Fin 630 Quiz Solved by Muhammad Naveed

IN630 Quiz Solved By Usman Aslam

Which of the following bonds do not pay interest during the life of the bonds?

Select correct option: Municipal bonds Callable bonds Convertible bonds Zero coupon bonds Ref: A zero coupon bond has a specific maturity date when it returns the bond principal, but it pays no periodic income. ________ is a temporary restriction on program trading in a particular security or market, usually to reduce dramatic price movements. Select correct option: SuperDot NYSE direct Trading curb Ticker tape REFRENCE: Both trading curbs and circuit breakers are designed to reduce temporary volatility in the market. Bond prices are expressed as a percentage of: Select correct option: Discount value Par value Future value Intrinsic value REF: Bond Characteristics

• Prices quoted as a % of par value. Prices quoted without accrued interest.

Which of the following industry is sensitive to business cycle and price changes? Select correct option: Growth industry Cyclical industry Defensive industry Interest sensitive industry REF: Cyclical industries:

Most affected by recessions and economic adversity. Bought to be sold”.

On which of the following financial statements would you expect to find assets, liabilities, and stockholders' equity? Select correct option: Balance sheet Income statement Statement of cash flows Statement of changes in equity REF: The balance sheet shows the portfolio of assets for a corporation, as well as its liabilities and owner's equity, at one point in time Which of the following is NOT a source of Return on Equity (ROE)? Select correct option: Return on assets Leverage Book value per share Sales per total assets REF: ROE = ROA * Leverage ROA = Net income margin * Turnover Net income margin = Net income/Sales Turnover = Sales/ Total Assets Leverage = Total Assets/Stockholder’s equity Which of the following is the theories searching the patterns in randomness? Select correct option: Elliott wave theory Chaos theory Portfolio theory Valuation theory REF: Chaos theory sees systematic behavior amidst apparent randomness. Companies that have capitalization amounts of more than $2 billion are known as _________. Select correct option: Small cap companies Mid cap companies Growth companies Large cap companies REF: Small-cap stocks: A firm with capitalization less than $500 million.

Mid-cap stocks: Capitalization between $500 million and $2billion. Large-cap stocks: Capitalization more than $2 billion. What does the abbreviation SIC stands for? Select correct option: Standard Industrial Classification Symbolic Industry Consortium Southeastern Illinois Compendium REF: One well-known and widely used system is the Standard Industrial Classification (SIC) System based on census data and developed to classify firms on the basis of what they produce. Which of the following is known as Secondary trend in Dow Theory? Select correct option: Wave Triangle Tide Rounded bottom REF: Primary Trend Called “the tide” by Dow. Others have called this a “secular” bull or bear market. Secondary Trend Called “the waves” by Dow. (weeks to month) All of the following are the forms of risk, EXCEPT: Select correct option: Political risks Interest rate risks Presented risks Economic risks REF: Forms of Risks

• Country Risks / Sovereign Risks • Political Risks • Interest Rate Risks • Economic Risks • Regional Risks • Risk in specific company • Inflation Risks

Technical Analysis method that tries to pinpoint when a security's shares are being accumulated (being bought) or are being sold is known as.

Select correct option:

Relative strength index On Balance Volume Moving average None of the given options REF: OBV attempts to detect when a financial instrument (stock, bond, etc.) is being accumulated by a large number of buyers or sold by many sellers. Traders will use an upward sloping OBV to confirm an uptrend, while a downward sloping OBV is used to confirm a downtrend In a bar chart what does the red line represents? Select correct option: Stock prices are getting high Stock prices are getting low Stock prices are closing Stock prices are opening

REF: Blue color indicates market or share price is going up.

Red color indicates market or share price is going down

Leverage ratios are designed to:

Select correct option: Measure a company's capital structure Measure the quality of a company's operations Measure a company's ability to cover its short-term obligations.Measure the percentage of earnings paid to shareholders REF: Ratio used to calculate the financial leverage of a company to get an idea of the company’s methods of financing or to measure its ability to meet financial obligations Leverage = Long term debt / total equity means capital structure which consist both the element like equity and debt, All of the following are the characteristics of the individual investor, EXCEPT: Select correct option: They are characterized by their personalities They maintain relatively constant profile over time They have great freedom in what they can do with regard to investing. They define risk as losing money. REFERENCE: Individual Investors characteristics

Life stage matters Risk defined as “losing money Characterized by personalities Institutional Investors Maintain relatively constant profile over time. Legal and regulatory constraints Well-defined and effective policy is critical. Which of the following lines depict the tradeoff between risk and expected return for individual securities? Select correct option: Value Market Line Capital Market Line Security Market Line Money Market Line REF: The capital market line depicts the risk-return trade-off in the financial markets in equilibrium, Investors should expect a risk premium for buying a risky asset such as a, stock. Financial instrument whose return is derived from the return on another instrument is known as a (n): Select correct option: Derivative security Fixed income security Equity security Money market security REF: Derivative assets get their name from the fact that their value derives from some other asset Of the following statements identify the advantage of the market measures to the investor. Select correct option: These measures identify the population to be measured and its method These measures offer equivalents for common sizes and metric units These measures regulate the access to and cost of imports and exports These measures quickly judge the overall portfolio performance REF:

Market measures are useful to investors in quickly judging their overall portfolio performance. Because stocks tend to move up or down together, the rising or falling of the market will generally indicate to the investor how he or she is likely to do Which of the following is also called the Gordon’s Growth Model? Select correct option: Dividend discount model Binomial models finance Capital asset pricing model Black scholes model finance REF: Relationship known as the dividend discount model (DDM), also called Gordon's growth model. A company that might not have historical perspective in background but it will find a place in the future depending on the product or industry is a ___________. Select correct option: Value company Large cap company Small cap company Growth company REF: One of the primary goals of fundamental security analysis is to-identify the growth industries, of the near and far future. Not from pastm Growth company might not have historical perspective in background but it will find a place in the future depending on the product or industry belong Which of the following represents an unusually risky stock? Select correct option: Blue chip stock Growth stock Penny stock None of the given options REF: Penny stock unusually risky specially in expensive share,, and it is a low-priced, high risk common stock that has a short or erratic history of revenues and earnings The trend lines can have the following trends, EXCEPT: Select correct option: Upward trend Downward trend Trend range Round phase REF: There are three basic kinds of trends:

– An Up trend where prices are generally increasing. – A Down trend where prices are generally decreasing.

