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MIDTERM EXAMINATION
Spring 2010
FIN630- Investment Analysis & Portfolio Management (Session - 5)
Question No: 1 ( Marks: 1 ) - Please choose one
_________ provides an automatic execution of limit orders up to 1,099 shares at
the best bid or offer.
► SuperDOT► NASDAQ
► Auction market
► NYSE direct
https://www.nyse.com/marketinfo/hybmarket/1126821290345.html
NYSE Direct+, an automatic-execution service for limit orders of up to 1,099 shares,
enables users to opt for an immediate execution at the best bid or offer, without a
fee and with anonymity and speed. The average execution time is 0.36 seconds
http://www.nyse.com/about/history/timeline_technology.html
Question No: 2 ( Marks: 1 ) - Please choose one
The trading of listed securities in the NASDAQ market is known as:
► Primary market
► Third market
► Secondary market
► Fourth market
(page 12) The trading of listed securities in the NASDAQ market is known as the
third market.
Question No: 3 ( Marks: 1 ) - Please choose one
A self-regulatory body that licenses brokers and generally oversees the trading
practices of Over the counter(OTC) securities is known as __________ .
► Securities and Exchange Commission (SEC)
► National Association of Security Dealers (NASD)
► Initial Public Offering (IPO)
► Offered for Sale (OFS)
(page 14) The National Association of Securities Dealers (NASD) is a self-regulatory
body that licenses brokers and generally oversees trading practices.
Question No: 4 ( 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
(page 25)Income stocks are those that have historically paid a larger than average
percentage of their NIAT as dividend to their shareholders
(page 289)http://books.google.com/books?id=fkrYsLrekAC&pg=PA289&lpg=PA289&dq=Companies+that+have+historically+paid
+a+larger+than+average+percentage+of+their+profit+as+dividend+to+their+share
holders&source=bl&ots=MPpAv1ms9w&sig=Q7JYowrauH8NATYUPhlJo_iGUFQ
&hl=en&ei=aMZ9Tda8IcfprQfs06XMBQ&sa=X&oi=book_result&ct=result&resn
um=8&ved=0CEsQ6AEwBw#v=onepage&q=Companies%20that%20have%20hist
orically%20paid%20a%20larger%20than%20average%20percentage%20of%20th
eir%20profit%20as%20dividend%20to%20their%20shareholders&f=false
Question No: 5 ( Marks: 1 ) - Please choose one
Which of the following is suitable for analyzing short term investments?
► Horizontal analysis
► Fundamental analysis
► Technical analysis
► Ratio analysis
For short term investment goals technical analysis is more suitable.http://www.getmoneyrich.com/how-to-predict-future-price-of-stocks/
Question No: 6 ( Marks: 1 ) - Please choose one
A procedure for valuing the price of a stock by using predicted dividends and
discounting them back to present value is known as.
► Dividend Discount Model
► The Residual Earning Model
► None of the given options
► Capital Asset Pricing Model
A procedure for valuing the price of a stock by using predicted dividends and
discounting them back to present value. The idea is that if the value obtained from
the DDM is higher than what the shares are currently trading at, then the stock is
undervalued.
http://www.investopedia.com/terms/d/ddm.asp
Question No: 7 ( Marks: 1 ) - Please choose one
A good time is characterized by which of following situation?
Market prices moving above the moving average
Market prices moving below the moving average
Market prices exactly same as moving average
None of the given options
bullish signal is generated when prices move above the moving
average. A bearish signal is generated when prices move below the
moving average
http://stockcharts.com/school/doku.php?id=chart_school:technical_in
dicators:moving_averages
(page 29)
http://books.google.com.pk/books?id=ZproZYDvKqsC&pg=PA29&lpg=P
A29&dq=A+good+time+is+characterized+by+%EF%80%A0Market+pri
ces+moving+below+the+moving+average%EF%80%A0%EF%80%A0
%EF%80%A0%EF%80%A0%EF%80%A0%EF%80%A0%EF%80%A0
%EF%80%A0&source=bl&ots=AJA0WzNsN6&sig=yYccUFz63m4SDXCN
h5N0N6fwzQk&hl=en&ei=Rvl9TajvCMiWhQfvlM3yBg&sa=X&oi=book_re
sult&ct=result&resnum=8&ved=0CEEQ6AEwBw#v=onepage&q&f=false
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 ►
Question No: 9 ( Marks: 1 ) - Please choose one
Which of the following depicts ratio of share price to stockholder equity?
