Security Analysis and Investment Management MCQ with Answers

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Online MCQ Quiz of Security Analysis and Investment Management

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Security Analysis and Investment Management

1 / 20

Q: Capital asset pricing theory asserts that Portfolio returns are best explained by:

A. specific risk.

B. systematic risk.

C. economic factors.

D. diversification.

2 / 20

Q: If an asset's expected return plots above the security market line, the asset is:

A. fairly priced (if it has an unusually large amount of unique risk).

B. under priced.

C. overpric

3 / 20

Q: Market risk is also called:

A. systematic risk and unique risk.

B. nondiversifiable risk and systematic risk.

C. unique risk and nondiversifiable risk.

D. systematic risk and diversifiable risk.

4 / 20

Q: Markowitz's main contribution to Portfolio theory is

A. That risk is the same for each type of financial asset

B. That risk is a function of credit, liquidity and market Factors

C. Risk is not quantifiable

D. Insight about the relative importance of variances and co variances in determining Portfolio risk

5 / 20

Q: Which of the following is a measure of the dispersion of returns around the mean?

A. Variance.

B. Risk premium.

C. Correlation.

D. Expected return.

6 / 20

Q: When ranking the riskiness of securities using the standard deviation, the highest risk security to the lowest risk security is as follows:

A. Small stocks, large stocks, long-term government bonds, U.S. treasury bills

B. Long-term government bonds, small stocks, large stocks, U.S. treasury bills

C. Large stocks, small stocks, long-term government bonds, U.S. treasury bills

D. Small stocks, long-term government bonds, large stocks, U.S. treasury bills

7 / 20

Q: Which of the following statements regarding Portfolio revisions is/are incorrect?

A. For effective implementation of constant Dollar value plan, it is necessary to estimate the possibility and extent of downward fluctuation of the aggressive Portfolio

B. Constant ratio plan becomes less aggressive in sales when the stock price rise

C. During a sustained rise or fall of stock prices the constant ratio plan gives higher profit than other two formula plans.

D. Variable ratio plan stock Portfolio becomes more aggressive when stock prices rise and vice versa.

8 / 20

Q: Which of the following is/are disadvantage(s) of indexing of bond Portfolio? I. Advisory fee schedule is high II. In past, returns earned by most active fund managers has much exceeded those of index Portfolio III. Loss of opportunity for incremental returns.

A. Only (I) above

B. Only (II) above

C. Only (III) above

D. Both (II) and (III) above

9 / 20

Q: Benchmark Portfolio risk is defined as

A. the return difference between the Portfolio and the benchmark

B. the variance of the return of the benchmark Portfolio

C. the variance of the return difference between the Portfolio and the benchmark

D. the variance of the return of the actively-managed Portfolio

10 / 20

Q: A hybrid strategy is one where the investor

A. uses both fundamental and technical analysis to select stocks.

B. selects the stocks of companies that specialize in alternative fuels.

C. selects some actively-managed mutual funds on their own and uses an investment advisor to select other actively-managed funds.

D. maintains a passive core and augments the position with an actively managed Portfolio.

11 / 20

Q: What are the components in determining the real rate of return?

A. The risk premium

B. The inflation factor

C. The required rate of return

D. Neither a) nor b)

12 / 20

Q: According to the Efficient Market Hypothesis (EMH)I. Stocks with smaller beta will be consistently overpriced. II. Stocks with higher beta will be consistently underpriced. III. Positive alphas on stocks will not remain for a longer period.

A. Only (I) above

B. Only (III) above

C. Both (I) and (II) above

D. Both (II) and (III) above

13 / 20

Q: A long-term movement of prices, lasting from several months to years is called___

A. a minor trend

B. a primary trend

C. an intermediate trend

D. trend analysis

14 / 20

Q: ___is a device to overcome the uncertainty connected with a stop order.

A. Stop limit order

B. Stay limit order

C. Halt limit order

D. End limit order

15 / 20

Q: Which of the following statement(s) is/are true?I. A unique characteristic line is plotted for each security to determine the beta. II. For a characteristic line, the X-axis represents betas for different securities. III. The slope of the characteristic line is the difference between the market returns and risk-free returns.

A. Only (I) above

B. Only (II) above

C. Only (III) above

D. Both (I) and (II) above

16 / 20

Q: Aggressive Portfolio consists of bonds: stock in the ratio of

A. 60:40

B. 70:30

C. 40:60

D. 50:50

17 / 20

Q: If investors do not know their investment horizons for certain

A. the CAPM is no longer valid.

B. the CAPM underlying assumptions are not violated.

C. the implications of the CAPM are not violated as long as investors' liquidity needs are not pric

18 / 20

Q: The person within the brokerage office with whom an investor will have the most contact is

A. Authorized representative

B. Registered representative

C. Authorized person

D. Registered authority

19 / 20

Q: An industry in the expansion stage of its life cycle is indicated by its

C. High Dividend Pay-Out Ratio

D. High Default

A. Low P/E Ratio.

B. High P/E Ratio.

20 / 20

Q: Financial leverage may increase a corporation's risk because

A. operating income may stabilize

B. the firm has fixed obligations to meet

C. more common stock is outstanding

D. dividends must be paid

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