and expected return
- D. Security analysis and portfolio management
Answer
Answer D. Security analysis and portfolio management
Q12: The rise of the Internet has
- A. Greatly increased the cost of security trading
- B. Significantly democratized the flow of investment information
- C. Led to fewer number of discount brokers
- D. Led to large amounts of security fraud
Answer
Answer A. Greatly increased the cost of security trading
Q13: Savings accounts are but are not
- A. Negotiable; liquid
- B. Marketable; liquid
- C. Liquid; personal
- D. Liquid; marketable
Answer
Answer C. Liquid; personal
Q14: Treasury bills are traded in the
- A. Money market
- B. Capital market
- C. Government market
- D. Regulated market
Answer
Answer A. Money market
Q15: Which of the following would not be considered as capital market security?
- A. A corporate bond
- B. A common stock
- C. A 6-month Treasury bill
- D. A mutual fund share
Answer
Answer C. A 6-month Treasury bill
Q16: The coupon rate is another name for the
- A. Market interest rate
- B. Current yield
- C. Stated interest rate
- D. Yield to maturity
Answer
Answer A. Market interest rate
Q17: If an investor states that Intel is overvalued at 65 times, he is referring to
- A. Earnings per share
- B. Dividend yield
- C. Book value
- D. P/E Ratio
Answer
Answer B. Dividend yield
Q18: If a preferred stock issue is cumulative, this means
- A. Dividends are paid at the end of the year
- B. Dividends is legally binding on the corporation
- C. Unpaid dividends will be paid in the future
- D. Unpaid dividends are never
Answer
Answer C. Unpaid dividends will be paid in the future
Q19: The most popular type of investment company is
- A. Unit investment trust
- B. Mutual fund
- C. Closed-end investment company
- D. Real estate investment trust
Answer
Answer A. Unit investment trust
Q20: An unmanaged fixed income security portfolio handled by an independent trustee is known as a
- A. Junk bond fund
- B. Closed-end investment company
- C. Unit investment trust
- D. Hedge fund
Answer
Answer D. Hedge fund
Q21: A major difference between a closed-end investment company and an open-end investment company is that
- A. Closed-end investment companies are generally much riskier
- B. Their security portfolios are substantially different
- C. Closed-end investment companies are passive investments and open-ends are not
- D. Closed-end companies have a more fixed capitalization
Answer
Answer B. Their security portfolios are substantially different
Q22: Which of the following generally traded on stock exchanges?
- A. Unit investment trusts
- B. Closed-end investment companies
- C. Open-end investment companies
- D. All trade on stock exchanges
Answer
Answer D. All trade on stock exchanges
Q23: It is not important to have a secondary market for mutual funds because
- A. Investors hold the securities till maturity
- B. Investors trade between themselves
- C. Investors sell their shares back to the company
- D. Banks will cash their shares as long as they have accounts at the bank
Answer
Answer D. Banks will cash their shares as long as they have accounts at the bank
Q24: If NAV> market price of a fund, then the fund
- A. Is selling at a discount
- B. Is selling at a premium
- C. Is an index fund
- D. Is an exchange traded fund
Answer
Answer B. Is selling at a premium
Q25: Mutual funds may be affiliated with an under writer. This means
- A. The underwriter has an exclusive right to distribute shares
- B. The underwriter selects the securities in the portfolio
- C. There is no risk to the issuer of the mutual fund
- D. There is no risk to the investor of the mutual fund
Answer
Answer A. The underwriter has an exclusive right to distribute shares
Q26: In an underwriting arrangement, the risk is assumed by the
- A. Issuer of the security
- B. Investment bankers
- C. Commercial bankers
- D. Institutional Investors
Answer
Answer A. Issuer of the security
Q27: The is a window through which the investor can see the company
- A. Syndicate offer
- B. IPO
- C. Prospectus
- D. Shelf rule
Answer
Answer C. Prospectus
Q28: Investment bankers are compensated by
- A. The underwriting spread
- B. Commissions paid by the buyers of the security
- C. Commission paid by the sellers of the security
- D. Guaranteed investment
Answer
Answer D. Guaranteed investment
Q29: Investment bankers operate in the
- A. Primary market
- B. Secondary market
- C. Third market
- D. Fourth market
Answer
Answer A. Primary market
Q30: Which exchange member is assigned to a specific trading post?
- A. Commission broker
- B. Floor trader
- C. Specialist
- D. Dealer
Answer
Answer C. Specialist
Q31: A computerized trading network that matches buy and sell orders electronically entered by customers is a
- A. National markets system
- B. Electronic communications networks
- C. Internet investment service
- D. Global investment network
Answer
Answer B. Electronic communications networks
Q32: If an investor is attempting to buy a stock that is very volatile, it would be best to use
- A. Market order
- B. Limit order
- C. Stop-loss order
- D. Contingency order
Answer
Answer B. Limit order
Q33: Which of the following has helped to eliminate the use of stock certificates by placing stock transactions on computers?
- A. Demat account
- B. Securities Exchange Commission
- C. Depository Trust Company
- D. Federal Depository Insurance Corporation
Answer
Answer A. Demat account
Q34: All new issues being offered for public sale are registered with
- A. SEBI
- B. New issue market
- C. Maloney act of 1936
- D. Securities investor protection act of1970
Answer
Answer B. New issue market
Q35: Total return is equal to
- A. Capital gain + price change
- B. Yield + income
- C. Capital gain – loss
- D. Yield + price change
Answer
Answer A. Capital gain + price change
Q36: The return component that gives periodic cash flows to the investor is known as the
- A. Capital gain
- B. Interest rate
- C. Yield
- D. Unrealized gain
Answer
Answer C. Yield
Q37: Investors should be willing to invest in riskier investments only
- A. If the term is short
- B. If there are no safe alternatives except for holding cash
- C. If the expected return is adequate for the risk level
- D. If they are true speculators
Answer
Answer D. If they are true speculators
Q38: Financial risk is most associated with
- A. The use of equity financing by corporations
- B. The use of debt financing by corporations
- C. Equity investments held by corporations
- D. Debt investments held by corporations
Answer
Answer B. The use of debt financing by corporations
Q39: Political stability is the major factor concerning
- A. Exchange risk
- B. Systematic risk
- C. Non-systematic risk
- D. Country risk
Answer
Answer D. Country risk
Q40: Which of the following is not related to overall market variability?
- A. Financial risk
- B. Interest rate risk
- C. Purchasing power risk
- D. Market risk
Answer
Answer A. Financial risk
