School of Distance Education

UNIVERSITY OF CALICUT
School of Distance Education
III Semester M.Com 2019 Admn
INVESTMENT MANAGEMENT
Multiple Choice Questions
1. Risk of two securities with different expected return can be compared with:
a) Coefficient of variation
b) Standard deviation of securities
c) Variance of Securities
d) None of the above
2. A portfolio having two risky securities can be turned risk less if
a) The securities are completely positively correlated
b) If the correlation ranges between zero and one
c) The securities are completely negatively correlated
d) None of the above.
3. Efficient portfolios can be defined as those portfolios which for a given level of risk
provides
a) Maximum return
b) Average return
c) Minimum return
d) None of the above
4. Capital market line is:
a) Capital allocation line of a market portfolio
b) Capital allocation line of a risk free asset
c) Both a and b
d) None of the above
5. CAPM accounts for:
a) Unsystematic risk
b) Systematic risk

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c) Both a and b
d) None of the above
6. The point of tangency between risk return indifferences curves and efficient frontier
highlights:
a) Optimal portfolio
b) Efficient portfolio
c) Sub-optimal portfolio
d) None of the above
7. A portfolio comprises two securities and the expected return on them is 12% and 16%
respectively. Determine return of portfolio if first security constitutes 40% of total
portfolio.
a) 12.4%
b) 13.4%
c) 14.4%
d) 15.4%
8. The value of a bond and debenture is
a) Present value of interest payments it gets
b) Present value of contractual payments it gets till maturity
c) Present value of redemption amount
d) None of the above
9. Required rate of return>Coupon rate, the bond will be valued at
a) Premium
b) Par value
c) Discount
d) None of the above
10. If the coupon rate is constant, the value of bond when close to maturity will be
a) Issued value
b) Par value
c) Redemption value
d) All of the above.

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11. A bond is said to be issued at premium when

a) Coupon rate>Required returns
b) Coupon rate=Required returns
c) Coupon rate
d) None of the above
12. When the concept of ratio is defined in respected to the items shown in the financial
statements, it is termed as
a) Accounting ratio
b) Financial ratio
c) Costing ratio
d) None of the above
13. The relationship between two financial variables can be expressed in:
a) Pure ratio
b) Percentage
c) Rate or time
d) Either of the above
14. The type of bond that pay coupon interest are classified as
a) Forward bond
b) Payment bond
c) Coupon bond
d) Interest bond
15. The type of bond whose present value is lesser than that of its face value is classified as
a) Discount
b) Premium
c) Coupon
d) Interest
16. The type of bond for which the bonds present value is greater bond face value is
classified as
a) Coupon
b) Interest
c) Discount

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d) Premium
17. The type of bonds that have tangible property as a collateral are classified as
a) Collateral security
b) Commercial trust notes
c) Equipment trust certificates
d) Equipment bonds
18. The object of portfolio is to reduce ……by diversification
a) Return
b) Risk
c) Uncertainty
d) Percentage
19. The fundamental analysis approach has been associated with …..
a) Uncertainties
b) Certainties
c) Ratios
d) Balance sheet
20. This type of risk is avoidable through proper diversification
a) Portfolio risk
b) Systematic risk
c) Unsystematic risk
d) Total risk
21. Beta is the slope of
a) The security market line
b) The capital market line
c) a characteristic line
d) The CAPM
22. .A measure of risk per unit of expected return
a) Standard deviation
b) Coefficient of variation
c) Correlation coefficient
d) Beta

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23. The greater the beta ,the security involved

a) Greater the unavoidable risk
b) Greater the avoidable risk
c) Less the unavoidable risk
d) Less the avoidable Risk .
24. A Statistical measure of the Degree to which two variables move together
a) Coefficient of variation
b) Variance
c) Covariance
d) Certainty equivalent
25. The fundamental analysis is a method of finding out
a) Ratio
b) Value of shares
c) Tips
d) Future price of a security
26. Which analysis provides a simplified picture of price behaviour of a shares
a) Fundamental
b) Technical
c) Ratio
d) Fund flow
27. Return of investment is determined by
a) Net profit
b) Capital employed
c) Net worth
d) Net profit & capital employed
28. The fundamental analysis is a method of finding out ……
a) Ratio
b) Value of share
c) Tips
d) Future price of security
29. Which analysis provides a simplified picture of price behavior of a shares

