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FINALTERM EXAMINATION
Spring 2009
FIN630- Investment Analysis & Portfolio Management
Marks: 81
Question No: 1 ( Marks: 1 ) - Please choose one
Shares of McDonald Corporation are an example of a (n):
- Standardized financial instrument
- Non-standardized financial instrument since their prices can differ over time
- Standardized financial liability instrument
- Open-end investment
Question No: 2 ( Marks: 1 ) - Please choose one
Which of the following includes fixed income securities?
- Bonds
- Shares
- Derivatives
- Options
Question No: 3 ( Marks: 1 ) - Please choose one
Companies that have capitalization amounts of less than $500 million are known as
_________.
- Small cap companies
- Mid cap companies
- Growth companies
- Large cap companies
Question No: 4 ( Marks: 1 ) - Please choose one
In bar chart, which color indicates share prices are going down?
- Blue
- Black
- White
- Red
Question No: 5 ( Marks: 1 ) - Please choose one
What will be the resulting figure,when gross profit is divided by net sales?
- Gross margin
- Operating margin
- Net margin
- Profit margin
Question No: 6 ( Marks: 1 ) - Please choose one
In bottom-up approach of fundamental analysis, investors begin their analysis with:
- Industry
- Economy
- Market
- Company
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 defined as the gradual loss in value of equipment and other
tangible assets over the course of its useful life?
- Appreciation
- Depreciation
- Revaluation
- Amortization
Question No: 9 ( Marks: 1 ) - Please choose one
On which of the following financial statements, revenues and expenses can be found?
- Balance sheet
- Income statement
- Statement of cash flows
- Statement of changes in equity
Question No: 10 ( Marks: 1 ) - Please choose one
Which of the following is an example of brokerage fee charged by a stockbroker?
- Margin profit
- Insurance premium
- Transaction cost
- Capital expenditure
Question No: 11 ( Marks: 1 ) - Please choose one
Technical analysis is NOT applicable in which form of efficient market hypothesis?
- Weak form efficiency
- Semi-strong form efficiency
- Strong-form efficiency
- Weak and strong form of efficiency
Question No: 12 ( Marks: 1 ) - Please choose one
Which of the following suggests that people express a different degree of emotion
towards gains than towards losses?
- Prospect theory
- Illusion of control
- Anchoring
- Loss aversion
Question No: 13 ( Marks: 1 ) - Please choose one
LSE 25 index was last reconstituted on _______ in line with the regular review policy.
- 20th December, 2002
- 1st July, 2006
- 25th July, 2007
- 1st July, 2008
Question No: 14 ( Marks: 1 ) - Please choose one
Which of the following is considered to be a characteristic of an equity security?
- Fixed income
- Debt
- Price
- Ownership
Question No: 15 ( 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
Sponsored Links
Question No: 16 ( Marks: 1 ) - Please choose one
The yield to maturity is equal to the realized compound return if all coupon interest
payments:
- Are not reinvested
- Are reinvested at the market rate
- Are reinvested at the bond's coupon rate
- Are reinvested at the bond's yield to maturity
Question No: 17 ( Marks: 1 ) - Please choose one
Which of the following measures the sensitivity of an asset's price to interest rate
movements, expressed as a number of years?
- Duration
- Yield to maturity
- Convexity
- Immunization
Question No: 18 ( Marks: 1 ) - Please choose one
Which of the following statement is FALSE regarding bond duration?
- 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
Question No: 19 ( Marks: 1 ) - Please choose one
Which of the following statement is TRUE about duration of a bond?
- It is less than maturity for bonds paying coupon interest
- It is directly related to coupon yield
- It decreases with maturity
- It is greater than maturity for zero coupon bonds
Question No: 20 ( Marks: 1 ) - Please choose one
Which of the following statement is FALSE regarding bond duration?
- Bond duration is inversely related to coupon rate
- Duration of a zero-coupon bond equals its time to maturity
- Holding maturity constant, a bond s duration is higher when the coupon rate is
- lower
- Duration is longer than maturity for all bonds except zero coupon bonds
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
Which of the following is referred to as risk-free bond?
- Government bond
- Municipal bond
- Sovereign bond
- Junk bond
Question No: 23 ( Marks: 1 ) - Please choose one
Diversification is the only way to protect investors from:
- Market risk
- Nonsystematic risk
- Systematic risk
- General risk
Question No: 24 ( Marks: 1 ) - Please choose one
The excess return that an individual stock or the overall stock market provides over a
risk-free rate is known as _____________.