A side ways band and moving in a Trading Range Which of the following is NOT true about technical analysis? Select correct option: It requires some subjective decision-making It requires much accounting information Its success would mean markets are not efficient Technical analysis is older than fundamental analysis REF: They believe that supply and demand are the determinants of security prices, so its success would means markets are efficient and investors are moving quick with information, It is also one of the oldest forms of analyzing companies. Which of the following orders are placed prior to the execution of trade? Select correct option: Market and stop orders Market and limit orders Stop and limit orders Stop and mitigate orders REF: Market orders are to be executed as soon as possible after reaching the exchange floor. Stop orders become market order when the stop price is reached. Therefore, it is possible for the actual sales price to be different from the stop price Which of the following is a current market in which all buying and selling is done on cash or margin basis? Select correct option: Target market Historic market Regular market Borough market REF: A Regular Market is a current market in which all buying and selling is on cash or margin. Standard & Poor’s Composite Index is composed of how many “large” firm stocks? Select correct option: 250 500 750 1000 REF: Standard & Poor’s Composite Index: Composed of 500 “large” firm stocks, Indicates how much the average equity value of the 500 firms in the index has increased relative to the base period. Which of the following charts give the economic information on weekly or yearly basis?

Select correct option: Line charts Bar charts Pie charts Symbol charts REF: A Bar Chart gives you an economic data on weekly basis and yearly basis. Which of the following captures cash flows during the evaluation period? Select correct option: Actual diminishing returns Dollar-weighted returns Time-weighted returns Opportunity cost returns REF:Dollar-weighted returns: Captures cash flows during the evaluation period. Equivalent to internal rate of return. Equates initial value of portfolio (investment) with cash inflows or outflows and ending value of portfolio. What does the abbreviation RSI stands for? Select correct option: Repetitive String Instruments Relative Strength Index Rapid Succession Intrigues Review of Symbolic Inquests REF: Relative Strength Index (RSI was developed by Welles Wilder as an oscillator to gauge overbought/oversold levels). Which of the following is a characteristic of cyclical stock? Select correct option: Their value is tied with the overall state of the national economy. They are low-priced, speculative and risky securities. They have stable earnings and no extensive liabilities None of the given options REF: A cyclical stock is one whose fortune is directly tied to the state of the overall national economy. When the economy is booming these stocks do well. During a recession they do poorly. Which of the following is referred to as risk-free bond? Select correct option: Government bond Municipal bond Sovereign bond

Junk bond REF: U.S. government is considered to be the safest credit risk because of its power to print money. Apart from the balance sheet or retained earnings what else must the financial analyst take into consideration in fundamental analysis? Select correct option: The assortment track record The previous track record The crowbar track record The advisor track record REF: In fundamental analysis you not only considered the balance sheet or retained earnings but you also considered the previous track record, ___________stipulate a relationship between expected return and risk. Select correct option: APT CAPM Both CAPM and APT Neither CAPM nor APT REF: Similar to the CAPM, or any other asset-pricing model, APT posits a relationship between expected return and risk. Which of the following industry is sensitive to business cycle and price changes? Select correct option: Growth industry Cyclical industry Defensive industry Interest sensitive industry REF: Cyclical industry cyclical industries are most volatile Most affected by recessions and economic adversity. Means in economy fluctuation in prices, like if demand goes up then the price of product will also goes up, so price fluctuation is clear in economy Which of the following is an income that is the source of revenue for members or brokers? Select correct option: Copyright fee Application fee Fixed cost fee Trading fee

REF: members of the exchange may trade there, so most people need someone to make the trade for them. As a fee for their services, brokerage firms charge a commission All of the following are the causes of change in investor’s circumstances, EXCEPT: Select correct option: Investment horizon changes Liquidity requirement changes Authority circumstance changes tax circumstances changes Regulatory considerations REF: Change in Time Horizon: Traditionally, we think of investors aging and becoming more conservative in their investment approach. Change in Liquidity Requirements: A need for more current income could increase the emphasis on dividend-paying stocks, Change in Legal / Regulatory Considerations: Laws affecting investors change Regularly, whether tax laws or laws governing retirement accounts, annuities, and so Forth. In which of the following markets do the investor cannot short sell? Select correct option: Target market Historic market Borough market Regular market REF: A Regular Market is a current market in which all buying and selling is on cash or margin. Short selling involves selling borrowed shares. In regular market short selling is not permitted. It is permitted in future market. When Beta >1.0, it indicates that: Select correct option: Security is more risky than the market Security is less risky than the market Security is as risky as the market Security is not risky at all REF: If Share A’s Beta = +2.0 then that Share is Twice as risky (or volatile) as the KSE Market If Share B’s Beta = +1.0 then that Share is Exactly as risky (or volatile) as the KSE Market • If Share C’s Beta = +0.5 then that Share is only Half as risky (or volatile) as the KSE Market The Beta of most Stocks ranges between + 0.5 and + 1.5 • The Average Beta for All Stocks = Beta of Market = + 1.0 Always.