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a) Fundamental
b) Technical
c) Financial
d) Any
30. Which theory believes that the investors prefer larger to smaller returns from securities ?
a) Modern
b) Traditional
c) Markowitz
d) Sharpe
31. Modern portfolio theory …….. the relationship between risk and return
a) Maximizes
b) Minimizes
c) Quantifies
d) Does not assume
32. Which measures the systematic or non -systematic risk of a security ?
a) Beta
b) Standard deviation
c) Variance
d) Range
33. According to CAPM ,the correct measure of risk is termed as ….
a) Business risk
b) Financial risk
c) Beta coefficient
d) Systematic risk
34. …….analysis is a study based on market emotions and share price movement .
a) Fundamental
b) Technical
c) Moral
d) all the above
35. The oldest approach to common stock selection is:
a) Fundamental analysis

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b) Technical analysis
c) Random walk analysis
d) Value analysis
36. Technical analysis reflects the idea that stock prices:
a) Move upward over time.
b) Move inversely over time.
c) Move in trends
d) Move randomly.
37. In fundamental analysis, industry analysis is the:
a) First step.
b) Second step.
c) Third step.
d) Fourth step
38. ___ is putting money at risk by betting on an uncertain outcome with the hope that you
might win money.
(a) Investment
(b) Gambling
(c) Financing
(d) Portfolio
39. ___ is a method used to evaluate the worth of security by studying the financial data of
the issues.
(a) Security Analysis
(b) Fundamental analysis
(c) Performance Analysis
(d) None of the Above
40. IPO stands for:
(a) Internal Public Office
(b) Initial Public Office
(c) Initial Public Offer
(d) Internal Police Office

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41. Which of the following are common errors in investment management?

(a) Not Having a Clearly Defined Investment Plan
(b) Investor often overdose themselves on Information
(c) Both A&B
(d) None A&B
42. ___ is the variability in a security’s returns resulting from fluctuations in the aggregate
market.
(a) Market Risk
(b) Inflation risk
(c) Credit Risk
(d) Intend rate risk
43. OTC stands for:
(a) Offer To The Centre
(b) Over The counter
(c) Over TO Corporation
(d) None of the Above.
44. ___ are the short-term unsecured promissory notes issued by a company to raise short-
term cash.
(a) CD
(b) CP
(c) Treasury bills
(d) All of the Above
45. ___ Are financial investments that have no intrinsic value, but drive their value from
something else.
(a) Bonds
(b) Commercial Bills
(c) Derivatives
(d) Shares
46. A group of security is known as:
(a) Investment
(b) Portfolio

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(c) Security
(d) Gambling
47. ___ Are organized markets for buying & selling securities which include stock, bonds,
options, futures.
(a) Derivatives
(b) Sensex
(c) Stock Exchange
(d) Market
48. ___ Analysis is a method that is used to evaluate the worth of security by analyzing the
statistics that are generated by market activity, such as the past price of volume.
(a) Economic
(b) Financial
(c) Technical
(d) None Of Above
49. Which of the following theory analyzes how wealth can be optimally invested in
portfolio’s which are made up of assets whose expected returns and risks are different.
(a) G.D. Gordon’s approach
(b) Modigliani miller approach
(c) Markowitz Model
(d) Traditional Theory
50. Which model relates return to a single factor?
(a) Markowitz
(b) Single Index
(c) M.M. Approach
(d) Traditional
51. CAPM stands for:
(a) Capital assets products method.
(b) Capital assets pricing model.
(c) Capitalization assets of product market.
(d) None of the Above.

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52. ___ Risk can be measured by be using data.

