http://172.16.1.50/printqp.php?heading=II MIB [2018 - 2020], SEMES...

Dr.G.R.Damodaran College of Science

(Autonomous, affiliated to the Bharathiar University, recognized by the UGC)Re-
accredited at the 'A' Grade Level by the NAAC and ISO 9001:2008 Certified
CRISL rated 'A' (TN) for MBA and MIB Programmes

II MIB [2018 - 2020]

SEMESTER IV
ELECTIVE : SECURITIES ANALYSIS AND PORTFOLIO MANAGEMENT - 453W1
Multiple Choice Questions.

1. Investment is the ----------------.

A. market addition made to the nations capital stocks.
B. Persons commitment to buy a flat or a house.
C. Employment of funds on assets to earn returns
D. Employment of funds on goods and services that are used in production process.
ANSWER: C

2. Speculator is a person --------------------.

A. Who evaluates the performance of the company.
B. Who use his funds only.
C. Who is willing to take high risk for high return.
D. Who considers hearsays and market behaviours.
ANSWER: D

3. To frame the investment policy the investor should have

A. Knowledge about the company and brokers.
B. Investible funds
C. Knowledge about the investment alternatives
D. Knowledge about the market with funds.
ANSWER: D

4. The stock is
A. Small units of equal value called shares
B. Expressed in terms of money.
C. Expressed in terms of number of shares.
D. Fully paid p and partly paid up shares
ANSWER: B

5. Equity shareholders rights are listed below: One of the right is incorrect
A. Right to have first claim in the case of winding up of the company.
B. Right to vote at the general body meeting of the company
C. Right to share profits in the form of the dividends.
D. Right to receive a copy of the statutory report.
ANSWER: A

6. In a limited company
A. The shareholders have to divide the debt of the company and pay.

1 of 22 1/14/2020, 11:20 AM
 http://172.16.1.50/printqp.php?heading=II MIB [2018 - 2020], SEMES...

B. The shareholders are not liable to pay the debt

C. The shareholders have to pay the debt to the extent of their shares in the capital.
D. Common stock and preference shareholders have to pay the debt
ANSWER: C

7. Zero coupon bond shares its origin in

A. U.S security market.
B. Wall street.
C. Japan's security market
D. Dalalstreet.
ANSWER: A

8. Capital Index bonds are linked with

A. BSE Sensex
B. NSE Nifty
C. Consumer price index
D. BSE-100
ANSWER: C

9. The aggressive investor buys more of --------

A. Money Market Instruments
B. Gold
C. Equity shares
D. Options and Futures
ANSWER: C

10. Financial intermediaries differ from other businesses in that both their assets and their liabilities are
mostly
A. Illiquid
B. Owned by government
C. Real
D. Financial
ANSWER: D

11. Sweat Equity is ----------------

A. A New class of equity shares
B. Issued to the employees and directors
C. Issued to the investor also
D. Issued out of the class of equity shares already issued by the company.
ANSWER: D

12. Financial assets

A. Contribute to the countrys productive capacity both directly and indirectly
B. Do not contribute to the countrys productive capacity both directly and indirectly
C. Directly contribute to the countrys productive capacity.
D. Indirectly contribute to the countrys productive capacity.
ANSWER: D

13. Which one of the following is not a money market security.

A. Treasury bills
B. National savings certificate

2 of 22 1/14/2020, 11:20 AM
 http://172.16.1.50/printqp.php?heading=II MIB [2018 - 2020], SEMES...

C. Certificate of deposit.
D. Commercial papers.
ANSWER: B

14. Registrar to the issue

A. Helps in the appointment of lead managers
B. Drafts the prospectus.
C. Recommends the basis of allotment
D. Directs the various agencies involved in the issue.
ANSWER: C

15. Primary and secondary markets

A. Compete with each others.
B. Complement each other.
C. Function independently
D. Control each other.
ANSWER: B

16. Book building is managed mainly by

A. Registrar
B. Lead manager
C. Registrar and book runner
D. Lead manager and book runner.
ANSWER: D

17. The issue can be priced at premium by

A. Any public issue of listed company with three years track record of sales
B. Any public issue of unlisted company with three years track record of personal management
C. Any public issue of listed on unlisted company with three years track record of profitability.
D. Any public issue of listed company.
ANSWER: C

18. SEBI has made it mandatory for the companies to disclose

A. The early annual report
B. Monthly report and annual report
C. Quarterly report and annual report
D. Monthly review and annual report.
ANSWER: C

19. Stock exchange

A. Helps in the fixation stock price
B. Ensure safe and fair dealings.
C. Induces good performance by the company.
D. All the above.
ANSWER: D

20. The broker has bought 10,000 ABC shares at Rs.200 and sold 8,000 shares at Rs.190 on the same day
the margin he has to pay is
A. Gross exposure margin
B. Special margin
C. Mark to market margin

3 of 22 1/14/2020, 11:20 AM
 http://172.16.1.50/printqp.php?heading=II MIB [2018 - 2020], SEMES...

