Investment Management MCQ Questions and Answers Part – 3

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Investment Management MCQ Questions and Answers Part – 1

Investment Management MCQ Questions and Answers Part – 2

Investment Management MCQ Questions and Answers Part – 3

101. The sustainable growth rate of a firm can be calculated as the product of the_________.
A. return on assets and the return on equity.
B. dividend payout ratio and leverage.
C. retention rate and the return on equity.
D. net profit margin and total sales.
ANSWER: D
102. One way to obtain earnings forecasts is the mechanical procedure known as___________.
A. cross-reference analysis.
B. exponential trending.
C. time series analysis.
D. data mining.
ANSWER: C
103. I modern investment analysis, the risk for a stock is related to its_______________.
A. leverage factor.
B. standard deviation.
C. beta coefficient.
D. coefficient of variation.
ANSWER: A
104. _______ uses a computer program in an attempt to imitate the brain in analyzing securities.
A. Decision trees.
B. Program trading.
C. Day traders.
D. Neural networks.
ANSWER: D
105. The difference between the cash price and the futures price on the same asset or commodity is known as the________________.
A. basis.
B. spread.
C. yield spread.
D. premium.
ANSWER: C
106. Speculators in the futures markets_____________.
A. make the market more volatile.
B. contribute liquidity to the market.
C. engage mainly in short sales.
D. serve no real economic function.
ANSWER: C
107. A major difference between individual and institutional investors is their very different_______.
A. approaches to market analysis.
B. evaluations of return.
C. time horizons.
D. types of securities held in their portfolios.
ANSWER: A
108. __________ are a way U. S. investor can invest in foreign companies.
A. ADRs
B. IRAs
C. SDRs
D. GNMAs
ANSWER: A
109. Investors can normally afford to assume larger risks in the ____ phase of the life- cycle.
A. accumulation.
B. consolidation.
C. spending.
D. gifting.
ANSWER: B
110. __________ is the most important investment decision because it determines the risk-return
characteristics of the portfolio.
A. Hedging.
B. Market timing.
C. Performance measurement.
D. Asset allocation.
ANSWER: A
111. A model for optimizing the selection of securities is the ______ model.
A. Miller-Orr.
B. Black-Sholes.
C. Markowitz.
D. Gordon.
ANSWER: C
112. The Markowitz model identifies the efficient set of portfolios, which offers the ____________.
A. highest return for any given level of risk or the lowest risk for any given level of return.
B. least-risk portfolio for a conservative, middle-aged investor.
C. long-run approach to wealth accumulation for a young investor.
D. risk-free alternative for risk-averse investors.
ANSWER: D
113. Which of the following is not normally one of the reasons for a change in an investor’s
circumstances?
A. Change in market conditions.
B. Change in legal considerations.
C. Change in time horizon.
D. Change in tax circumstances.
ANSWER: A
114. The material wealth of a society is equal to the sum of _________.
A. all financial assets.
B. all real assets.
C. all financial and real assets.
D. all physical assets.
ANSWER: C
115. _______ are financial assets.
A. Bonds
B. Machines.
C. Stocks.
D. Real estate.
ANSWER: B
116. _______ is example of financial intermediaries.
A. Commercial banks.
B. Insurance companies.
C. Insurance companies.
D. Credit unions.
ANSWER: C
117. Financial intermediaries exist because small investors cannot efficiently ________.
A. diversify their portfolios.
B. gather all relevant information.
C. assess the credit risk of borrowers.
D. advertise for needed investments.
ANSWER: D
118. Firms that specialize in helping companies raise capital by selling securities are called ________.
A. commercial banks.
B. investment banks.
C. savings banks.
D. credit unions.
ANSWER: D
119. Financial assets ______.
A. directly contribute to the country’s productive capacity.
B. indirectly to the country’s productive capacity.
C. contribute to the country’s productive capacity both directly and indirectly.
D. do not contribute to the country’s productive capacity either directly or indirectly.
ANSWER: A
120. Investment bankers perform the following role ___________.
A. market new stock and bond issues for firms.
B. provide advice to the firms as to market conditions, price, etc.
C. design securities with desirable properties.
D. all of the above.
ANSWER: B
121. Investors seeking to avoid actively managing their portfolios will prefer which of the following assets?
A. Common stock.
B. Commercial bank deposits.
C. Financial futures.
D. Real estate.
ANSWER: B
122. Which of the following short term securities is inappropriate for an individual, desiring funds for financial emergencies?
A. treasury bills.
B. certificates of deposit.
C. financial futures.
D. savings accounts.
ANSWER: C
123. Asset allocation affects the investor’s return by______________.
A. altering the returns on individual assets.
B. weighting the portfolio return by the allocation.
C. assuring diversification.
D. increasing the investor’s use of mutual funds.
ANSWER: B
124. Diversification reduces
A. Interest rate risk
B. Market risk
C. Unique risk
D. Inflation risk
ANSWER: C
125. Unsystematic risk is______.
A. the risk associated with movements in security prices.
B. reduced through diversification.