(a) Specific
(b) Technical
(c) Systematic
(d) Financial
53. ___ Bonds give the bondholders an option to exchange each bond for a specified no. of
shares of common stock of the team.
(a) Preference
(b) Irredeemable
(c) Redeemable
(d) Convertible
54. ___ Risk is the possibility that borrowers repay debt ahead of schedule.
(a) Liquidity
(b) Inflation
(c) Prepayment
(d) Investment
55. Which of the following is not a common risk factor?
(a) Market Risk
(b) Promotional Risk
(c) Interest Rate Risk
(d) Inflation Risk
56. Which of the following chart gives more details than a regular line chart?
(a) Line
(b) Histogram
(c) Pie
(d) Bar
57. The issues promise to repay to the principal at maturity date plus coupon interest over
some specified period of being.
(a) Investor
(b) Tender

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(c) Both a & b

(d) Borrower
58. “Not putting all your eggs in one basket” means.
(a) Investment
(b) Financing
(c) Diversification
(d) None of the above
59. The financial market can be divided into and market.
(a) Primary, Secondary.
(b) Money, Capital.
(c) Organized, OTC.
(d) None of the Above.
60. The two types of data analysis techniques that are available to assist investors to make a
better investment decision are:
(a) Fundamental, Technical analysis.
(b) Financial, Fundamental analysis.
(c) Economic, Financial analysis.
(d) Economic, Fundamental analysis.
61. ___ step involves determining periodically how the portfolio has performed over the
review period.
(a) Portfolio performance evaluation
(b) Portfolio revision
(c) Portfolio construction
(d) Performing security analysis
62. Capital market is firstly initiated by
a) Mohsin
b) Linter
c) Markowitz
d) William sharpe
63. A combination of various investment products like bonds, shares, securities, mutual funds
and so on is called as __________

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a) Portfolio
b) Investment
c) Speculation
d) Gambling
64. 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
65. The value of bond depends on ____________.
A. The coupon rate.
B. Years to maturity.
C. Expected yield to maturity.
D. All the above.
66. _______ are examples of financial intermediaries.
A. Commercial banks
B. Insurance companies
C. Investment companies
D. All of the above
67. 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.
68. Diversification reduces
A. Interest rate risk
B. Market risk
C. Unique risk
D. Inflation risk
69. Asset allocation affects the investor’s return by______________.
A. altering the returns on individual assets.

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B. weighting the portfolio return by the allocation.

C. assuring diversification.
D. increasing the investor’s use of mutual funds.
70. 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.
71. 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.
72. 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.
73. A model for optimizing the selection of securities is the ______ model.
A. Miller-Orr.
B. Black-Sholes.
C. Markowitz.
D. Gordon
74. __________ is the most important investment decision because it determines the risk-
return characteristics of the portfolio.
A. Hedging.
B. Market timing.

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C. Performance measurement.
D. Asset allocation.
75. If an investor searches for patterns in security returns by examining various techniques
applied to a set of data, this is known as__________
a) Fundamental analysis.
b) Technical analysis.
c) Data mining.
d) Random walk theory.
76. A bond issue is broken up so that some investors will receive only interest payments
while others will receive only principal payments, which is an example of ________.
a) Bundling
b) Un-bundling
c) Financial engineering
d) B&d
77. Market risk is best measured by the__________________.
a) Alpha.
b) Beta.
c) Standard deviation.
d) Coefficient of variation.
78. The relevant risk for a well-diversified portfolio is________________
a) Interest rate risk
b) Inflation risk.
c) Business risk.
d) Market risk.
79. Company-specific risk is also known as_________________
a) Market risk.
b) Systematic risk.
c) Non-diversifiable risk.
d) Idiosyncratic risk
80. Which of the following is true regarding the expected return of a portfolio?
a) It is a weighted average only for stock portfolios.