D. Concentration ratio margin

ANSWER: C

21. Which one of the following statements regarding orders is false?

A. A market order is simply an order to buy or sell a stock immediately at the prevailing market price
B. A limit sell order is where investors specify prices at which they are willing to sell a security.
C. If stock ABC is selling at $50, a limit-buy order may instruct the broker to buy the stock if and when
the share price falls below $45.
D. None of the above.
ANSWER: D

22. The use of the Internet to trade and underwrite securities

A. Is illegal under SEC regulations
B. Is regulated by the New York Stock Exchange.
C. Decreases underwriting costs for a new security issue.
D. Increases underwriting costs for a new security issue.
ANSWER: C

23. Sell Reliance X Company shares at Rs. 60/- . This order is a

A. Best rate order
B. Limit Order
C. Discretionary order
D. Stop Loss order
ANSWER: B

24. The Bombay Stock Exchange Ltd was originally known as

A. The Native share and Stock Brokers Association
B. The Native share and stock brokers union
C. The Native Stock Brokers Association
D. The Native share and stock brokers association of India
ANSWER: A

25. Shares for short transactions

A. Are usually borrowed from other brokers
B. Are typically shares held by the short seller's broker in street name?
C. Are borrowed from commercial banks.
D. B and C.
ANSWER: B

26. Assume you purchased 100 shares of common stock at $50 per share using 2,500 of your own money.
The initial margin requirement is 50%. If the maintenance margin is 30%, at what prince would you get a
margin call?
A. $26.14
B. $50.00
C. $35.71
D. $77.12
ANSWER: C

27. Conventional theories presume that investors ____________ and behavioural finance presumes that
they ____________.
A. are irrational; are irrational

4 of 22 1/14/2020, 11:20 AM
 http://172.16.1.50/printqp.php?heading=II MIB [2018 - 2020], SEMES...

B. are rational; may not be rational

C. are rational; are rational
D. may not be rational; may not be rational
ANSWER: B

28. ____________ may be responsible for the prevalence of active versus passive investments management
A. Forecasting errors
B. Overconfidence
C. Mental accounting
D. Conservatism
ANSWER: B

29. If a person gives too much weight to recent information compared to prior beliefs, they would make
________ errors
A. framing
B. selection bias
C. Overconfidence
D. Forecasting
ANSWER: D

30. __________ was the grandfather of technical analysis

A. Harry Markowitz
B. William Sharpe
C. Charles Dow
D. Benjamin Graham
ANSWER: C

31. . The Dow Theory posits that the three forces that simultaneously affect stock prices are
____________. I) primary trend II) Intermediate trend III) momentum trend IV) minor trend V) Contrarian
trend
A. I, II, and III
B. II, III, and IV
C. III, IV and V
D. II, and IV
ANSWER: D

32. The put/call ratio is computed as ____________ and higher values are considered ____________
signals
A. the number of outstanding put options divided by outstanding call options; bullish or bearish
B. the number of outstanding put options divided by outstanding call options; bullish
C. the number of outstanding put options divided by outstanding call options; bearish
D. the number of outstanding call options divided by outstanding put options; bullish
ANSWER: A

33. Mumbai stock exchange was recognised on a permanent basis in

A. 1956
B. 1957
C. 1950
D. 1958
ANSWER: B

5 of 22 1/14/2020, 11:20 AM
 http://172.16.1.50/printqp.php?heading=II MIB [2018 - 2020], SEMES...

34. Customer's Protection fund is set up

A. To protect the broker in case of non-payment of money by investors
B. To protect the broker in case of non-payment of money by investors
C. To provide insurance to investors in case of default by the members
D. To protect the member and the investors.
ANSWER: C

35. The VSAT which connects the main central computer means
A. Videsh Sanchar automated trading
B. Videsh Sanchar aperture terminal
C. Very special aperture terminal
D. Very small aperture terminal
ANSWER: D

36. Clearing and settlement operations of the NSE is carried out by

A. National security Depository Ltd
B. National Security Clearing co-operation
C. State bank of India
D. By the exchange itself
ANSWER: B

37. The Sensex has

A. 25 Stocks
B. 30 Stocks
C. 33 Stocks
D. 35 Stocks
ANSWER: B

38. Inter Connected stock exchange is to interlink

A. The BSE,NSE, OTCEI
B. All the stock exchange
C. Fifteen regional stock exchange
D. Fourteen regional stock exchanges
ANSWER: C

39. Over the counter Exchange of India was started after the role model of
A. NASAQ
B. JASAQ
C. NASDAQ andJASDAQ
D. NSE
ANSWER: C

40. To be listed on the OTCEI , the minimum capital requirement for a company is
A. Rs 5 Crores
B. Rs. 3 crores
C. Rs. 2crores
D. Rs. 1 crores
ANSWER: B

41. According to SEBI guidelines

A. All the new issues should be in the depository mode

6 of 22 1/14/2020, 11:20 AM
 http://172.16.1.50/printqp.php?heading=II MIB [2018 - 2020], SEMES...

