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Thread: FIN630 Investment Analysis & Portfolio Management Spring 2009

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    28 FIN630 Investment Analysis & Portfolio Management Spring 2009

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    FINALTERM EXAMINATION
    Spring 2009
    FIN630- Investment Analysis & Portfolio Management

    Marks: 81

    Question No: 1 ( Marks: 1 ) - Please choose one
    The price at which a security dealer sells a security is known as:

    • Bid price
    • Market price
    • Offer price
    • Order price


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    Question No: 2 ( Marks: 1 ) - Please choose one
    __________ is a temporary restriction on program trading in a particular security or
    market, usually to reduce dramatic price movements.

    • SuperDot
    • NYSE direct
    • Trading curb
    • Ticker tape


    Question No: 3 ( Marks: 1 ) - Please choose one
    A brokerage account in which broker lends the customer cash to purchase securities is
    called:

    • Margin account
    • Cash account
    • IRA account
    • Option account


    Question No: 4 ( Marks: 1 ) - Please choose one
    The Dow theory use _______ to follow three major types of market movements.

    • Charting
    • Key indicators
    • Fundamental analysis
    • Technical analysis


    Question No: 5 ( Marks: 1 ) - Please choose one
    Which of the following is defined as a procedure for valuing the price of a stock by using
    predicted dividends and discounting them back to present value?

    • Relative Strength Index
    • On Balance Volume
    • Dividend Discount Model
    • Bollinger bands


    Question No: 6 ( Marks: 1 ) - Please choose one
    When inflation and interest rates are low, Price per Earning (P/E) ratio tend to be:

    • High
    • Low
    • Minimum
    • Average


    Question No: 7 ( Marks: 1 ) - Please choose one
    Which of the following is EXCLUDED from Porter s competitive factors?

    • Substitute products or services
    • Changes in the economy
    • Bargaining power of buyers
    • Rivalry between existing competitors


    Question No: 8 ( Marks: 1 ) - Please choose one
    Which of the following is a basket of stocks that tracks a particular sector, investment
    style, geographical area, or the market as a whole?

    • Exchange traded fund
    • Open-end fund
    • Closed-end fund
    • Unit investment trust


    Question No: 9 ( Marks: 1 ) - Please choose one
    If an investor wants to avoid transaction costs, which of the following strategy should he
    select?

    • Active strategy
    • Defensive strategy
    • Buy and hold strategy
    • Sector rotation


    Question No: 10 ( Marks: 1 ) - Please choose one
    Which of the following is the annual net income from an average investment expressed as
    a percentage of average amount invested?

    • Net asset value
    • Return on equity
    • Return on average investment (ROI)
    • Discounted value


    Question No: 11 ( Marks: 1 ) - Please choose one
    Which of the following would justify an investor preference for cash dividends?

    • Illusion of control
    • Anchoring
    • Mental accounting
    • Asset segregation


    Question No: 12 ( Marks: 1 ) - Please choose one
    Which of the following is NOT a "value-weighted" index?

    • NYSE Composite Index
    • Dow-Jones Industrial Average
    • NASDAQ Composite Index
    • Standard & Poor's 500 Index


    Question No: 13 ( Marks: 1 ) - Please choose one
    Which of the following focuses on how investors interpret and act on information to
    make informed investment decisions?

    • Dividend discount model
    • Efficient market hypothesis
    • Dow Theory
    • Behavioral finance


    Question No: 14 ( Marks: 1 ) - Please choose one
    Which of the following is expressed as index number relative to a base index value of 10?

    • Dow-Jones Industrial Average
    • NASDAQ Composite Index
    • Standard & Poor's 500 Index
    • NYSE Composite Index


    Question No: 15 ( Marks: 1 ) - Please choose one
    Which of the following is NOT included in money market securities?

    • Treasury Bill
    • Certificate of deposit
    • Commercial paper
    • Future


    Question No: 16 ( Marks: 1 ) - Please choose one
    Which of the following is an example of a non-marketable security?