Which of the following suggests that people express a different degree of emotion towards gains than towards losses? Select correct option: Loss aversion Prospect theory Illusion of control Anchoring Ref from investopedia: Prospect theory suggests people express a different degree of emotion towards gains than towards losses. Individuals are more stressed by prospective losses than they are happy from equal gains. A form of the EMH which states that security prices fully reflect all public and private information. Select correct option: Strong form efficiency Weak form efficiency Semi strong form efficiency None of the given options REF: The most extreme version of the EMH is strong form efficiency. This version states that security prices fully reflect all public and private information Which of the following is an objective of a tax shelter? Select correct option: Eliminate tax liabilities Postpone tax liabilities as long as possible Reduce tax liabilities as much as possible Shift tax liabilities to other taxpayers REF: Retirement programs offer tax sheltering whereby any income and/or capital gains taxes are avoided until such time as the funds are withdrawn All of the following are examples of financial assets EXCEPT. Select correct option: Stocks Transport vehicles Bonds Bank deposits

REF: Financial assets such as stocks and bonds but here motor vehicles is fixed assets which is not showing corresponding liability like fanatical assets, Which of the following equation is FALSE? Select correct option: Total risk = general risk + specific risk Total risk = market risk + issuer risk Total risk = systematic risk + nonsystematic risk Total risk = un-diversified risk + equity risk REFRENCE: we have systematic risk and nonsystematic risk, which are additive: Total risk = General risk + Specific risk = Market risk + Issuer risk = Systematic risk + Nonsystematic risk Which of the following ratios will be used if portfolio’s numerous other assets systematic risk of investment is the best? Select correct option: Treynor reward-to-volatility ratio Jensen's differential return ratio Jennet’s return on liquidity ratio Sharpe reward-to-variability ratio REF: However for Those investors, whose portfolio constitutes only one (relatively) small part of their total assets that is, they have numerous other assets systematic risk may well be the relevant risk. In these circumstances, RVOL Is appropriate, because it considers only systematic or non diversifiable risk. Which order will be executed automatically at the current bid or ask price? Select correct option: Limit order Market order Stop order Good till cancelled REF:With this order, the investor trusts the fair pricing function of the marketplace. The broker is to buy or sell at the best price prevailing at the moment. The key element of a market order is that the order is to be executed as soon as possible. Which of the following has the assumptions of absence of personal taxes, single-period investment and riskless borrowing or lending? Select correct option: Modern Portfolio Theory Capital Asset Pricing Model Binomial Options Pricing Model

Arbitrage Pricing Theory Capital Asset Pricing Model All investors can borrow or lend money at the risk-free rate of return. There are no personal income taxes---investors are indifferent between capital gains and dividends. 6. There is no inflation. The APT was developed in 1976 by __________. Select correct option: Lintner Modigliani and Miller Ross Sharpe Ref: Another model that has received attention is based on arbitrage pricing theory (APT) as developed by Ross and enhanced by others. In recent years, Which of the following index is also known as value weighting? Select correct option: Price weighting Equal weighting Base weighting Capitalization weighting Ref: Capitalization weighting is also called value weighting. This method weights components by the size of the company rather than by the value of a share. Which of the following considers the size of the company and needs no adjustment for stock splits? Select correct option: Price weighting Capitalization weighting Equal weighting Base weighting Ref: Capitalization weighting is also called value weighting. This method weights components by the size of the company rather than by the value of a share. The practice of spreading money among different investments to reduce risk is known as _______. Select correct option: Diversification Risk aversion

Securitization Sector rotation Which of the following types of bonds are usually unsecured debts maturing in 20-40 years and paying semi-annual interest? Select correct option: Municipal bonds Convertible bonds Zero coupon bonds Corporate bonds Ref: Corporate bonds are senior securities. However, within the bond .category itself there are various degrees of security. Usually unsecured debts maturing in 20-40 years, paying semi-annual interest, callable, with par value of $1,000. Which of the following involves an additional source of basis risk due to the difference between the asset being hedged and the asset underlying the futures? Select correct option: Long hedge Short hedge Cross hedge Stack hedge REF:When there is no futures contract on the asset being hedged, choose the contract whose futures price is most highly correlated with the asset price. This is known as cross hedging. Which of the following measures the sensitivity of the asset's price to interest rate movements, expressed as a number of years? Select correct option: Duration Yield to maturity Convexity Immunization REF: Duration is a measure of interest rate risk that considers the effects of both the coupon rate & maturity changes in bond prices. By matching the duration of their firm’s assets & liabilities, managers of financial institutions can minimize exposure to interest rate risk. Which of the following is the right to buy? Select correct option: Put option Strategic option

System option Call option REF: A call option gives its owner the right to buy; it is not a promise to buy. For example, a store holding an item for you for a fee is a call option. Which of the following is NOT an example of derivative security? Select correct option: Futures Options Swaps Bonds REF: Derivatives Instruments Futures Contract, Forward Contract, Option contract, Swap Which of the following bonds are high yield bonds issued by companies that are considered highly speculative because of risk of default? Select correct option: Junk bonds Municipal bonds Callable bonds Convertible bonds REF: Which of the following is the right to sell? Select correct option: System option Strategic option Call option Put option REF: A put option gives its owner the right to sell; it is not a promise to sell. For example, a lifetime money back guarantee policy on items sold by a company is an embedded put option.

Which of the following shows the relationship between the market yields and time to maturity?

Smart curves

Bezier curves

Yield curves

Filling curves

What does the abbreviation SIC stands for?

Standard Industrial Classification

Symbolic Industry Consortium

Southeastern Illinois Compendium

Of the following statements identify the advantage of the market measures to the

investor.

These measures identify the population to be measured and its method

These measures offer equivalents for common sizes and metric units

These measures regulate the access to and cost of imports and exports

These measures quickly judge the overall portfolio performance

Current yield is defined as:

Internal rate of return that equates the prevailing market price with future interest and principal payments

Approximate yield to call for premium bonds

Coupon interest divided by the average of market and call prices

Coupon rate expressed as a percent of the prevailing market price

The trend lines can have the following trends, EXCEPT:

Upward trend

Downward trend

Trend range

Round phase

Which of the following measures deviation of a bond’s price-yield curve from a straight line?

Bond duration

Bond convexity

Bond valuation

All of the given options

Which of the following is the basic exchange rate in the economy?