B. All the A group shares should be traded through NSDL

C. All the B group shares should be traded through NSDL
D. All the above are true
ANSWER: A

42. SEBI would not offer documents seeking listing on----

A. OTCEI
B. NSE
C. BSE
D. ISE
ANSWER: A

43. The promoters contribution should not be less than

A. 25% of the issue size
B. 20% of the issue size
C. 30% of the issue size
D. 33% of the issue size
ANSWER: B

44. At present the merchant bankers

A. Are divided into four categories
B. Are divided into three categories
C. Have to segregate fund and fee based activity
D. Should have net worth of Rs. 3 cr
ANSWER: C

45. The broker shall have to furnish SEBI a copy of audited balance sheet and profit and loss account
within
A. One month of each accounting period
B. Two months of each accounting period
C. Three months of each accounting period
D. Six months of each accounting period
ANSWER: D

46. Mutual fund can make investment

A. In any company listed or unlisted
B. In privately placed securities of associated company.
C. Up to 40% of the listed or unlisted securities of group companies.
D. Should not exceed 10% of the funds in securities of a single company
ANSWER: D

47. FII's are permitted

A. To invest in the listed companies only
B. To invest in the listed and unlisted companies only
C. Not to invest in the debentures
D. To invest in shares of listed, unlisted companies and debentures.
ANSWER: D

48. Gross domestic product is a logical factor to analyse the economy in picking up a stock because it
indicates
A. Inflation or deflation

7 of 22 1/14/2020, 11:20 AM
 http://172.16.1.50/printqp.php?heading=II MIB [2018 - 2020], SEMES...

B. The market value of assets

C. The status of the economy
D. The condition of the stock market
ANSWER: C

49. An investor gets 15% return from X stock. The inflation rate is 7 %. His real rate of return is
A. 7.48
B. 8.00
C. 2.5
D. 7.84
ANSWER: A

50. One of the following factors leads the activity stock market
A. Money supply
B. Per capita income
C. Unemployment rate
D. Manufacturing and trade
ANSWER: A

51. 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 economy
ANSWER: D

52. Mr.A is a daring portfolio manager. He wants to increase the return of his portfolio. He should choose
stocks from
A. Defensive industry
B. Industry at growth stage
C. Industry in the maturity period
D. Industry with more export potential
ANSWER: B

53. The rise of dividend taxes affects

A. Investor
B. The corporate
C. The stock market
D. The financial institution
ANSWER: D

54. Which of the following items might result in dilution of a corporate s earnings per share at present/
A. Convertible bonds
B. Warrants
C. Stock options given as incentive to top executives
D. All of the above
ANSWER: C

55. The growth in book value per share shows the

A. Rise in the share prices
B. Increase in the physical assets of the firm.

8 of 22 1/14/2020, 11:20 AM
 http://172.16.1.50/printqp.php?heading=II MIB [2018 - 2020], SEMES...

C. Increase in the net worth.

D. Growth in reserves
ANSWER: D

56. A common stock pay-out ratio

A. Is directly related to the company s growth rate.
B. Can be zero for a growth firm.
C. Measures the earnings of shares as a percentage of its market price.
D. Indicates the future cashdividends to be expected.
ANSWER: B

57. The price earnings ratio of a stock reflects

A. The growth of the company
B. The market mood for the companys stock
C. The earnings retained and invested in the company
D. The dividend paid out for the company s stock
ANSWER: B

58. The market value of the scrip is determined by

A. The dividend declared by the company.
B. The present status of the stock market.
C. The number of floating shares
D. The interaction of demand and supply.
ANSWER: D

59. In the stock market psychology

A. Investors forget the past
B. History repeats itself
C. More faith in future prediction
D. A and b
ANSWER: B

60. Dow theory was developed to explain

A. New york stock market movement.
B. The Dow Jones Industrial average
C. Security market price movement.
D. The buy and sell strategy.
ANSWER: B

61. The share prices

A. Move either in declining trend or increasing trend.
B. May remain flat for a period of time.
C. The movements of the share prices form a straight line.
D. The increasing or decreasing move may be Zigzag.
ANSWER: D

62. Violation of a trend line means

A. Moving away from the trend line.
B. Changing the direction
C. Presentation of the trend line
D. Cutting the rising trend line from above.