    • Treasury bill
    • Negotiated CD
    • U.S. Government savings bond
    • Banker s acceptance


    Question No: 17 ( Marks: 1 ) - Please choose one
    Which of the following statement is TRUE about yield to maturity?

    • Yield to maturity is inversely related to bond price
    • Yield to maturity is always less than the yield to call
    • Yield to maturity will be less than the current yield
    • Yield to maturity tends to fall with a rise in duration


    Question No: 18 ( Marks: 1 ) - Please choose one
    Which of the following statement is TRUE about yield to maturity?

    • Yield to maturity is inversely related to bond price
    • Yield to maturity is always less than the yield to call
    • Yield to maturity will be less than the current yield for bonds purchased at a
    • discount
    • Yield to maturity tends to fall with a rise in duration


    Question No: 19 ( Marks: 1 ) - Please choose one
    Which of the following statement is TRUE regarding bond prices?

    • Bond prices are expressed as a percentage of discounted value
    • Bond prices are expressed as a percentage of par value
    • Bond prices are expressed as a percentage of future value
    • Bond prices are expressed as a percentage of intrinsic value



    Question No: 20 ( Marks: 1 ) - Please choose one
    The value of the bond is NOT directly tied to the value of which of the following assets?

    • Real assets of the business
    • Liquid assets of the business
    • Fixed assets of the business
    • Long term assets of the business


    Question No: 21 ( Marks: 1 ) - Please choose one
    Which of the following is known as speculative bond?

    • Government bond
    • Municipal bond
    • Sovereign bond
    • Junk bond


    Question No: 22 ( Marks: 1 ) - Please choose one
    Bond horizon premium is the difference between which of the following types of
    securities?

    • Long- and short-term government securities
    • Stock and risk-free returns
    • Equity and shot-term government securities
    • None of the given options


    Question No: 23 ( Marks: 1 ) - Please choose one
    The market value of a company stock has declined due to competition in the market. The
    investors of this company are faced with what type of risk?

    • Financial risk
    • Market risk
    • Interest rate risk
    • Business risk


    Question No: 24 ( Marks: 1 ) - Please choose one
    Which of the following bond redeems the principal amount at maturity and pays no
    periodic income?

    • Municipal bond
    • Corporate bond
    • Junk bond
    • Zero coupon bond


    Question No: 25 ( Marks: 1 ) - Please choose one
    Diversifying without looking at relevant investment characteristics is known as:

    • Random diversification
    • Non-random diversification
    • Horizontal diversification
    • Vertical diversification


    Question No: 26 ( Marks: 1 ) - Please choose one
    Which of the following statement is FALSE about efficient portfolio?

    • An efficient portfolio provides greatest expected return for a given level of risk
    • Investors can identify efficient portfolios by specifying an expected portfolio
    • return
    • Investors can identify efficient portfolios by maximizing the portfolio-risk
    • Efficient portfolio risks are measured by the standard deviation


    Question No: 27 ( Marks: 1 ) - Please choose one
    Which of the following statement is CORRECT?

    • One hundred stocks are required to eliminate the bulk of the diversifiable risk from
    • a portfolio
    • Standard deviation measures diversifiable risk
    • The number of stocks needed to highly diversify a portfolio is constant over time
    • A fully diversified portfolio still contains undiversifiable risk


    Question No: 28 ( Marks: 1 ) - Please choose one
    Which of the following statement is TRUE regarding efficient frontier?

    • It is a downward sloping curved line
    • It is an upward sloping straight line
    • It is a downward sloping straight line
    • It is an upward sloping curved line


    Question No: 29 ( Marks: 1 ) - Please choose one
    When beta of a security >1.0, it indicates that:

    • 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


    Question No: 30 ( Marks: 1 ) - Please choose one
    A bond will sell at a discount when __________.

    • The coupon rate is greater than the current yield and the current yield is greater
    • than yield to maturity
    • The coupon rate is greater than yield to maturity
    • The coupon rate is less than the current yield and the current yield is greater than
    • the yield to maturity
    • The coupon rate is less than the current yield and the current yield is less than
    • yield to maturity


    Question No: 31 ( Marks: 1 ) - Please choose one
    The _________ is a measure of the average rate of return an investor will earn if the
    investor buys the bond now and holds until maturity.