Debt coverage ratio ►
Price-to-sales ratio ►
Price-to-market value ratio►
Price-to-book value ratio ►
http://books.google.com.pk/books?id=fJ9dj4kCo0AC&pg=PA100&dq=
Price-to-market+value+ratio&hl=en&ei=lf19TcPHOIWnrAeGwYTDg&sa=X&oi=book_result&ct=result&resnum=3&ved=0CDUQ6AEwAg#
v=onepage&q&f=falseThe price-to-book ratio, or P/B ratio, is a financial ratio used to compare a
company's book value to its current market price. Book value is an accounting term
denoting the portion of the company held by the shareholder
http://en.wikipedia.org/wiki/P/B_ratio
Question No: 10 ( Marks: 1 ) - Please choose one
On which of the following financial statements, revenues and expenses can be
found?
► Balance sheet
► Income statement
► Statement of cash flows
► Statement of changes in equity
(page 115) (the result after all revenues and expenses have been accounted for, also
known as the "bottom line").
Question No: 11 ( Marks: 1 ) - Please choose one
Which of the following is a basket of stocks that tracks a particular sector,
investment style, geographical area, or the market as a whole?
► Exchange traded fund
► Open-end fund
► Closed-end fund
► Unit investment trust
(page 135) An ETF is a basket of stocks that tracks a particular sector, investment
style, geographical area, or the market as a whole.
Question No: 12 ( Marks: 1 ) - Please choose one
Which of the following is defined as an investment strategy that involves ongoing
buying and selling actions by the investors?
► Make or Buy strategy
► Active strategy
► Passive strategy
► Buy-and-Hold strategy
An active investment strategy involves ongoing buying and selling
actions by the investor. http://www.boomerandecho.com/how-toinvest-your-money-part-three-finding-your-strategy/
http://www.investopedia.com/terms/a/activeinvesting.asp
Question No: 13 ( Marks: 1 ) - Please choose one
Which of the following is an example of brokerage fee charged by a stockbroker?
► Margin profit
► Insurance premium
► Transaction cost
► Capital expenditure
(Q#13)http://highered.mcgrawhill.com/sites/0073523097/student_view0/chapter3/quiz_1.html
Question No: 14 ( Marks: 1 ) - Please choose one
Which of the following would be considered as the most bullish indicator?
► A price decrease with heavy volume
► A price increase with small volume
► A price increase on heavy trading
► No change in price but an increase in volume
Question No: 15 ( Marks: 1 ) - Please choose oneFinancial securities with a maturity of less than a year from their original issue
date are sold in which of following market?
► Money market
► Bond market
► Equity market
► Derivative market
(page233)
http://books.google.com/books?id=QVoxIhN_y1gC&pg=PA233&dq=Fi
nancial+securities+with+a+maturity+of+less+than+a+year&hl=en&ei
=iwZTduUBsP3rQeThaDGBQ&sa=X&oi=book_result&ct=result&resnum=1&v
ed=0CCcQ6AEwAA#v=onepage&q=Financial%20securities%20with%2
0a%20maturity%20of%20less%20than%20a%20year&f=false
Question No: 16 ( Marks: 1 ) - Please choose one
_____________ enables market participants to get accurate and up-to-date
price information.
► Fair pricing function
► Continuous pricing function
► Economic function
► Exchange function
(page 6)The continuous price function enables market participants to get accurate, up-todate price information.
Question No: 17 ( Marks: 1 ) - Please choose one
The average price of a security or currency over a specified time period used to
spot pricing trends by smoothing out the large fluctuations is known as:
► Moving Average
► Standard deviation
► Variance
► Beta
(EMA) — The average price of a security or currency over a specified
time period used to spot pricing trends by smoothing out the large
fluctuations. The exponential variety assigns more value or weight to
the most recent data
http://www.metaglossary.com/meanings/248146/
Question No: 18 ( Marks: 1 ) - Please choose one
An investor will purchase shares of companies in the development stage for:
► Current income
► Current income and capital gains
► Passive losses to offset other income
► Capital gains only
An investor will purchase shares of companies in the development stage
for:
A) Current income only
B) Current income and capital gains
C) Capital gains only
D) Passive losses to offset other income
Answer: C
http://www1.emath.pu.edu.tw/chchang/test006.pdfQuestion No: 19 ( Marks: 1 ) - Please choose one
Which of the following industry is NOT sensitive to business cycle and price
changes?