External rate of return

Real rate of return

Rate of return on assets

Net present value rate of return

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

Explanation: when interest rates rise, market risk increases, but reinvestment risk declines. When interest rates are declining, investors have to reinvest their interest

income and any return of principal, whether scheduled or unscheduled, at lower prevailing rates.

In which of the following condition an investment is considered desirable?

When cost is less then the future value of the present cash flows

When profit is less then the present value of the future cash flows

When present value of the future cash flows is less then the cost

When cost is less then the present value of the future cash flows

Which of the following depicts a bullish trend in stock market?

Stock price drop below support level

Stock price drop below resistant level

None of given options

Which of the following bond will have the longest duration?

5-year, 10 percent coupon bond

5-year, 15 percent coupon bond

10-year, zero coupon bond

10-year, 10 percent coupon bond

Dow Jones Industrial Average is composed of how many “blue-chip” stocks?

10

30

50

70

Which of the following make use of a divisor to adjust for stock splits?

Capitalization weighting

Price weighting

Equal weighting

Base weighting

The industries that are least affected by recessions and economic adversity are referred as which of the following?

Growth industries

Cyclical industries

Interest-sensitive industries

Defensive industries

Which of the following suggests that people express a different degree of emotion towards gains than towards losses?

Loss aversion

Prospect theory

Illusion of control

Anchoring

Bonds and preffered stock do not ensures ________. Select correct option: A fixed income

Security Ownership None of given options

Which of the following give pay back period of the investment made? Select correct option: Future cash flows Present cash flows Operating cash flows Free cash flows

Which of the following is a pattern that occurs during high volatility, when a security shows great movement with little direction? Select correct option:

Broadening Formation Relative Strength Index On Balance Volume Bollinger Bands

Which of the following is a payment to owners in stock? Select correct option:

Penny stock Stock dividend Stock flicker Stock ticker

Which of the following bonds may be exchanged for another asset at the owner’s discretion? Select correct option:

Municipal bonds Callable bonds Convertible bonds Zero coupon bonds

All of the following are the reasons of investing, EXCEPT: Select correct option:

Compensate inferences Capital gains Supplementing their income Excitement

All of the following are the levels of market efficiency, EXCEPT: Select correct option:

Weak form Subjective form Semi-strong form Strong form

Which of the following is NOT an anomaly related to efficient market hypothesis? Select correct option:

LowPE effect The small firm effect The neglected firm effect Common size effect

High-yield bonds: Select correct option:

Pay lower coupon rates than investment-grade bonds Have a lower probability of default than junk bonds Are avoided by institutional investors Are high risk bonds

Which of the following compares the magnitude of recent gains to recent losses in an attempt to determine overbought and oversold conditions of an asset? Select correct option: Moving Average Convergence/Divergence Relative Strength Index On Balance Volume Bollinger Bands

Which of the following are the required inputs of the present value approach? Select correct option:

Discount rate and the expected cash flows Expenses paid in cash and dividends disbursed Earnings in valuing stocks and stock-in-trade Retained earnings and dividends paid out ratio

On which of the following financial statements would you expect to find assets, liabilities, and stockholders' equity? Select correct option:

Balance sheet Income statement Statement of cash flows Statement of changes in equity

Financial instrument whose return is derived from the return on another instrument is known as a (n): Select correct option:

Derivative security Fixed income security Equity security Money market security

Which of the following is NOT a test of semi-strong form efficiency? Select correct option:

Stock splits Accounting changes Dividend announcements Insider transactions

Which of the following is the difference between the expected return and the actual return on an investment? Select correct option:

Expected return Abnormal return Normal return Tax return

Which of the following programs propagate the ethics? Select correct option:

London Instruments Fiscal Attachment Laurel Immigration Fairness Analysis Low Income Financial Association Licensed International Financial Analyst

Which of the following tests is often used to test the weak form of market efficiency? Select correct option:

Stock splits Runs test Insider transactions Accounting changes

Which of the following represents an unusually risky stock? Select correct option: Blue chip stock Growth stock Penny stock None of the given options

Bond prices are expressed as a percentage of: Select correct option: Discount value Par value Future value Intrinsic value

All of the following are the investment alternatives, EXCEPT: Select correct option: Derivative assets Collateral securities Fixed income securities Equity securities

Explanation: Alternative investments include hedge funds, managed futures, real estate, commodities and derivatives contracts.

In which of the following markets do the investor cannot short sell? Select correct option: Target market Historic market Borough market Regular market

Apart from the balance sheet or retained earnings what else must the financial analyst take into consideration in fundamental analysis? Select correct option: The assortment track record The previous track record The crowbar track record The advisor track record

Which of the following is an average signifying the point in time when the present value of a security is repaid? Select correct option: Yield to maturity Duration Convexity Immunization

Which of the following is a current market in which all buying and selling is done on cash or margin basis? Select correct option: Target market Historic market Regular market Borough market

Which of the following terms is used synonymously for equity? Select correct option: Share Distribution

Section Division

If the Dow Jones Industrial Average stock splits 3 for 1 then what impact will this have on the index divisor? Select correct option: Index divisor will incline Index divisor remains constant Index divisor will decline Index divisor multiply

The sensitivity of a coupon bond price to a change in its yield: Select correct option: Is directly related to the bond's yield to maturity Is inversely related to the bond's yield to maturity Is greater for increases in yield to maturity than it is for decreases in yield to maturity Is constant regardless of whether the yield to maturity increases or decreases

Which of the following stage offers the highest potential returns and greatest risk? Select correct option: Pioneering stage Expansion stage Stabilization stage Decline stage

Margin accounts are mostly used by: Select correct option: Traders who think their long-run returns will be greater than the cost of borrowing Speculators who think their long-run returns will be greater than the cost of borrowing Investors who think their long-run returns will be greater than the cost of borrowing All of given options

All of the following are the problems associated to the Dividend Discount Model, EXCEPT: Select correct option: This model need infinite stream of dividends This model has uncertain dividend stream

This model must estimate future dividends This model requires constant earnings per share