    • Current yield
    • Dividend yield
    • P/E ratio
    • Yield to maturity


    Question No: 32 ( Marks: 1 ) - Please choose one
    Nominal rate of interest
    inflation is equal to which of the following?

    • Interest amount
    • Nominal interest
    • Risk premium
    • Real rate of interest


    Question No: 33 ( Marks: 1 ) - Please choose one
    The APT was developed in 1976 by ____________.

    • Lintner
    • Modigliani and Miller
    • Ross
    • Sharpe


    Question No: 34 ( Marks: 1 ) - Please choose one
    Which of the following is a financial instrument whose return is derived from the return
    on another instrument?

    • Derivative security
    • Fixed income security
    • Equity security
    • Money market security


    Question No: 35 ( Marks: 1 ) - Please choose one
    Which of the following is a derivative in which one party exchanges a stream of interest
    payments for another party's stream of cash flows?

    • Foreign currency swap
    • Total return swap
    • Credit default swap
    • Interest rate swap


    Question No: 36 ( Marks: 1 ) - Please choose one
    Which of the following is a commodity/security market in which goods are sold and
    delivered immediately?

    • Spot market
    • Forward market
    • Laissez-faire market
    • Future market


    Question No: 37 ( Marks: 1 ) - Please choose one
    Which of the following statement is FALSE regarding forward contracts?

    • Forward contracts are traded on over- the-counter market
    • There is no surety/guarantee of the trade settlement
    • There are no pre determined standards in future contracts
    • Forward contracts involve a process known as marking to market


    Question No: 38 ( Marks: 1 ) - Please choose one
    Which of the following refers to the simultaneous purchase and sale in two markets so
    that the selling price is higher than the buying price by more than the transaction cost?

    • Hedging
    • Arbitrage
    • Speculation
    • Brokerage


    Question No: 39 ( Marks: 1 ) - Please choose one
    Which of the following statement is FALSE regarding short hedge?

    • The value of short hedge contracts is equal the value of the stock portfolio
    • A short futures hedge is appropriate when you know you will purchase an asset in
    • the future and want to lock in the price
    • A short futures hedge is appropriate when you know you will sell an asset in the
    • future & want to lock in the price
    • A short hedge reduces or possibly eliminates the risk taken in a long position


    Question No: 40 ( Marks: 1 ) - Please choose one
    S & P 500 future stock index closes at $ 300 and spot price is $ 325. What is its basis?

    • -25
    • -30
    • 25
    • 30


    Question No: 41 ( Marks: 1 ) - Please choose one
    Secondary trend in Dow Theory is known as __________.

    • Triangle
    • Wave
    • Tide
    • Rounded bottom


    Question No: 42 ( Marks: 1 ) - Please choose one
    Which of the following is TRUE about profitability ratios?

    • Profitability ratios are designed to measure a business's ability to generate earnings
    • Profitability ratios are designed to measure the quality of a company's operations
    • Profitability ratios are designed to measure a company's ability to cover its shortterm
    • obligations
    • Profitability ratios are designed to measure the percentage of earnings paid to
    • shareholders


    Question No: 43 ( Marks: 3 )
    Define covariance.What does covariance shows?

    Question No: 44 ( Marks: 3 )
    What is meant by Interest rate tradeoff"?

    Question No: 45 ( Marks: 3 )
    What is the difference between the spot market and the futures market?

    Question No: 46 ( Marks: 5 )
    Describe the general types of risk in detail.

    Question No: 47 ( Marks: 5 )
    Describe why an investor might purchase a call.

    Question No: 48 ( Marks: 10 )
    What is meant by expected return? Describe how expected return of a portfolio is
    calculated.

    Question No: 49 ( Marks: 10 )
    Do you agree with the following statements? Justify your answer in each case with proper
    reasoning?

    a) Stock index acts as effective barometer, which gauge the prevalent market
    sentiments and behaviors.
    b) Stock market move randomly.
    Last edited by viki; 07-16-2010 at 10:19 PM.
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