- Equity risk premium
- Bond horizon premium
- Share premium
- Liquidity premium
Question No: 25 ( Marks: 1 ) - Please choose one
Systematic risk contains all of the following components EXCEPT:
- Purchasing power risk
- Market risk
- Business risk
- Interest rate risk
Question No: 26 ( 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: 27 ( Marks: 1 ) - Please choose one
Which of the following measures deviation of returns from the mean?
- Variance
- Standard deviation
- Geometric mean
- Correlation coefficient
Question No: 28 ( Marks: 1 ) - Please choose one
Which of the following statement is FALSE?
- Each portfolio asset has a weight which represents the percent of the total portfolio
- value
- Portfolio risk is not a weighted average of the risk of individual securities in the
- portfolio
- Portfolio risk is measured by variance or standard deviation of the portfolio s
- return
- None of the given options
Question No: 29 ( Marks: 1 ) - Please choose one
Which of the following is defined as a line that graphs the systematic, or market, risk
versus return of the whole market at a certain time and shows all risky marketable
securities?
- Security market line
- Capital market line
- Budget line
- Value line
Question No: 30 ( Marks: 1 ) - Please choose one
What is the other name used for optimal portfolio?
- Business portfolio
- Market portfolio
- Mutual fund portfolio
- Systematic portfolio
Question No: 31 ( Marks: 1 ) - Please choose one
Which of the following is FALSE regarding separation theorem?
- The firm's investment decision is independent of the preferences of the owner
- The investment decision is dependent on financial decision
- Risky portfolios are not tailored to each individual s taste
- It is possible to separate investment decisions from financial decisions
Question No: 32 ( Marks: 1 ) - Please choose one
Which of the following is a measure of securities volatility or systematic risk in
comparison to the market as a whole?
- Beta
- Return on equity
- Liquidity
- Rate of return
Question No: 33 ( Marks: 1 ) - Please choose one
A single-index model uses __________ as a proxy for the systematic risk factor.
- A market index, such as the S&P 500
- The current account deficit
- The growth rate in GNP
- The unemployment rate
Question No: 34 ( Marks: 1 ) - Please choose one
The concept that two identical assets cannot be sold at different prices is associated with
which of the following theory?
- Prospect Theory
- Modern Portfolio Theory
- Dow Theory
- Arbitrage Pricing Theory
Question No: 35 ( Marks: 1 ) - Please choose one
Which of the following is NOT an anomaly related to efficient market hypothesis?
- Low PE effect
- The small firm effect
- The neglected firm effect
- Common size effect
Question No: 36 ( Marks: 1 ) - Please choose one
Which of the following is defined as an obligatory agreement to transact in the future,
based on future price expectations?
- Forward contract
- Futures contract
- Annuity contract
- Spread contract
Question No: 37 ( Marks: 1 ) - Please choose one
Which of the following is defined as a user of the market, who enters into futures contract
to manage the risk of adverse price fluctuation in respect of his existing or future asset?
- Speculator
- Broker
- Hedger
- Arbitrager
Question No: 38 ( 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: 39 ( Marks: 1 ) - Please choose one
In which of the following situation, the writers of call options expect profit?
- When the stock price declines
- When the stock prices remain the same
- When increase in stock price is less than premium
- All of the given options
Question No: 40 ( Marks: 1 ) - Please choose one
Which of the following is defined as an option whose payoff depends on whether or not
the underlying asset has reached or exceeded a predetermined price?
- Barrier option
- Forward start option
- Over-the-counter options
- Compound options
Question No: 41 ( Marks: 1 ) - Please choose one
An over-the-counter market can be defined as:
- A network of dealers connected electronically
- An illegal secondary market for stocks used primarily by those attempting to
- evade taxes
- A primary market for stocks
- A form of centralized exchange
Question No: 42 ( Marks: 1 ) - Please choose one
Which of the following is specifically a measure of a volatility of the stock or mutual
fund?
- Beta
- Standard deviation
- Covariance
- None of the given options
Question No: 43 ( Marks: 3 )
What is the relationship between risk and return?
Question No: 44 ( Marks: 3 )
Define a zero coupon bond?
Question No: 45 ( Marks: 3 )
Describe how derivatives are used as a risk management tool.
Question No: 46 ( Marks: 5 )
Bonds are 100% risk free investments. Do you agree with this statement? Justify your
answer in either case.
Question No: 47 ( Marks: 5 )
The key to maximize profits is diversification . Do you agree with this statement?
Question No: 48 ( Marks: 10 )
Explain the indicators used to measure the fluctuations in equity market.
Question No: 49 ( Marks: 10 )
What is diversification? Describe the impact of diversification on Risk?
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