MCQ on Security Analysis and Portfolio Management

1- We can compare the price earnings ratio of a market to its historical average
to make judgement about, whether market is:-
(A) Under valued
(B) Over valued
(C) Both (A) and (B)
(D) None of the above
 

2- The possibility of reduction of risk through the construction of a portfolio depends on the value of
________ between the two assets.
(A) Correlation coefficient
(B) Time
(C) Difference
(D) None of the above
 

3- When a firm can grow net profits by issuing equity, the expected growth rate in net profits is
determined by:-
(A) Price earnings ratio X return on equity
(B) Equity reinvestment rate X return on equity
(C) Both (A) and (B)
(D) None of the above
 

4- What is a load fund?

(A) Fund charging a fee for entry
(B) Fund charging a fee for exit
(C) Fund charging a fee for entry and exit
(D) None of the above
 

5- Investment is a risk free investment when:-

(A) Actual return < expected return
(B) Actual return > expected return
(C) Actual return = expected return
(D) None of the above
 

6- Debt instruments that have a maturity period of more than one year are called as:-
(A) Equity shares
(B) Bonds
(C) Debentures
(D) Dividend
 

7- What is (are) the feature(s) of point and figure charts?

(A) Charts are constructed using a combination of X’s and O’s known as boxes
(B) X’s show that the prices are moving up
(C) O’s show that the prices are moving down
(D) All of the above
8- The firm issuing bonds operating sinking fund and repurchases bonds either:-
(A) Calling in a certain number of bonds by lot
(B) Buying bonds in the open market
(C) Buying bonds issued to banks and financial institutions
(D) All of the above
 

9- Which of these is a short-maturity debt issue?

(A) Money market funds and gilts
(B) Fixed Deposits
(C) Bonds
(D) None of the above
 

10- The feature(s) of bond is (are):-

(A) Collateral
(B) Call provision
(C) Sinking fund and protective covenants
(D) All of the above
 

11- Dow Jones transportation average was previously known as ________.

(A) Rail average
(B) Net average
(C) Train average
(D) None of the above
 

12- Under futures market ________ process provides for collection of losses that have already occurred.
(A) The monthly settlement
(B) The weekly settlement
(C) The daily settlement
(D) None of the above
 

ANSWERS:
1-(C), 2-(A), 3-(B), 4-(C), 5-(C), 6-(B), 7-(D), 8-(D), 9-(A), 10-(D), 11-(A), 12-(C)

13- The computation of return on a bond involves considering:-

(A) The entire sequence of cash flows

(B) The timing of cash flows
(C) Calculating the internal rate of return
(D) All of the above
 

14- What is (are) the feature(s) of line charts?

(A) It connects closing prices from one period to the next
(B) It is ideal for securities with no high or low price data
(C) Both (A) and (B)
(D) None of the above
 

15- Explain what is (are) leverage ratio(s)?

(A) Debt equity ratio and interest coverage ratio and DSCR are important leverage ratios
(B) Debt is riskier source of finance as it entails fixed outgo of periodic payments
(C) Help in assessing the risk arising using the debt capital
(D) All of the above
 

16- What is Support level?

(A) A point where the prices become relatively attractive for buyers
(B) Market resistance to a price fall
(C) Both (A) and (B)
(D) None of the above
 

17- The investor in bonds receives income from:-

(A) Interest payments at coupon rates
(B) Capital gain/loss arising out of the sale of the bond
(C) Redemption of the bond of the issuer at a contracted value
(D) All of the above
 

18- The Dow theory states that there are simultaneously ________ movements in the stock market.
(A) Two
(B) Three
(C) Four
(D) Five
 

19- Turnover ratios
(A) Help measure the efficiency of utilization of assets
(B) Debt / Equity
(C) Highly liquid assets
(D) Similar to debtors turnover
 

20- Quick assets
(A) Help measure the efficiency of utilization of assets
(B) Debt / Equity
(C) Highly liquid assets
(D) Similar to debtors turnover
 

21- Under the options contract ________ gives the holder the right, but not the obligation to buy or sell
the underlying instrument only on the expiry date.
(A) American option
(B) European option
(C) Asian option
(D) African option
 

22-________ ratio indicates the margin available after meeting the manufacturing expenses.
(A) Gross Profit margin
(B) Gross Profit
(C) Gross margin
(D) None of the above

 
23- Secondary reactions occurs because of ________ which arise in the market as a result of over
optimism and over pessimism.
(A) Technical distortions
(B) Bearish trends
(C) Both (A) and (B)
(D) None of the above

24- A market that is trading at a Price earning ratio that is much higher than its
historical norms is considered to be:-

(A) Over valued

(B) Under valued
(C) Under-valued and over valued
(D) None of the above
 

25- The average historical growth rate can be calculated as:-

(A) Arithmetic average
(B) Geometric average
(C) Both (A) and (B)
(D) None of the above
 

ANSWERS:
13-(D), 14-(C), 15-(D), 16-(A), 17-(D), 18-(B), 19-(A), 20-(C), 21-(B), 22-(A), 23-(A), 24-(A), 25-(C)