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MID TERM EXAMINATION
2009 fin630
Question No: 1 ( Marks: 1 ) - Please choose one
________ are qualified and regulated professionals who trade shares and other securities
through market makers on behalf of investors.
► Stock brokers
► Members
► Specialists
► Day traders
A stock broker is a qualified and regulated professional who buys and sells shares
and other securities through market makers on behalf of investors.
http://onlinetradingtutorial.org/brief-description-basics-of-online-share-trading
Question No: 2 ( Marks: 1 ) - Please choose one
Which of the following function removes the fear of buying or selling at rip off price?
► Fair pricing function
► Continuous pricing function► Economic function
► Exchange function
(handout page 7) The fair price function removes the fear of buying or selling at rip off
price.
Question No: 3 ( Marks: 1 ) - Please choose one
Which function of capital market facilitates transfer of money from savers to borrowers?
► Economic function
► Fair pricing function
► Exchange function
► Continuous pricing function
(Handout page 5) The most important function is the economic function. This
mechanism facilitates the transfer of money from savers to borrowers.
Question No: 4 ( Marks: 1 ) - Please choose one
___________ is a computerized device that relays financial information to investors
around the world, including the stock symbol, the latest price and the volume of securities
as they are traded.
► Super Dot
► NYSE Direct
► Ticker tape
► Trading Curb
http://www.investhub.com/glossary/Ticker-tape.htm
ticker tape Computerized device that relays to investors around the world the stock symbol and
the latest price and volume on securities as they are traded.
Question No: 5 ( Marks: 1 ) - Please choose one
Companies that have historically paid a larger than average percentage of their profit as
dividend to their shareholders is known as:
► Blue chip companies
► Cyclical companies
► Growth companies
► Income companies
(Handout page 24) Income stocks are those that have historically paid a larger than
average percentage of their NIAT as dividend to their shareholders.
Question No: 6 ( Marks: 1 ) - Please choose one
_________ think that supply and demand factors play the most important part.
► Ratio analysts
► Technical analysts
► Research analysts
► Fundamental analysts
(Handout page 40) Technical analysts think supply and demand factors play the most
important role.
Question No: 7 ( Marks: 1 ) - Please choose one
According to Dow Theory, primary trend is a:
► Short term trend
► Long term trend
► Medium term trend
► None of the given options
(Handout page 67) The primary trend is the long-term direction of the market and is the most important.
Question No: 8 ( Marks: 1 ) - Please choose one
Which of the following statement is FALSE about Elliot Wave Theory?
► It made extensive use of Fibonacci series
► It is based on repeating 8 waves’ cycles
► It identified three movements in security prices
► It was proposed by R.N. Elliot
Technical Analysis
R.N. Elliot formulated this idea in a series of articles in Financial World in 1939.
Elliot believed that the market has a rhythmic regularity that can be used to
predict future prices.
The Elliot Wave Principle is based on a repeating 8-wave cycle, and each cycle is
made up of similar shorter-term cycles (“Big fleas have little fleas upon their
backs to bite 'em - little fleas have smaller fleas and so on ad infinitem”).
Elliot Wave adherents also make extensive use of the Fibonacci series
Question No: 9 ( Marks: 1 ) - Please choose one
The idea of long term business cycle with a period of 50-60 years was proposed in which
of the following theory?
► Kondratev Wave Theory
► Dow Theory
► Elliot Wave Theory
► None of the given options
(Handout page 68) Kondratev wave theory states there is a 50- to 60-year business cycle.
Question No: 10 ( Marks: 1 ) - Please choose one
Current ratio is also known as:
► Working capital ratio
► Acid test ratio
► Debt coverage ratio
► Dividend yield ratio
(Handout page 82) current ratio is also known as the working capital ratio and is
normally presented as a real ratio.
Question No: 11 ( Marks: 1 ) - Please choose one
A ratio that indicates the extent to which a firm could pay its current liabilities without
relying on the sale of inventory is known as:
► Current ratio
► Quick ratio
► Inventory turnover ratio
► Debt coverage ratio
Quick Ratio: Quick ratio focuses on immediate liquidity (i.e., cash, accounts
receivable, etc.) but specifically ignores inventory. Also called the acid test ratio, it
indicates the extent to which you could pay current liabilities without relying on the
sale of inventory.http://www.missouribusiness.net/sbtdc/docs/financial_ratios.asp
Question No: 12 ( Marks: 1 ) - Please choose one
Which of the following ratio depicts a firm’s ability to cover its short-term obligations?