In which of the following accounts the trading charges are high? Select correct option: Savings account System account Personal account Cash account

A Financial instrument whose return is derived from the return on another instrument is known as a (n): Select correct option: Derivative security Fixed income security Equity security Money market security

In which of the following approaches the capitalization of income is done? Select correct option: Present value approach Multiple of earning approach Communicative approach Integrated eclectic approach

Which of the following is the formula of earning per share? Select correct option: EPS=IRR / Market value per share EPS=ROE * Net asset value per share EPS=NPV * Retained earning value per share EPS=ROE * Book value per share

The rate of return anticipated on a bond if it is held until the maturity date is known as: Select correct option: Discount rate Interest free rate Return on equity Yield to maturity

_____________is an unmanaged fund designed to replicate as closely as possible the performance of a specified index of market activity. Select correct option: Index fund Reserve fund Mutual fund Pension fund

Which of the following statements highlights the financial condition of a company at any single point of time? Select correct option: Income Statement Cash Flow Statement Balance Sheet Statement of Owner’s Equity

Lahore Stock of Exchange is ___________ based market indicator. Select correct option: Volume

Capitalization Price weighting Profit

Which of the following is necessary in order to reduce the huge number of possible investments to a smaller number that can investigate carefully? Select correct option: Securing Screening Saving Discounting

Which of the following equations assume a linear relationship between price and yield? Select correct option: Yield to maturity equation Duration equation Convexity equation Immunization equation

Explanation: Duration assumes a linear relationship between price and yield. However, this equation is not always accurate in predicting the change in value. This is because the PV does not generally fall linearly with increasing yield.

Which of the following index is also known as value weighting? Select correct option:

Price weighting Equal weighting

Base weighting Capitalization weighting

A form of the EMH which states that security prices fully reflect all relevant publicly available information is known as: Select correct option: Strong form Weak form Semi strong form None of the given options

Which of the following moves inversely to each other? Select correct option: Interest rates and debt to equity ratios Discount rates and P/E ratios Coupon rates and leverage ratios Interest rates and activity ratios

In bottom-up approach of fundamental analysis, investors begin their analysis with: Select correct option:

Industry Economy Market Company

Which of the following is the difference between the expected return and the actual return on an investment? Select correct option: Expected return Abnormal return

Normal return Tax return

Which of the following is a characteristic of cyclical stock? Select correct option: Their value is tied with the overall state of the national economy. They are low-priced, speculative and risky securities. They have stable earnings and no extensive liabilities None of the given options

Which of the following is NOT true about technical analysis? Select correct option: It requires some subjective decision-making It requires much accounting information Its success would mean markets are not efficient Technical analysis is older than fundamental analysis

In which of the following cases support occurs? Select correct option: Inability to recede prior high Inability to break below prior low Inability to surpass prior low Capacity to surpass prior high

Which of the following is a basket of stocks that tracks a particular sector, investment style, geographical area, or the market as a whole? Select correct option: Exchange traded fund Open-end fund Closed-end fund Unit investment trust

Which of the following hypothesis states that some stocks are priced more efficiently than others? Select correct option: Financial media hypothesis Financial instability hypothesis Semi-efficient market hypothesis Adaptive markets hypothesis

A place where trading of listed securities in the NASDAQ market is performed is known as: Select correct option: Primary market Secondary market Third market Fourth market

In which of the following cases resistance occurs? Select correct option:

Inability to break below prior high Inability to break below prior low Inability to surpass prior high Inability to repair beyond prior low

Which of the following is the theories searching the patterns in randomness? Select correct option: Elliott wave theory Chaos theory Portfolio theory Valuation theory

Which of the following is an income that is the source of revenue for members or brokers? Select correct option: Copyright fee Application fee Fixed cost fee Trading fee

Which of the following bonds are high yield bonds issued by companies that are considered highly speculative because of risk of default? Select correct option: Junk bonds Municipal bonds Callable bonds Convertible bonds

Which of the following statement is not a characteristic of a line chart? Select correct option: It is simplest and most familiar chart It is efficient in showing more details It is an extension of a scatter graph It is created by connecting a series of points.

Which of the following bonds give the issuer the right to repay the debt prior to maturity? Select correct option: Municipal bonds Callable bonds Convertible bonds Zero coupon bonds

In order to analyze long term investment, the most suitable analysis will be. Select correct option: Fundamental analysis Technical analysis Vertical analysis Horizontal analysis

The duration of a bond: Select correct option: Is less than maturity for bonds paying coupon interest Is directly related to coupon yield Decreases with maturity Is greater than maturity for zero coupon bonds

The interest rate stated on a bond, note or other fixed income security, expressed as a percentage of the principal (face value) is known as: Select correct option: Interest free rate Coupon rate Discount rate Bank rate

Which of the following is a basket of shares bought for you by an asset management company? Select correct option: Hedge fund Managed fund Adaptation fund Mutual fund

Leverage ratios are designed to: Select correct option: Measure a company's capital structure Measure the quality of a company's operations Measure a company's ability to cover its short-term obligations Measure the percentage of earnings paid to shareholders

Which of the following statements hold TRUE for ask price? Select correct option: It is the price at which a broker is willing to sell a certain security It is the price at which a broker is willing to buy a certain security It is the quoted price in an order to buy shares of a company It is the rate at which a dealer will buy the base currency

Which of the following ratios measures a company's capital structure? Select correct option: Price to sales ratio Price to book value ratio Leverage ratio Debt coverage ratio

Investment Analysis & Portfolio Management

Quiz No. 3 - July 7, 2010

Solved By vuZs Team

[email protected]

S

Brokerage fee charged by a stockbroker is an example of: Select correct option: Margin profit Insurance premium Transaction cost Capital expenditure

The three broad categories of financial assets are: Select correct option: Debt, equity and money market securities Corporate securities, derivatives and equity Debt, equity and derivatives long-term debt and equity and money market securities

Companies that have capitalization amounts of more than $2 billion are known as _________. Select correct option: Small cap companies Mid cap companies Growth companies Large cap companies

In which of the following cases will the buy decision be taken? Select correct option: Where the intrinsic value is greater than the current market price as the asset is undervalued Where the intrinsic value is lesser than the current market price as the asset is overvalued Where the intrinsic value is equivalent to the current market price as the asset is acquired Where the current market price has doubled from the intrinsic value as the asset is distributed

Which of the following index is price weighted?