9 of 22 1/14/2020, 11:20 AM
 http://172.16.1.50/printqp.php?heading=II MIB [2018 - 2020], SEMES...

ANSWER: C

63. In the bull market

A. The stock prices are increasing
B. Each peak is higher than the previous peak.
C. Each bottom is higher than the previous bottom.
D. B and c
ANSWER: D

64. Overbought region indicates.

A. More shares are sold.
B. The supply is more.
C. Potential fall in the price level.
D. Potential rise in the share price.
ANSWER: C

65. The chartist believes that chart

A. Spot the current trend for buying and selling
B. Indicates the future action to be taken
C. Shows the past historic movement
D. Al the above.
ANSWER: D

66. . The Black-Litterman model is geared toward ____________ while the Treynor-Black model is geared
toward ____________.
A. security analysis; security analysis
B. B) asset allocation; asset allocation
C. security analysis; asset allocation
D. asset allocation; security analysis
ANSWER: D

67. he Treynor-Black model is a model that shows how an investment manager can use security analysis
and statistics to construct __________.
A. a market portfolio
B. a passive portfolio
C. an active portfolio
D. an index portfolio
ANSWER: C

68. In the Treynor-Black model, the weight of each security in the portfolio should be proportional to its
__________.
A. alpha/beta
B. alpha/beta/residual variance
C. beta/residual variance
D. alpha/residual variance
ANSWER: B

69. Jensen's Performance index gives importance

A. To the asset combination
B. Professional management
C. The market condition

10 of 22 1/14/2020, 11:20 AM
 http://172.16.1.50/printqp.php?heading=II MIB [2018 - 2020], SEMES...

D. The predictive ability of the manager

ANSWER: D

70. According to the Treynor-Black model, the weight of a security in the active portfolio depends on the
ratio of __________ to __________.
A. the degree of mispricing; the non-systematic risk of the security
B. the degree of mispricing; the systematic risk of the security
C. the market sensitivity of the security; the non-systematic risk of the security
D. thenon-systematic risk of the security; the systematic risk of the security
ANSWER: A

71. If a portfolio manager consistently obtains a high Sharpe measure, the manager's forecasting ability
A. is average.
B. is above average.
C. is below average
D. does not exist.
ANSWER: B

72. The critical variable in the determination of the success of the active portfolio is
A. alpha/non-systematic risk.
B. alpha/systematic risk.
C. gamma/non-systematic risk
D. gamma/systematic risk.
ANSWER: A

73. An active portfolio manager faces aI) using the Sharpe measure. II)Holding too much of the risk-free
asset. III) Exploiting perceived security mispricing. IV) Using mean-variance analysis. V) Letting a few
stocks dominate the portfolio. trade-off between
A. I and II
B. II and V
C. III and V
D. III and IV
ANSWER: C

74. The common practice in the traditional approach is

A. To evaluate entire stock market.
B. To maximise the expected return for a given level of risk.
C. To evaluate the entire financial plan of the individual
D. To select the portfolios.
ANSWER: C

75. The need for constant income depends on

A. Market risk
B. Inflation risk
C. Interest risk
D. Unique risk
ANSWER: B

76. The highly liquid security is

A. Mutual fund units
B. Treasury bills.

11 of 22 1/14/2020, 11:20 AM
 http://172.16.1.50/printqp.php?heading=II MIB [2018 - 2020], SEMES...

C. Shares
D. Commercial papers
ANSWER: B

77. Investors invest more in stocks during their

A. Early career period.
B. Mid-career level.
C. Retirement stage with huge money.
D. All the above mentioned period
ANSWER: A

78. An investor is having their portfolio with the combination of stock and bonds in the ratio of 75:25 . He
is
A. Risk averse
B. Risk neutral
C. A risk taker
D. Active in portfolio management.
ANSWER: C

79. In the active approach the investor continuously studies

A. Group related risk
B. Market related risk
C. Security specific risk
D. All above
ANSWER: D

80. Diversification reduces

A. Interest rate risk
B. Market risk
C. Unique risk
D. Inflation risk
ANSWER: C

81. Simple diversification means

A. Purchase of more than 15 stocks
B. Purchase of treasury bills
C. Purchase of less than 15 stocks at random.
D. Purchase of largevarieties of assets.
ANSWER: C

82. Markowitz approach has roots in

A. Good portfolio management
B. Proper entry and exit in the market.
C. Estimation of stock return.
D. Analysing risk and return related to stocks.
ANSWER: D

83. The risk involved in the purchase of infotech and satyam computers shares are measured with the help
of
A. Average return of stocks of companies individually.
B. Co-variance between two companies scrip return

12 of 22 1/14/2020, 11:20 AM
 http://172.16.1.50/printqp.php?heading=II MIB [2018 - 2020], SEMES...