► Dividend yield ratio
► Return on assets ratio
► Debt coverage ratio
► Current ratio
(Handout page 83) Positive working capital means that the company is able to pay off its
short-term liabilities
Question No: 13 ( Marks: 1 ) - Please choose one
Which of the following ratios would NOT be used to draw a conclusion about a
company's managerial effectiveness?
► Return on investment
► Return on equity
► Net margin
► Price-Earnings ratio
(question 7)http://highered.mcgrawhill.com/sites/0073526797/student_view0/chapter13/multiple_choice_quiz.html
Question No: 14 ( Marks: 1 ) - Please choose one
Which of the following functions do mutual fund companies perform for their investors?
► Record keeping and administration
► Professional management
► Diversification and divisibility
► All of the given options
(question 4)http://highered.mcgrawhill.com/sites/007338237x/student_view0/chapter4/multiple_choice_quiz.html
Question No: 15 ( Marks: 1 ) - Please choose one
Which of the following is defined as an unmanaged, fixed-income security portfolio put
together by a sponsor and handled by an independent trustee?
► Unit investment trust
► Closed-end investment
► Open-end investment
► Money market fund
(Handout page 131)Unit Investment Trusts:
An alternative form of. Investment Company that deviates from the normal managed
type is the unit -investment trust, (OIT), which typically is an unmanaged, fixed-income
security portfolio put together by a sponsor and handled by an independent trustee.
Question No: 16 ( Marks: 1 ) - Please choose one
Which of the following stocks would be expected to adversely impact during periods of
high interest rates?
► Consumer durable shocks
► Interest-sensitive stocks
► Capital goods stocks
► Defensive stocks
(handout page 140)interest-sensitive stocks would be expected to be adversely impacted
during periods of high interest rates, arid such periods tend to occur at the latter stages of the business cycle.
Question No: 17 ( Marks: 1 ) - Please choose one
If an investor wants to avoid transaction costs, which of the following strategy should he
select?
► Active strategy
► Defensive strategy
► Buy and hold strategy
► Sector rotation
(page 138)Buy-And-Hold Strategy:
A buy-and-hold strategy means exactly that an investor buys stocks and basically holds
them until some future time in order to meet some objective. The emphasis is on
avoiding transaction costs, additional search costs, and so forth.
Question No: 18 ( Marks: 1 ) - Please choose one
Technical analysts ______________ fundamental analysis.
► Always incorporate
► Does not deny the value of
► Reject the value of
► Have no connection with
(question 8)http://highered.mcgrawhill.com/sites/0073405175/student_view0/chapter9/multiple_choice_quiz.html
Question No: 19 ( Marks: 1 ) - Please choose one
Who was the grand father of technical analysis?
► Harry Markowitz
► William Sharpe
► Charles Dow
► Benjamin Graham
(Handout page 67)Charles Dow was one of the founders of Dow Jones & Co. (DJ,
NYSE), publisher of The Wall Street Journal.
(Question 18)
http://webcache.googleusercontent.com/search?q=cache:iQ6jd_D_GPQJ:www2.cob
.ilstu.edu/gnnaidu/Tb/Chap012.RTF+Who+was+the+grand+father+of+technical+an
alysis%3F&cd=3&hl=en&ct=clnk&source=www.google.com
Question No: 20 ( Marks: 1 ) - Please choose one
The direct trade between large institutional investors takes place in which of the
following market?
► Primary market
► Secondary market
► Third market
► Fourth market
(Handout page 12)Direct trades between large institutional investors comprise the
fourth market.
Question No: 21 ( Marks: 1 ) - Please choose one
Which of the following statement is TRUE about value investors?