Select option:

New York Stock Exchange Composite Dow Jones Industrial Average

Standards and Poor’s Index Russell 3000 Index

Which of the following ratios that shows how much a company pays out in dividends each year relative to its share price? Select correct option: Dividend per share Dividend yield ratio Dividend coverage ratio Dividend earned ratio

Which of the following statements hold TRUE for spread? Select correct option: It is the price asked by a seller of securities from buyers It is the quoted price in an order to buy shares of a company It is the rate at which a dealer will buy the base currency It is the difference between the bid and ask price

Which of the following statements also takes into account some non-cash accounting items such as depreciation? Select correct option: Income Statement Cash Flow Statement Balance Sheet Statement of Owner’s Equity

Which of the following shows brokerage fees charged by a stockbroker? Select correct option: Margin profit An insurance premium Transaction costs Capital expenditure

In which of the following cases will the sell decision be taken? Select correct option: Where the intrinsic value is greater than the current market price as the asset is undervalued Where the intrinsic value is lesser than the current market price as the asset is overvalued Where the intrinsic value is equivalent to the current market price as the asset is acquired Where the current market price has doubled from the intrinsic value as the asset is distributed

All of the following is required to calculate the present value figure, EXCEPT: Select correct option: The amount of future cash flows The length of time The discount rate The retained earnings

___________ are financial intermediaries that hold a portfolio of securities on behalf of their shareholders. Select correct option: Growth companies Value companies Investment companies Banking companies

Which of the following trading systems is used by the Lahore Stock Exchange? Select correct option: ISECTS LOTS KATS PETS

Which of the following ratios would not be used to draw a conclusion about a company's managerial effectiveness? Select correct option:

Net margin Price-Earnings Ratio Return on equity Return on Investment (not sure)

If a company decides to issue new securities, these should be issued in: Select correct option: Primary market Secondary market Third market Fourth market

Apart from the balance sheet or retained earnings what else must the financial analyst take into consideration in fundamental analysis?

The assortment track record The previous track record The crowbar track record The advisor track record

Which of the following always involve predicting an uncertain future and mistakes will be made and outlooks will differ?

Fundamental analysis Technical analysis Security analysis Vertical analysis

Which of the following is a payment to owners in stock?

Penny stock Stock dividend Stock flicker Stock ticker

In which of the following approaches the capitalization of income is done?

Present value approach Multiple of earning approach Communicative approach Integrated eclectic approach

Which of the following is NOT true about technical analysis?

It requires some subjective decision-making It requires much accounting information Its success would mean markets are not efficient Technical analysis is older than fundamental analysis

Which of the following terms refer to the recurring and fluctuating levels of economic activity that an economy experiences over a long period of time?

Claims cycle Reaction cycle Business cycle Capital cycle

A technical analysis term pattern to describe a chart formation in which a stock's price rises to a peak and subsequently declines, then the price rises above the former peak and again declines. And finally, rises again, but not to the second peak and declines once more is known as:

Head and shoulder Resistance and support Double ups Triangles

Which of the following is NOT a type of bond?

Tertiary bond Bearer bond Fixed income bond Euro bond

Which of the following statements record performance over a period of time?

Cash flow and statement of owner’s equity Cash flow and income statements Balance sheet and income statement Cash flow statement and balance sheet

Which of the following represents the total amount that may be distributed to its shareholders?

Other income Net income Extraordinary income Operating income

The circuit breaker that is applied where stock prices in the market are dropping is known as which of the following?

Starter Floor Ceiling Simulator

All of the following are the broad sectors of stocks, EXCEPT: Select correct option: Interest-sensitive stocks Consumer durable stocks

Capital goods stocks Hostile stocks

Which order will be executed automatically at the current bid or ask price? Select correct option: Limit order Market order Stop order Good till cancelled

A degree of informational efficiency which states that future stock prices cannot be predicted by analyzing price from the past is known as: Select correct option: Strong form efficiency Weak form efficiency Semi strong form efficiency None of the given options

In which of the following markets do the investor cannot short sell? Select correct option: Target market Historic market Borough market Regular market

Which of the following statement is FALSE regarding bond duration? Select correct option: Duration is shorter than maturity for all bonds except zero coupon bonds Duration is equal to maturity for zero coupon bonds Duration is directly related to coupon yield Duration is measured in years

Which of the following is NOT the technical indicator? Select correct option: Moving Average Convergence/Divergence Relative Strength Index On Balance Volume Broadening Formation

Which of the following charts give the economic information on weekly or yearly basis? Select correct option: Line charts Bar charts Pie charts Symbol charts

In which of the following cases support occurs? Select correct option: Inability to recede prior high Inability to break below prior low Inability to surpass prior low Capacity to surpass prior high

What is the relationship between price sensitivity and yield to maturity at which the bond is selling? Select correct option: It has a direct relationship It has no relationship It has a countless relationship It has an inverse relationship

Which of the following statements hold TRUE for bid price? Select correct option: It is the price at which a broker is willing to sell a certain security It is the price at which an investor can buy units from the funded company It is the price asked by a seller of securities from buyers It is the price at which a broker is willing to buy a certain security

Which of the following is known as Secondary trend in Dow Theory? Select correct option: Wave Triangle Tide Rounded bottom

Which of the following invest in undervalued stocks as determined by fundamental financial analysis? Select correct option: Growth funds Value funds Mutual funds Hedge funds Which of the following orders is used to secure your profits? Select correct option:

Market order Stop order Limit order Mitigate order If an investor wants to avoid transaction costs, which of the following strategy should he opt? Select correct option: Active strategy Passive strategy Buy and hold strategy

Sector rotation

Question # 1 of 15 ( Start time: 05:07:00 AM ) Total Marks: 1 All of the following are the investment alternatives, EXCEPT: Select correct option: Derivative assets Collateral securities Fixed income securities Equity securities Question # 2 of 15 ( Start time: 05:07:22 AM ) Total Marks: 1

Which of the following is an income that is the source of revenue for members or brokers?