C. Variance of each company s stock.

D. All the above.
ANSWER: C

84. 1965) and by Miller and Scholes (1972), it was found that the average difference between a stock's
return and the risk-free rate was ________ to its non-systematic risk.
A. Positively related
B. Negatively related
C. Unrelated
D. Related in a nonlinear fashion
ANSWER: A

85. In the empirical study of a multi-factor model by Chen, Roll, and Ross, a factor that appeared to have
significant explanatory power in explaining security returns was
A. the unexpected change in the rate of inflation.
B. the risk premium on bonds.
C. industrial production.
D. A, B and C
ANSWER: D

86. If a professionally managed portfolio consistently outperforms the market proxy on a risk-adjusted
basis and the market is efficient, it should be concluded that
A. either the CAPM is invalid or the proxy is inadequate.
B. the proxy is inadequate.
C. the CAPM is invalid.
D. the CAPM is valid and the proxy is adequate.
ANSWER: A

87. The research by Fama and French suggesting that CAPM is invalid has generated which of the
following responses?
A. Theoretical sources and implications of research that contradicts CAPM needs to be reconsidered.
B. Estimates of asset betas need to be improved
C. Better econometrics should be used in the test procedure
D. All of the above are true.
ANSWER: D

88. According to Roll, the only testable hypothesis associated with the CAPM is
A. whether the market portfolio is mean-variance efficient.
B. the exact composition of the market portfolio.
C. the number of ex post mean-variance efficient portfolios.
D. the SML relationship
ANSWER: A

89. Strongest evidence in support of the CAPM has come from demonstrating that
A. the average return-beta relationship is highly significant.
B. non-systematic risk has significant explanatory power in estimating security returns
C. Professional investors do not generally out-perform market indexes, demonstratingthat the market is
efficient.
D. the intercept in tests of the excess returns-beta relationship is exactly zero.
ANSWER: C

13 of 22 1/14/2020, 11:20 AM
 http://172.16.1.50/printqp.php?heading=II MIB [2018 - 2020], SEMES...

90. The duration of a bond is a function of the bond's

A. coupon rate.
B. time to maturity
C. yield to maturity.
D. all of the above
ANSWER: D

91. The "modified duration" used by practitioners is equal to the Macaulay duration
A. times the change in interest rate.
B. times (one plus the bond's yield to maturity).
C. divided by (one plus the bond's yield to maturity).
D. divided by (one minus the bond's yield to maturity).
ANSWER: C

92. The interest-rate risk of a bond is

A. the risk related to the possibility of bankruptcy of the bond's issuer
B. the risk that arises from the uncertainty of the bond's return caused by changes in interest rates.
C. the unsystematic risk caused by factors unique in the bond
D. A and B above
ANSWER: B

93. Which of the following two bonds is more price sensitive to changes in interest rates? A par value
bond, X, with 10 years-to-maturity and a 10% coupon rate or a zero-coupon bond, Y, with 10 years-to-
maturity and a 10% yield-to-maturity.
A. Bond Y because of the longer duration.
B. Bond X because of the longer time to maturity
C. Bond X because of the higher yield to maturity
D. Both have the same sensitivity because both have the same yield to maturity.
ANSWER: A

94. A highly liquid security is a

A. Mutual fund unit
B. Treasury bill
C. Share
D. Commercial paper
ANSWER: B

95. . Contingent immunization

A. is a mixed-active passive bond portfolio management strategy
B. is a strategy whereby the portfolio may or may not be immunized
C. is a strategy whereby if and when some trigger point value of the portfolio is reached, the portfolio is
immunized to insure an minimum required return
D. A , B and C.
ANSWER: D

96. Indexing of bond portfolios is difficult because

A. the number of bonds included in the major indexes is so large that it would be difficult to purchase
them in the proper proportions
B. many bonds are thinly traded so it is difficult to purchase them at a fair market price.
C. the composition of bond indexes is constantly changing
D. all of the above

14 of 22 1/14/2020, 11:20 AM
 http://172.16.1.50/printqp.php?heading=II MIB [2018 - 2020], SEMES...