► They are patient
► They seek rapidly growing companies
► They are speculators
► They seek slow growing companies(page 88)http://books.google.com/books?id=-
J3rVW9qydEC&pg=PA88&lpg=PA88&dq=%22value+investors+are+patient%22
&source=bl&ots=nFYEEhIjy&sig=CEXXKS47PUmo8FNm7mIacKcT_aA&hl=en&ei=oQt9Tf_xNpDIrQeRx
YjDg&sa=X&oi=book_result&ct=result&resnum=7&sqi=2&ved=0CDsQ6AEwBg#v=
onepage&q=%22value%20investors%20are%20patient%22&f=false
Question No: 22 ( Marks: 1 ) - Please choose one
In point and figure chart, what does X indicates?
► Market price is going up
► Market price is going down
► Market price remains constant
► Market price is fluctuating
(Handout page 56) The X represents the prices increase and the O represents the price
decline. http://www.incrediblecharts.com/technical/point_figure_chart.php
Question No: 23 ( Marks: 1 ) - Please choose one
Which of the following statement about a security is true, if it's beta > 1.0?
► Security is more risky than the market
► Security is less risky than market
► Security is exactly as risky as maket
► It is not possible to predict riskiness of a security by beta
(Handout page 137) A stock with a beta lower than 1.0 has a required rate of return
below kM, because its risk (beta) is less than that of the market. On the other hand, a
stock with a beta greater than 1.0 has a required rate of return greater than that of the
market.
Question No: 24 ( Marks: 1 ) - Please choose one
Which of the following is a characteristic of line chart?
► It is efficient in showing more details
► It is simplest and most familiar chart
► It show the highest degree of accuracy
► It can be used for comparing three values
(Handout page 55)The line chart is the simplest and most familiar.
Question No: 25 ( Marks: 1 ) - Please choose one
In a candlestick chart, what does black body candle depict?
► Prices are moving up
► Prices are moving down
► Prices are constant
► Prices are fluctuating
(page 56) The principle difference between a daily candlestick chart and a bar chart is
the white and black candles augmenting the daily trading range lines. White candles
represent stock advances, with black candle representing declines.
Question No: 26 ( Marks: 1 ) - Please choose one
Who has introduced the On Balance Volume technique of technical analysis?
► Charles Dow
► Joseph Granville
► John Bollinger ► Welles Wilder
(Page 150)
http://books.google.com/books?id=AmQh8Zm34zgC&pg=PA150&dq=introduced+the+
On+Balance+Volume+technique+of+technical+analysis&hl=en&ei=JgV1TemZMYPpr
Qe1iaH9Bg&sa=X&oi=book_result&ct=result&resnum=1&ved=0CC0Q6AEwAA#v=on
epage&q&f=false
(PAGE 416)
http://books.google.com/books?id=I5SgX5q5sQEC&pg=PA416&dq=introduced+the+On
+Balance+Volume+technique+of+technical+analysis&hl=en&ei=JgV1TemZMYPprQe1
iaH9Bg&sa=X&oi=book_result&ct=result&resnum=4&ved=0CD0Q6AEwAw#v=onepa
ge&q&f=false
Question No: 27 ( Marks: 1 ) - Please choose one
Which of the following is calculated by dividing gross profit by net sales?
► Gross margin
► Operating margin
► Net margin
► Profit margin
(Handout page 83)Gross Profit Margin = Gross Profit / Net Sales * 100
Question No: 28 ( Marks: 1 ) - Please choose one
When a company’s market value is divided by sales, it is known as:
► Net income margin
► Price-to-market value ratio
► Price-to-book value ratio
► Price-to-sales ratio
(Handout page 107)Net income margin = Net income/Sales
Question No: 29 ( Marks: 1 ) - Please choose one
Which of the following is TRUE regarding price earning ratio?
► P/E=Earnings available to common stockholders/outstanding shares
► P/E=Market price per share/dividend per share
► P/E=Market price per share/earning per share
► P/E=Dividend per share/earning per share
(Handout page 86)P/E = Current Market Share Price / EPS
Question No: 30 ( Marks: 1 ) - Please choose one
Which of the following situations implies an upward sloping curve?
► Accelerating economic activity
► Static economic activity
► Slowing economic activity
► A recession period
Economy/Market Analysis
Upward sloping and steepening curve implies accelerating economic activity http://www.ysapak.com/YSAforum/index.php/topic,4416.new.html#new
2009 fin630
Question No: 1 ( Marks: 1 ) - Please choose one
________ are qualified and regulated professionals who trade shares and other securities
through market makers on behalf of investors.