Select correct option: Copyright fee Application fee Fixed cost fee Trading fee

Question # 3 of 15 ( Start time: 05:07:46 AM ) Total Marks: 1 All of the following are the basic technical tools, EXCEPT: Select correct option: Recession Trend lines Indicators Cycles Question # 4 of 15 ( Start time: 05:08:08 AM ) Total Marks: 1 Which one of following statement is true if intrinsic value of a security is higher then its current market price? Select correct option: The security is being undervalued The security is being overvalued The security is correctly valued None of given options Question # 5 of 15 ( Start time: 05:09:06 AM ) Total Marks: 1 Which of the following represents an unusually risky stock? Select correct option: Blue chip stock Growth stock Penny stock None of the given options for more contents visit http://groups.google.com/group/vuZs Question # 6 of 15 ( Start time: 05:09:23 AM ) Total Marks: 1 Fundamental analysis includes the evaluation of which of the following? Select correct option:

Quantitative and empirical data Qualitative and colonial data Qualitative and imperial data Quantitative and imperial data Question # 7 of 15 ( Start time: 05:09:43 AM ) Total Marks: 1 Which of the following is NOT a source of Return on Equity (ROE)? Select correct option: Return on assets Leverage Book value per share Sales per total assets Question # 8 of 15 ( Start time: 05:10:19 AM ) Total Marks: 1 Which of the following is defined as a stock whose price tends to move in the opposite direction from that of interest rates? Select correct option: Defensive stock Growth stock Value stock Interest sensitive stock Question # 9 of 15 ( Start time: 05:11:23 AM ) Total Marks: 1 Each division of the Standard Industrial Classification has several major industry groups, designated by which of the following codes? Select correct option: A uni-digit code A bilingual code A two-digit code

A tentative code Question # 10 of 15 ( Start time: 05:11:51 AM ) Total Marks: 1 Which of the following charts give the economic information on weekly or yearly basis? Select correct option: Line charts Bar charts Pie charts Symbol charts for more contents visit http://groups.google.com/group/vuZs Question # 11 of 15 ( Start time: 05:12:43 AM ) Total Marks: 1 Return on equity depends on the product of all of the following, EXCEPT: Select correct option: Total asset turnover Market value per share Profit margin on sales Financial leverage Ref: ROE = ROA × Leverage And ROA = Net income margin × Turnover Question # 12 of 15 ( Start time: 05:13:43 AM ) Total Marks: 1 Which function of capital market facilitates transfer of money from savers to borrowers? Select correct option: Fair pricing function Exchange function Economic function Continuous pricing function Reference

Question # 13 of 15 ( Start time: 05:13:59 AM ) Total Marks: 1 A technical analysis term pattern to describe a chart formation in which a stock's price rises to a peak and subsequently declines, then the price rises above the former peak and again declines. And finally, rises again, but not to the second peak and declines once more is known as: Select correct option: Head and shoulder Resistance and support Double ups Triangles Ref : This is the definition of Head and Shoulder pattern. The first and third peaks are shoulders, and the second peak forms the head. Question # 14 of 15 ( Start time: 05:14:31 AM ) Total Marks: 1 ABC Furniture has worth $51 million. What is the other term used for this? Select correct option: Book value Earning per share Market value Cost per share Question # 15 of 15 ( Start time: 05:14:56 AM ) Total Marks: 1 All of the following are the problems associated to the Dividend Discount Model, EXCEPT: Select correct option: This model need infinite stream of dividends This model has uncertain dividend stream This model must estimate future dividends This model requires constant earnings per share

Question # 1 of 15 ( Start time: 12:51:18 PM ) Total Marks: 1 Technical Analysis method that tries to pinpoint when a security's shares are being accumulated (being bought) or are being sold is known as. Select correct option: Relative strength index On Balance Volume Moving average None of the given options Question # 2 of 15 ( Start time: 12:52:35 PM ) Total Marks: 1 According to Dow Theory, secondary trend is a: Select correct option: Long term trend Short term trend Medium term trend

None of given options

Question # 3 of 15 ( Start time: 12:53:56 PM ) Total Marks: 1 All of the following are characteristics of stop orders EXCEPT: Select correct option: Protecting profits Minimizing losses Rapid execution It is seldom used by investors Question # 4 of 15 ( Start time: 12:54:40 PM ) Total Marks: 1 Which of the following prices can be different from the rate at which your shares are to be sold? Select correct option: Skimming price Consumer price Retail price Trigger price Question # 5 of 15 ( Start time: 12:55:54 PM ) Total Marks: 1 Derivatives are assets that include all of the following, EXCEPT: Select correct option: Future Option Forward Pay order

Question # 6 of 15 ( Start time: 12:56:44 PM ) Total Marks: 1 In which of the following cases resistance occurs? Select correct option: Inability to break below prior high Inability to break below prior low Inability to surpass prior high Inability to repair beyond prior low Question # 7 of 15 ( Start time: 12:58:11 PM ) Total Marks: 1 Which of the following includes fixed income securities? Select correct option: Bonds Shares Derivatives None of the given options Question # 8 of 15 ( Start time: 12:58:42 PM ) Total Marks: 1 Which of the following statements hold TRUE for ask price? Select correct option: It is the price at which a broker is willing to sell a certain security It is the price at which a broker is willing to buy a certain security It is the quoted price in an order to buy shares of a company It is the rate at which a dealer will buy the base currency Question # 9 of 15 ( Start time: 12:59:31 PM ) Total Marks: 1 Which of the following is the reason stock prices behave the way they do at resistance lines? Select correct option: Many investors want to buy at this price Market makers resist moving prices lower than this price Many investors want to sell at this price Market makers support prices at this level Question # 9 of 15 ( Start time: 12:59:31 PM ) Total Marks: 1 Which of the following is the reason stock prices behave the way they do at resistance lines? Select correct option: Many investors want to buy at this price Market makers resist moving prices lower than this price Many investors want to sell at this price Market makers support prices at this level Ref: When a stock's price rises to a level where demand decreases and owners begin to sell to lock in their profits, this creates the "ceiling" or resistance level.