ANSWER: D

97. _______ is the amount of money per common share that could be realized by breaking up the firm,
selling the assets, repaying the debt, and distributing the remainder to shareholders.
A. Book value per share
B. Liquidation value per share
C. Market value per share
D. Tobin's Q
ANSWER: B

98. You wish to earn a return of 10% on each of two stocks, C and D. Each of the stocks is expected to pay
a dividend of $2 in the upcoming year. The expected growth rate of dividends is 9% for stock C and 10%
for stock D. The intrinsic value of stock C _____.
A. will be greater than the intrinsic value of stock D
B. will be the same as the intrinsic value of stock D
C. will be less than the intrinsic value of stock D
D. cannot be calculated without knowing the rate of return on the market portfolio
ANSWER: C

99. The goal of fundamental analysts is to find securities

A. with high market capitalization rates.
B. with a positive present value of growth opportunities
C. whose intrinsic value exceeds market price.
D. all of the above
ANSWER: A

100. Many stock analysts assume that a mispriced stock will

A. immediately return to its intrinsic value.
B. gradually approach its intrinsic value over several years.
C. never return to its intrinsic value.
D. return to its intrinsic value within a few days.
ANSWER: B

101. Because the DDM requires multiple estimates, investors should

A. carefully examine inputs to the model
B. not use this model without expert assistance
C. perform sensitivity analysis on price estimates
D. both A and C
ANSWER: D

102. A firm has a higher asset turnover ratio than the industry average, which implies
A. the firm is utilizing assets more efficiently than other firms in the industry.
B. the firm is more likely to avoid insolvency in the short run than other firms in the industry.
C. the firm is more profitable than other firms in the industry.
D. the firm has a higher P/E ratio than other firms in the industry.
ANSWER: A

103. A measure of asset utilization is

A. sales divided by working capital.
B. return on equity capital.
C. return on total assets.

15 of 22 1/14/2020, 11:20 AM
 http://172.16.1.50/printqp.php?heading=II MIB [2018 - 2020], SEMES...

D. operating profit divided by sales.

ANSWER: C

104. During periods of inflation, the use of FIFO (rather than LIFO) as the method of accounting for
inventories causes
A. higher inventory turnover.
B. higher reported sales
C. lower ending inventory.
D. higher income taxes
ANSWER: D

105. Suppose you own two stocks, A and B. In year 1, stock A earns a 2% return and stock B earns a 9%
return. In year 2, stock A earns an 18% return and stock B earns an 11% return. __________ has the higher
arithmetic average return
A. stock A
B. stock B
C. the two stocks have the same arithmetic average return
D. at least three periods are needed to calculate the arithmetic average return
ANSWER: C

106. The Jensen portfolio evaluation measure

A. is an absolute measure of return over and above that predicted by the CAPM.
B. is a measure of return per unit of risk, as measuredeviation.d by standard
C. is a measure of return per unit of risk, as measured by beta.
D. A and B
ANSWER: A

107. A portfolio manager's ranking within a comparison universe may not provide a good measure of
performance because
A. portfolio durations can vary across managers.
B. portfolio returns may not be calculated in the same way
C. if managers follow a particular style or subgroup, portfolios may not be comparable.
D. A and C.
ANSWER: D

108. Hedge funds are ______ transparent than mutual funds because of ______ strict SEC regulation on
hedge funds.
A. more; more
B. more; less
C. less; less
D. less; more
ANSWER: C

109. Hedge funds may invest or engage in

A. distressed firms
B. convertible bonds
C. currency speculation
D. All of the above
ANSWER: D

110. A hedge fund pursuing a ______ strategy is attempting to exploit temporary misalignments in relative

16 of 22 1/14/2020, 11:20 AM
 http://172.16.1.50/printqp.php?heading=II MIB [2018 - 2020], SEMES...

pricing
A. directional
B. non-directional
C. stock or bond
D. arbitrage or speculation
ANSWER: B

111. . A hedge fund attempting to profit from a change in the spread between mortgages and Treasuries is
using a ______ strategy
A. market neutral
B. directional
C. relative value
D. divergence
ANSWER: C

112. __________ refer to strategies aimed at attaining the established rate of return requirements while
meeting expressed risk tolerance and applicable constraints
A. Investment constraints
B. Investment objectives
C. Investment policies
D. All of the above
ANSWER: C

113. An important benefit of Keogh plans is that

A. they are not taxable until funds are withdrawn as benefits
B. they are protected against inflation.
C. they are automatically insured by the Federal government
D. A and B
ANSWER: A

114. One incorrect belief that is often cited as a reason for fully-funded pension funds to invest in equities
is
A. stocks provide a hedge against inflation.
B. bonds have lower returns.
C. stocks have higher risk.
D. stocks have higher returns
ANSWER: A

115. Workers who change jobs may wind up with lower pension benefits at retirement than otherwise
identical workers who stay with the same employer, even if the employers have defined benefit plans with
the same final-pay benefit formula. This is referred to as
A. an accumulated benefit obligation.
B. an unfunded liability.
C. the portability problem
D. indexation.
ANSWER: C

116. A remainder man is

A. a stockbroker who remained working on Wall Street after the 1987 crash.
B. one who receives the principal of a trust when it is dissolved.
C. one who receives interest and dividend income from a trust during their lifetime.