► Stock brokers
► Members
► Specialists
► Day traders
A stock broker is a qualified and regulated professional who buys and sells shares
and other securities through market makers on behalf of investors.
http://onlinetradingtutorial.org/brief-description-basics-of-online-share-trading
Question No: 2 ( Marks: 1 ) - Please choose one
Which of the following function removes the fear of buying or selling at rip off price?
► Fair pricing function
► Continuous pricing function► Economic function
► Exchange function
(handout page 7) The fair price function removes the fear of buying or selling at rip off
price.
Question No: 3 ( Marks: 1 ) - Please choose one
Which function of capital market facilitates transfer of money from savers to borrowers?
► Economic function
► Fair pricing function
► Exchange function
► Continuous pricing function
(Handout page 5) The most important function is the economic function. This
mechanism facilitates the transfer of money from savers to borrowers.
Question No: 4 ( Marks: 1 ) - Please choose one
___________ is a computerized device that relays financial information to investors
around the world, including the stock symbol, the latest price and the volume of securities
as they are traded.
► Super Dot
► NYSE Direct
► Ticker tape
► Trading Curb
http://www.investhub.com/glossary/Ticker-tape.htm
ticker tape Computerized device that relays to investors around the world the stock symbol and
the latest price and volume on securities as they are traded.
Question No: 5 ( Marks: 1 ) - Please choose one
Companies that have historically paid a larger than average percentage of their profit as
dividend to their shareholders is known as:
► Blue chip companies
► Cyclical companies
► Growth companies
► Income companies
(Handout page 24) Income stocks are those that have historically paid a larger than
average percentage of their NIAT as dividend to their shareholders.
Question No: 6 ( Marks: 1 ) - Please choose one
_________ think that supply and demand factors play the most important part.
► Ratio analysts
► Technical analysts
► Research analysts
► Fundamental analysts
(Handout page 40) Technical analysts think supply and demand factors play the most
important role.
Question No: 7 ( Marks: 1 ) - Please choose one
According to Dow Theory, primary trend is a:
► Short term trend
► Long term trend
► Medium term trend
► None of the given options
(Handout page 67) The primary trend is the long-term direction of the market and is the most important.
Question No: 8 ( Marks: 1 ) - Please choose one
Which of the following statement is FALSE about Elliot Wave Theory?
► It made extensive use of Fibonacci series
► It is based on repeating 8 waves’ cycles
► It identified three movements in security prices
► It was proposed by R.N. Elliot
Technical Analysis
R.N. Elliot formulated this idea in a series of articles in Financial World in 1939.
Elliot believed that the market has a rhythmic regularity that can be used to
predict future prices.
The Elliot Wave Principle is based on a repeating 8-wave cycle, and each cycle is
made up of similar shorter-term cycles (“Big fleas have little fleas upon their
backs to bite 'em - little fleas have smaller fleas and so on ad infinitem”).
Elliot Wave adherents also make extensive use of the Fibonacci series
Question No: 9 ( Marks: 1 ) - Please choose one
The idea of long term business cycle with a period of 50-60 years was proposed in which
of the following theory?
► Kondratev Wave Theory
► Dow Theory
► Elliot Wave Theory
► None of the given options
(Handout page 68) Kondratev wave theory states there is a 50- to 60-year business cycle.
Question No: 10 ( Marks: 1 ) - Please choose one
Current ratio is also known as:
► Working capital ratio
► Acid test ratio
► Debt coverage ratio
► Dividend yield ratio
(Handout page 82) current ratio is also known as the working capital ratio and is
normally presented as a real ratio.
Question No: 11 ( Marks: 1 ) - Please choose one
A ratio that indicates the extent to which a firm could pay its current liabilities without
relying on the sale of inventory is known as:
► Current ratio
► Quick ratio
► Inventory turnover ratio
► Debt coverage ratio
Quick Ratio: Quick ratio focuses on immediate liquidity (i.e., cash, accounts
receivable, etc.) but specifically ignores inventory. Also called the acid test ratio, it
indicates the extent to which you could pay current liabilities without relying on the
sale of inventory.http://www.missouribusiness.net/sbtdc/docs/financial_ratios.asp
Question No: 12 ( Marks: 1 ) - Please choose one
Which of the following ratio depicts a firm’s ability to cover its short-term obligations?