C. higher when interest rates rise.
D. the risk of loss of purchasing power.
ANSWER: A
126. The expected return on an investment in stock is___________.
A. the expected dividend payments.
B. the anticipated capital gains.
C. the sum of expected dividends and capital gains.
D. less than the realized return.
ANSWER: D
127. If the dispersion around a security’s return is larger__________________.
A. the expected return is smaller.
B. the standard deviation is smaller.
C. the stock’s price is higher.
D. the security’s risk is higher.
ANSWER: A
128. Another name for stockbrokers is________________.
A. specialists.
B. registered representatives.
C. security analysts.
D. portfolio managers.
ANSWER: B
129. Investment professionals whose jobs may depend on their performance relative to the market are the_______________.
A. registered representatives.
B. security analysts.
C. investment bankers.
D. portfolio managers.
ANSWER: A
130. One reason for the declining importance of pension funds is the_______________.
A. decrease in pension benefits for workers.
B. downsizing of U.S. companies.
C. large number of conversions into self-directed plans.
D. increasing number of federal regulations that restrict pension fund portfolios.
ANSWER: B
131. Most financial advisors are registered with the Securities and Exchange Commission
as____________________.
A. registered representatives.
B. registered investor advisors.
C. registered financial planners.
D. registered securities consultants.
ANSWER: C
132. Underlying all investments is the tradeoff between_________
A. expected return and actual return
B. low risk and high risk
C. actual return and high risk
D. expected return and risk.
ANSWER: D
133. Mumbai stock exchange was recognized on a permanent basis in___________.
A. 1950.
B. 1956.
C. 1957.
D. 1965.
ANSWER: C
134. Over the Counter Exchange of India was started after the role model of_________.
A. NASAQ.
B. JASAQ.
C. NASDAQ& JASDAQ.
D. NSE.
ANSWER: C
135. The Accounting period cycle of NSE is___________.
A. Wednesday to next Tuesday.
B. Tuesday to next Wednesday.
C. Monday to next Friday.
D. Wednesday to next Wednesday.
ANSWER: A
136. The growth in book value per share shows the_____________.
A. rise in share price.
B. increase in physical asset of the firm.
C. increase in net worth.
D. growth in reserves.
ANSWER: D
137. International investing is_______________________.
A. is only practical for institutional investors.
B. increases the overall risk of a stock portfolio.
C. always leads to higher returns than a domestic portfolio.
D. can reduce risk due to increased diversification.
ANSWER: C
138. Mr. A is a daring portfolio manager. He wants to increase the return in his portfolio. He should choose stocks from_______________.
A. defensive industry.
B. industry at a growth stage.
C. industry in the maturity period.
D. industry with more export potential.
ANSWER: B
139. ________________ factors lead to activity of stock market.
A. Money supply.
B. Per capita income.
C. Unemployment rate.
D. Manufacturing and Trade.
ANSWER: A
140. in the weekly efficient market, the stock price reflects,
A. the company’s financial performance
B. the past price of the scrip
C. the demand for the scrip
D. the past price and traded volumes
ANSWER: D
141. one of the statements given below provides evidence for the semi-strongly efficient form.
A. Low P/E ratio effect
B. The size effect
C. Effect on the stock split
D. Weekend effect
ANSWER: C
142. Investment professionals whose jobs may depend on their performance relative to the market are
the________________.
A. registered representatives
B. security analysts
C. investment bankers
D. portfolio managers.
ANSWER: A
143. A growth industry is defined as ____________.
A. an industry with 15% rate of growth per annum.
B. an industry where demand for its product is growing.
C. an industry with high capital investment.
D. an industry with average growth higher than the growth of the economy.
ANSWER: D
144. In BSE shares are divided into_______________.
A. two categories.
B. three categories.
C. four categories.
D. five categories.
ANSWER: B
145. _______ are examples of financial intermediaries.
A. Commercial banks
B. Insurance companies
C. Investment companies
D. All of the above
ANSWER: D
146. The largest single institutional owner of common stocks is_______________.
A. mutual funds.
B. insurance companies.
C. pension funds.
D. commercial banks.
ANSWER: D
147. The value of bond depends on ____________.
A. the coupon rate.
B. years to maturity.
C. expected yield to maturity.
D. all the above.
ANSWER: D
148. _________ is equal to (common shareholders’ equity/common shares outstanding).
A. book value per share.
B. liquidation value per share.
C. market value per share.
D. Tobin’s Q.
ANSWER: A
149. Corner portfolio are calculated where a
A. Security enters
B. Security leaves
C. Security enters or leave
D. Security with high extreme value enters
ANSWER: C
150. The relationship between potential unsystematic risk and reward is given by
A. Excess return to beta ration
B. Excess return to security’s standard deviation ratio
C. Excess return to security’s variance ratio
D. Excess return to beta square ratio
ANSWER: C

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Author and Assistant Professor in Finance, Ardent fan of Arsenal FC. Always believe "The only good is knowledge and the only evil is ignorance - Socrates"