17 of 22 1/14/2020, 11:20 AM
 http://172.16.1.50/printqp.php?heading=II MIB [2018 - 2020], SEMES...

D. an employee of a trustee.
ANSWER: B

117. Suppose that the pre-tax holding period returns on two stocks are the same. Stock X has a high
dividend payout policy and stock Y has a low dividend payout policy. If you are an individual in a high
marginal tax bracket and do not intend to sell the stocks during the holding period
A. stock X will have a higher after-tax holding period return than stock Y.
B. the after-tax holding period returns on stocks X and the samr
C. it is impossible to determine which stock will have a higher after-tax holding period return given the
information available
D. stock Y will have a higher after-tax holding period return than stock X.
ANSWER: D

118. The first step a pension fund should take before beginning to invest is to
A. establish investment objectives.
B. develop a list of investment managers with superior records to interview.
C. establish asset allocation guidelines.
D. decide between active and passive management.
ANSWER: A

119. Investors seeking to diversify are likely to find that their largest investment is in
A. stocks.
B. bonds.
C. foreign securities
D. their job
ANSWER: D

120. Deferral of capital gains tax I. means that the investor doesn't need to pay taxes until the investment is
sold. II. allows the investment to grow at a faster rate. III. means that you might escape the capital gains tax
if you live long enough. IV. provides a tax shelter for investors.
A. II and III
B. I, II, IV
C. I, III, and V
D. II, III, and IV
ANSWER: B

121. A risk-free intermediate or long-term investment

A. is free of all types of risk.
B. Does guarantee the future purchasing power of its cash flows.
C. Does not guarantee the future purchasing power of its cash flows as it is insured by the U.S. Treasury.
D. A and B.
ANSWER: C

122. In words, the real rate of interest is approximately equal to

A. The nominal rate times the inflation rate.
B. The inflation rate minus the nominal rate
C. The nominal rate minus the inflation rate
D. The inflation rate divided by the nominal rate.
ANSWER: C

123. Olivia is a risk-averse investor. Alex is a less risk-averse investor than Olivia. Therefore,

18 of 22 1/14/2020, 11:20 AM
 http://172.16.1.50/printqp.php?heading=II MIB [2018 - 2020], SEMES...

A. For the same risk, Alex requires a higher rate of return than Olivia.
B. For the same return, Alex tolerates higher risk than Olivia.
C. For the same risk, Olivia requires a lower rate of return than Alex.
D. the same return, Olivia tolerates higher risk than Alex
ANSWER: B

124. Given the capital allocation line, an investor's optimal portfolio is the portfolio that
A. Maximizes her expected utility
B. Maximizes her risk.
C. Minimizes both her risk and return.
D. Maximizes her expected profit.
ANSWER: A

125. The exact indifference curves of different investors

A. Can be calculated precisely with the use of advanced calculus
B. Cannot be known with perfect certainty.
C. Although not known with perfect certainty, do allow the advisor to create more suitable portfolios for
the client
D. B and C.
ANSWER: D

126. The presence of risk means that

A. More than one outcome is possible.
B. Investors will lose money.
C. The standard deviation of the payoff is larger than its expected value.
D. Final wealth will be greater than initial wealth.
ANSWER: A

127. The standard deviation of a two-asset portfolio is a linear function of the assets' weights when
A. The assets have a correlation coefficient less than zero
B. The assets have a correlation coefficient equal to zero.
C. The assets have a correlation coefficient greater than zero
D. The assets have a correlation coefficient equal to one.
ANSWER: B

128. Which statement about portfolio diversification is correct?

A. Proper diversification can reduce or eliminate systematic risk
B. The risk-reducing benefits of diversification do not occur meaningfully until at least 50-60 individual
securities have been purchased.
C. Because diversification reduces a portfolio's total risk, it necessarily reduces the portfolio's expected
return
D. Typically, as more securities are added to a portfolio, total risk would be expected to decrease at a
decreasing rate
ANSWER: D

129. Portfolio theory as described by Markowitz is most concerned with

A. The elimination of systematic risk.
B. The identification of unsystematic risk.
C. The effect of diversification on portfolio risk.
D. Active portfolio management to enhance returns
ANSWER: C

19 of 22 1/14/2020, 11:20 AM
 http://172.16.1.50/printqp.php?heading=II MIB [2018 - 2020], SEMES...