Question # 10 of 15 ( Start time: 01:00:48 PM ) Total Marks: 1 An upward trend in share prices in a bar chart is represented by _______ color. Select correct option: White Black Red Blue Question # 12 of 15 ( Start time: 01:03:38 PM ) Total Marks: 1 Which of the following compares the magnitude of recent gains to recent losses in an attempt to determine overbought and oversold conditions of an asset? Select correct option: Moving Average Convergence/Divergence Relative Strength Index On Balance Volume Bollinger Bands Ref: Relative Strength Index - RSI

A technical momentum indicator that compares the magnitude of recent gains to recent losses in an attempt to determine overbought and oversold conditions of an asset. Question # 13 of 15 ( Start time: 01:04:46 PM ) Total Marks: 1 Which of the following lines in charts are the prices formed from the trend lines? Select correct option: Support lines Resistance lines Tangent lines Interval lines Note: We are not in a position to solve it either. If any member can solve it properly, Please post it on the group or at email address [email protected] Question # 14 of 15 ( Start time: 01:06:03 PM ) Total Marks: 1 The Islamabad Stock exchange is a (n): Select correct option: Over the counter market Third market Primary market Secondary market Question # 15 of 15 ( Start time: 01:06:40 PM ) Total Marks: 1 Bonds and preffered stock do not ensures ________.

Select correct option: A fixed income Security Ownership None of given options Question # 1 of 15 ( Start time: 01:12:53 PM ) Total Marks: 1 Which of the following function removes the fear of buying or selling at rip off price? Select correct option: Fair pricing function Economic function Exchange function Continuous pricing function Reference by Nomi: Ref: The fair price function removes the fear of buying or selling at rip off price. The greater number of participants and the more formal the marketplace, the greater is the likelihood that you are getting a fair price. Question # 2 of 15 ( Start time: 01:13:46 PM ) Total Marks: 1 A place where trading of listed securities in the NASDAQ market is performed is known as: Select correct option: Primary market Secondary market Third market Fourth market Ref:The trading of listed securities in the NASDAQ market is known as the third market. The third market may offer greater trading flexibility than the exchanges, particularly with regard to trading rules and fees. Question # 3 of 15 ( Start time: 01:14:56 PM ) Total Marks: 1 Which of the following is EXCLUDED from the reasons of investing? Select correct option: To obtain capital gain To supplement their money To experience an excitement To gather market information Question # 4 of 15 ( Start time: 01:16:24 PM ) Total Marks: 1 Which of the following statements hold TRUE for Fibonacci series? Select correct option:

It is an eight part series that left an indelible mark in developing strategy It ia a sequence of numbers where each successive number is the sum of the two previous numbers It is a sequence of numerical data points in successive order occurring in uniform intervals It is a series for which the ratio of each two consecutive terms is a constant function Question # 5 of 15 ( Start time: 01:17:49 PM ) Total Marks: 1 Which of the following is also called the Gordon’s Growth Model? Select correct option: Dividend discount model Binomial models finance Capital asset pricing model Black scholes model finance Question # 6 of 15 ( Start time: 01:18:43 PM ) Total Marks: 1 In the point and figure charts all of the following will be NOT be present, EXCEPT: Select correct option: Data points Lines Bars Zeros Note: We are not in a position to solve it either. If any member can solve it properly, Please post it on the group or at email address [email protected] Question # 8 of 15 ( Start time: 01:21:39 PM ) Total Marks: 1 Which of the following theories states that five waves move in the direction of the main trend followed by three corrective waves? Select correct option: Portfolio theory Valuation theory Elliott wave theory Chaos theory Question # 9 of 15 ( Start time: 01:22:33 PM ) Total Marks: 1 All of the following are the basic technical tools, EXCEPT: Select correct option: Recession Trend lines Indicators Cycles

Question # 10 of 15 ( Start time: 01:23:58 PM ) Total Marks: 1 What does the abbreviation RSI stands for? Select correct option: Repetitive String Instruments Relative Strength Index Rapid Succession Intrigues Review of Symbolic Inquests Question # 11 of 15 ( Start time: 01:25:28 PM ) Total Marks: 1 Companies that have capitalization amounts of more than $2 billion are known as _________. Select correct option: Small cap companies Mid cap companies Growth companies Large cap companies # 12 of 15 ( Start time: 01:26:37 PM ) Total Marks: 1 Which of the following shows brokerage fees charged by a stockbroker? Select correct option: Margin profit An insurance premium Transaction costs Capital expenditure Question # 13 of 15 ( Start time: 01:27:44 PM ) Total Marks: 1 Which of the following is the theories searching the patterns in randomness? Select correct option: Elliott wave theory Chaos theory Portfolio theory Valuation theory Ref:Chaos theory is the study of nonlinear dynamics, where seemingly random events are actually predictable from simple deterministic equations. Question # 14 of 15 ( Start time: 01:29:16 PM ) Total Marks: 1 Which of the following is NOT the type of moving averages? Select correct option: Exponential Density Simple Variable

Question # 15 of 15 ( Start time: 01:30:45 PM ) Total Marks: 1 Which of the following programs propagate the ethics? Select correct option: London Instruments Fiscal Attachment Laurel Immigration Fairness Analysis Low Income Financial Association Licensed International Financial Analyst Ref: The Licensed International Financial Analyst (LIFA) designation attempts to help candidates attain higher levels of professionalism and ethics in the global industry of investment management and analysis