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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/Stockholders 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 companys 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 Gordons 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 & Poors Composite Index is composed of how many large firm stocks?
Select correct option:

250
500
750
1000

REF: Standard & Poors 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 investors 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 As Beta =+2.0 then that Share is Twice as risky (or volatile) as the KSE
Market
If Share Bs Beta = +1.0 then that Share is Exactly as risky (or volatile) as the KSE
Market
If Share Cs 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 portfolios numerous other assets systematic
risk of investment is the best?
Select correct option:

Treynor reward-to-volatility ratio
Jensen's differential return ratio
Jennets 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 firms
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 bonds 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 owners
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 Owners 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
vuzshelp@gmail.com
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 Poors 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 Owners 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 owners 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
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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

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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 vuZshelp@gmail.com

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 Gordons 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 vuZshelp@gmail.com

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