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b) It can only be positive.

c) It can never be above the highest individual return.
d) All of the above are true.
81. In order to determine the expected return of a portfolio, all of the following must be
Known except______________
a) Probabilities of expected returns of individual assets.
b) Weight of each individual asset to total portfolio value.
c) Expected return of each individual asset.
d) All of the above must be known in order to determine the expected return of a
portfolio
82. . _________________is concerned with the interrelationships between security returns.
a) Random diversification.
b) Correlating diversification.
c) Friedman diversification.
d) Markowitz diversification.
83. In order to determine the compound growth rate of an investment over some period, an
investor would calculate the________________
a) Arithmetic mean.
b) Geometric mean.
c) Calculus mean.
d) Arithmetic median.
84. If interest rates rose, you would expect ____________ to also rise.
a) Business risk.
b) Financial risk.
c) Liquidity risk.
d) Inflation risk.
85. Which of the following is not related to overall market variability?
a) Financial risk.
b) Interest rate risk.
c) Purchasing power risk.
d) Market risk.

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86. If interest rates are expected to rise, you would expect___________

a) Bond prices to fall more than stock prices
b) Bond prices to rise more than stock prices
c) Stock prices to fall more than bond prices.
d) Stock prices to rise and bond prices to fall.
87. The coupon rate is another name for the__________
a. Market interest rate.
b. Current yield.
c. Stated interest rate.
d. Yield to maturity.
88. Treasury bills are traded in the __________
a. Money market.
b. Capital market
c. Government market.
d. Regulated market
89. The largest single institutional owner of common stocks is________.
a. Mutual funds.
b. Insurance companies.
c. Pension funds.
d. Commercial banks.
90. Which of the following relates to industry analysis?
a) Infrastructure facilities
b) Competitive forces
c) Interest rate
d) Market share
91. The theory of bond immunisation was introduced by------
a) Redington
b) F.Amling
c) Burton G.Malkiel
d) Kritzman
92. Bond price will move --------- to market interest changes.

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a) Inversely
b) Positively
c) Constant
d) Randomly
93. . Bond pricing theorems was introduced by—
a) Harry Markowitz
b) Kritzman
c) F.Amling
d) Burton G.Malkiel
94. Bond price-yield relationship is referred to as -----
a) Concave
b) Convex
c) Linear
d) Rectangular hyperbola
95. Unsystematic risk may arise due to the following reason.
a) Change in interest rate
b) Increase in population
c) Employee strike in the company
d) Exchange rate fluctuations
96. Total risk includes---------
a) Systematic risk only
b) Unsystematic risk only
c) Both a and b above
d) Only diversifiable risks
97. ------is the amount left over after individual consumption.
a) Investment
b) Savings
c) Surplus
d) Money.
98. --- include “expensive stocks” that offer big rewards but have big risk.
a) The patient portfolio

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b) Conservative portfolio
c) Aggressive portfolio
d) Efficient portfolio
99. Find the odd one.
a) Risk
b) Return
c) Safety
d) Tax evasion
100. An investor committed money for very short period expect….
a) Return from price fluctuation
b) Dividend
c) Benefit from both price variation and dividend
d) None of these

ANSWER KEY
QN Ans QN Ans QN Ans QN Ans QN Ans
1 A 21 C 41 C 61 A 81 D
2 C 22 B 42 A 62 D 82 D
3 A 23 A 43 B 63 D 83 A
4 C 24 C 44 B 64 C 84 C
5 B 25 D 45 C 65 D 85 A
6 A 26 B 46 B 66 D 86 A
7 C 27 D 47 C 67 A 87 A
8 B 28 D 48 C 68 C 88 A
9 C 29 B 49 C 69 B 89 A
10 C 30 A 50 B 70 C 90 B
11 A 31 C 51 B 71 A 91 A
12 A 32 A 52 C 72 D 92 A
13 D 33 C 53 A 73 C 93 D
14 C 34 C 54 C 74 A 94 B
15 A 35 B 55 B 75 B 95 C
16 D 36 C 56 D 76 D 96 C

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17 C 37 B 57 C 77 D 97 B
18 B 38 B 58 C 78 D 98 B
19 A 39 B 59 C 79 C 99 D
20 C 40 C 60 A 80 C 100 A
Prepared By
Rajan P
Assistant Professor of Commerce
School of Distance Education
University of Calicut

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