► Dividend yield ratio
► Return on assets ratio
► Debt coverage ratio
► Current ratio
(Handout page 83) Positive working capital means that the company is able to pay off its
short-term liabilities
Question No: 13 ( Marks: 1 ) - Please choose one
Which of the following ratios would NOT be used to draw a conclusion about a
company's managerial effectiveness?
► Return on investment
► Return on equity
► Net margin
► Price-Earnings ratio
(question 7)http://highered.mcgrawhill.com/sites/0073526797/student_view0/chapter13/multiple_choice_quiz.html
Question No: 14 ( Marks: 1 ) - Please choose one
Which of the following functions do mutual fund companies perform for their investors?
► Record keeping and administration
► Professional management
► Diversification and divisibility
► All of the given options
(question 4)http://highered.mcgrawhill.com/sites/007338237x/student_view0/chapter4/multiple_choice_quiz.html
Question No: 15 ( Marks: 1 ) - Please choose one
Which of the following is defined as an unmanaged, fixed-income security portfolio put
together by a sponsor and handled by an independent trustee?
► Unit investment trust
► Closed-end investment
► Open-end investment
► Money market fund
(Handout page 131)Unit Investment Trusts:
An alternative form of. Investment Company that deviates from the normal managed
type is the unit -investment trust, (OIT), which typically is an unmanaged, fixed-income
security portfolio put together by a sponsor and handled by an independent trustee.
Question No: 16 ( Marks: 1 ) - Please choose one
Which of the following stocks would be expected to adversely impact during periods of
high interest rates?
► Consumer durable shocks
► Interest-sensitive stocks
► Capital goods stocks
► Defensive stocks
(handout page 140)interest-sensitive stocks would be expected to be adversely impacted
during periods of high interest rates, arid such periods tend to occur at the latter stages of the business cycle.
Question No: 17 ( Marks: 1 ) - Please choose one
If an investor wants to avoid transaction costs, which of the following strategy should he
select?
► Active strategy
► Defensive strategy
► Buy and hold strategy
► Sector rotation
(page 138)Buy-And-Hold Strategy:
A buy-and-hold strategy means exactly that an investor buys stocks and basically holds
them until some future time in order to meet some objective. The emphasis is on
avoiding transaction costs, additional search costs, and so forth.
Question No: 18 ( Marks: 1 ) - Please choose one
Technical analysts ______________ fundamental analysis.
► Always incorporate
► Does not deny the value of
► Reject the value of
► Have no connection with
(question 8)http://highered.mcgrawhill.com/sites/0073405175/student_view0/chapter9/multiple_choice_quiz.html
Question No: 19 ( Marks: 1 ) - Please choose one
Who was the grand father of technical analysis?
► Harry Markowitz
► William Sharpe
► Charles Dow
► Benjamin Graham
(Handout page 67)Charles Dow was one of the founders of Dow Jones & Co. (DJ,
NYSE), publisher of The Wall Street Journal.
(Question 18)
http://webcache.googleusercontent.com/search?q=cache:iQ6jd_D_GPQJ:www2.cob
.ilstu.edu/gnnaidu/Tb/Chap012.RTF+Who+was+the+grand+father+of+technical+an
alysis%3F&cd=3&hl=en&ct=clnk&source=www.google.com
Question No: 20 ( Marks: 1 ) - Please choose one
The direct trade between large institutional investors takes place in which of the
following market?
► Primary market
► Secondary market
► Third market
► Fourth market
(Handout page 12)Direct trades between large institutional investors comprise the
fourth market.
Question No: 21 ( Marks: 1 ) - Please choose one
Which of the following statement is TRUE about value investors?