130. A statistic that measures how the returns of two risky assets move together is
A. Correlation
B. Standard deviation.
C. Covariance.
D. A and C.
ANSWER: D

131. The individual investor's optimal portfolio is designated by

A. The point of tangency with the opportunity set and the capital allocation line.
B. The point of highest reward to variability ratio in the opportunity set.
C. The point of tangency with the indifference curve and the capital allocation line
D. The point of the highest reward to variability ratio in the indifference curve.
ANSWER: C

132. Marketability risk of bond is

A. The market risk which affects all the bonds.
B. Variation in return caused by difficulty in selling bonds.
C. The failure to pay the agreed value of the bond by the issuer
D. a and b
ANSWER: B

133. Default risk is lower in

A. treasury bill
B. Government bonds
C. ICICI Bonds
D. IDBI bonds.
ANSWER: A

134. The value of the bond depends on

A. The coupon rate
B. Years to maturity.
C. . Expected yield to maturity.
D. All the above.
ANSWER: D

135. The bond yield remains constant over its life and the discount or premium amount will decrease
A. At an decreasing rate as its life gets shorter.
B. At an decreasing rate as its life gets longer.
C. At an increasing rate as its life gets shorter
D. At an increasing rate as its life gets longer
ANSWER: C

136. Yield to maturity is the single factor that makes

A. The future value of the present cash flows from a bond equal to bond value.
B. The future value of the present cash flows equal to the future price of the bond.
C. Present value of the future cashflows of the bond equal to the current price of the bond.
D. . The future value of the bond equal to the present price.
ANSWER: C

137. The term structure of the bond is the relationship between the

20 of 22 1/14/2020, 11:20 AM
 http://172.16.1.50/printqp.php?heading=II MIB [2018 - 2020], SEMES...

A. The interest rate and bond s maturity period.

B. interest rate of the bond and market rate of interest.
C. Interest rate and price of the bond.
D. . Yield and time taken to mature
ANSWER: D

138. Coupon yield of the bond is

A. the discounted value of the bond.
B. Coupon payment stated as a percentage of bond features
C. Coupon payment stated as a percentage of bond present price.
D. a and c
ANSWER: C

139. The bond portfolio manager has to watch carefully

A. The shape of the yield curve.
B. The market interest rate.
C. The shape of the yield curve and shifts that occur in the market interest rate.
D. The repaying capacity of the issuers
ANSWER: C

140. Duration is the measure of

A. Time structure of the bond
B. Interest rate risk
C. Time structure and market risk
D. Time structure and the interest rate risk.
ANSWER: D

141. the NSE nifty index fund consists of

A. The stock of the high market capitalisation in NSE
B. Blue chip companies stock of the index.
C. All the stocks of the Nifty index
D. Consists 90% OF THE STOCKS OF THE INDEX LEAVING stocks of lesser importance.
ANSWER: C

142. The market timer is a

A. Professional portfolio manager
B. Active portfolio manager
C. Passive portfolio manager
D. None
ANSWER: B

143. The rupee cost averaging approach seems to work better with
A. Cyclical stock price
B. declining stock price
C. Rising stock price
D. Rising stock price with cyclical patterns.
ANSWER: D

144. the efficient frontier becomes a straight line through out because of the
A. Introduction of risk free assets.
B. introduction of lending

21 of 22 1/14/2020, 11:20 AM
 http://172.16.1.50/printqp.php?heading=II MIB [2018 - 2020], SEMES...

C. introduction of lending and borrowing.

D. Introduction od borrowing
ANSWER: C

145. . On the capital market line lies

A. All the efficient and inefficient portfolio
B. Only the efficient portfolio
C. All the efficient portfolio and securities
D. All portfolio and securties.
ANSWER: B

146. The security market line describes the expected return for
A. The efficient portfolio
B. the inefficient portfolio.
C. All portfolio and assets
D. The efficient and inefficient portfolio
ANSWER: C

147. A support level exists at a

A. A price fixed by the stock exchange brokers
B. Price fixed by the regulatory authority of the stock exchanges
C. A price where considerable demand is created
D. Low price where stock would be available
ANSWER: C

148. According to stock market psychology

A. Investor forget the past
B. history repeats itself
C. More faith is placed in predictions of the future
D. A & B
ANSWER: B

149. If a portfolio manager consistently obtains a high Sharpe measure, the manager's forecasting ability
A. is average.
B. is above average.
C. is below average
D. does not exist.
ANSWER: B

150. Oscillators show the share price movement

A. Over a reference period
B. Below a reference point
C. Through a reference point
D. B & C
ANSWER: C

Staff Name
Subashini R.

22 of 22 1/14/2020, 11:20 AM