► They are patient
► They seek rapidly growing companies
► They are speculators
► They seek slow growing companies(page 88)http://books.google.com/books?id=-
J3rVW9qydEC&pg=PA88&lpg=PA88&dq=%22value+investors+are+patient%22
&source=bl&ots=nFYEEhIjy&sig=CEXXKS47PUmo8FNm7mIacKcT_aA&hl=en&ei=oQt9Tf_xNpDIrQeRx
YjDg&sa=X&oi=book_result&ct=result&resnum=7&sqi=2&ved=0CDsQ6AEwBg#v=
onepage&q=%22value%20investors%20are%20patient%22&f=false
Question No: 22 ( Marks: 1 ) - Please choose one
In point and figure chart, what does X indicates?
► Market price is going up
► Market price is going down
► Market price remains constant
► Market price is fluctuating
(Handout page 56) The X represents the prices increase and the O represents the price
decline. http://www.incrediblecharts.com/technical/point_figure_chart.php
Question No: 23 ( Marks: 1 ) - Please choose one
Which of the following statement about a security is true, if it's beta > 1.0?
► Security is more risky than the market
► Security is less risky than market
► Security is exactly as risky as maket
► It is not possible to predict riskiness of a security by beta
(Handout page 137) A stock with a beta lower than 1.0 has a required rate of return
below kM, because its risk (beta) is less than that of the market. On the other hand, a
stock with a beta greater than 1.0 has a required rate of return greater than that of the
market.
Question No: 24 ( Marks: 1 ) - Please choose one
Which of the following is a characteristic of line chart?
► It is efficient in showing more details
► It is simplest and most familiar chart
► It show the highest degree of accuracy
► It can be used for comparing three values
(Handout page 55)The line chart is the simplest and most familiar.
Question No: 25 ( Marks: 1 ) - Please choose one
In a candlestick chart, what does black body candle depict?
► Prices are moving up
► Prices are moving down
► Prices are constant
► Prices are fluctuating
(page 56) The principle difference between a daily candlestick chart and a bar chart is
the white and black candles augmenting the daily trading range lines. White candles
represent stock advances, with black candle representing declines.
Question No: 26 ( Marks: 1 ) - Please choose one
Who has introduced the On Balance Volume technique of technical analysis?
► Charles Dow
► Joseph Granville
► John Bollinger ► Welles Wilder
(Page 150)
http://books.google.com/books?id=AmQh8Zm34zgC&pg=PA150&dq=introduced+the+
On+Balance+Volume+technique+of+technical+analysis&hl=en&ei=JgV1TemZMYPpr
Qe1iaH9Bg&sa=X&oi=book_result&ct=result&resnum=1&ved=0CC0Q6AEwAA#v=on
epage&q&f=false
(PAGE 416)
http://books.google.com/books?id=I5SgX5q5sQEC&pg=PA416&dq=introduced+the+On
+Balance+Volume+technique+of+technical+analysis&hl=en&ei=JgV1TemZMYPprQe1
iaH9Bg&sa=X&oi=book_result&ct=result&resnum=4&ved=0CD0Q6AEwAw#v=onepa
ge&q&f=false
Question No: 27 ( Marks: 1 ) - Please choose one
Which of the following is calculated by dividing gross profit by net sales?
► Gross margin
► Operating margin
► Net margin
► Profit margin
(Handout page 83)Gross Profit Margin = Gross Profit / Net Sales * 100
Question No: 28 ( Marks: 1 ) - Please choose one
When a company’s market value is divided by sales, it is known as:
► Net income margin
► Price-to-market value ratio
► Price-to-book value ratio
► Price-to-sales ratio
(Handout page 107)Net income margin = Net income/Sales
Question No: 29 ( Marks: 1 ) - Please choose one
Which of the following is TRUE regarding price earning ratio?
► P/E=Earnings available to common stockholders/outstanding shares
► P/E=Market price per share/dividend per share
► P/E=Market price per share/earning per share
► P/E=Dividend per share/earning per share
(Handout page 86)P/E = Current Market Share Price / EPS
Question No: 30 ( Marks: 1 ) - Please choose one
Which of the following situations implies an upward sloping curve?
► Accelerating economic activity
► Static economic activity
► Slowing economic activity
► A recession period
Economy/Market Analysis
Upward sloping and steepening curve implies accelerating economic activity http://www.ysapak.com/YSAforum/index.php/topic,4416.new.html#new