► Defensive industry
► Interest sensitive industry
► Growth industry
► Cyclical industry
defensive industries have little sensitivity to the business cycle. These are
the industries that produce goods for which sales and profits are least
sensitive to the state of economy.
http://webcache.googleusercontent.com/search?q=cache:8Ho6pX3s5CkJ:www.man
agementparadise.com/uploads_blog/210000/209942/0_2345.ppt+%22Defensive+indu
stry+is+NOT+sensitive+to+business+cycle+%22&cd=8&hl=en&ct=clnk&client=gm
ail&source=www.google.com
A defensive industry is one that is relatively insensitive to changes in the economic
environment.
http://www.stockboulevard.com/tutorial/index.php?action=tutorial10
Question No: 20 ( Marks: 1 ) - Please choose one
Which of the following categories is NOT a financial statement element?
► Cash flow
► Contributed capital
► Assets
► Distributions
(q#3)https://highered.mcgrawhill.com/sites/0073526770/student_view0/chapter1/online_quizzes.html
Question No: 21 ( 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: 22 ( Marks: 1 ) - Please choose one
A bad time in market will persist when the market prices move:
► Above the moving average
► Below the moving average
► Exactly same as moving average
► Firstly up then down the moving average
Question No: 23 ( Marks: 1 ) - Please choose one
What does price earning ratio indicate?
► It indicates how many interest payments could be made with a firm's
earnings.
► It indicates how much investors pay for Rs.1 earning of the company.
► It indicates the percentage of earnings paid to shareholders.
► It indicates the per share profit available for distribution to the shareholders.(page 86)The P/E ratio is a vital ratio for investors. Basically, it gives us an
indication of the confidence that investors have in the future prosperity of the business.
A P/E ratio of 1 shows very little confidence in that business whereas a P/E ratio of 20
expresses a great deal of optimism about the future of a business. Here's the formula;
P/E = Current Market Share Price / EPS
Question No: 24 ( 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
Question No: 25 ( Marks: 1 ) - Please choose one
Which of the following stock’s price move in opposite direction to that of interest
rates?
► Growth stock
► Value stock
► Interest sensitive stock
► Defensive stock
Interest-sensitive stock
A stock that tends to move in the opposite direction from that of interest
rates. http://www.infoplease.com/finance/tools/glossary.html
Question No: 26 ( Marks: 1 ) - Please choose one
Which of the following is NOT a component of ROA?
► Turnover
► Leverage
► Sales
► Net income margin
(page 107)ROA is an important measure of the firm’s profitability. It is a product of
two factors,
ROA = Net income margin × Turnover
Net income margin = Net income/Sales
Turnover = Sales/ Total Assets
Question No: 27 ( Marks: 1 ) - Please choose one
Which of the following statement about the types of the orders is LEAST
accurate?
► Market orders are orders to buy or sell at the best price available.
► Limit orders are orders to buy or sell at or away from the market price.
► A stop buy order is used to protect a short position in a security and is
placed below the current market price.
► Limit order must specify a price and a time limit.
(page141)
http://books.google.com/books?id=pagDs_H827IC&pg=PA141&dq=Li
mit+orders+are+orders+to+buy+or+sell+at+or+away+from+the+mar
ket+price.&hl=en&ei=kBlTfa_M9GxrAe4kszEBQ&sa=X&oi=book_result&ct=result&resnum=2&ve
d=0CCwQ6AEwAQ#v=onepage&q=Limit%20orders%20are%20orders%20to%20buy%20or%20sell%20at%20or%20away%20from%20the
%20market%20price.&f=false
http://en.wikipedia.org/wiki/Order_%28exchange%29
A buy stop order is typically used to limit a loss (or to protect an existing profit) on a
short sale.
[12]
A buy stop price is always above the current market price.
(page45)
http://books.google.com/books?id=vmhYIcuYB8cC&pg=PA43&dq=%E
2%96%BA+Market+orders+are+orders+to+buy+or+sell+at+the+best
+price+available.+%E2%96%BA+Limit+orders+are+orders+to+buy+o
r+sell+at+or+away+from+the+market+price.++%E2%96%BA+A+sto
p+buy+order+is+used+to+protect+a+short+position+in+a+security+a
nd+is+placed+below+the+current+market+price.+%E2%96%BA+Limi
t+order+must+specify+a+price+and+a+time+limit.&hl=en&ei=whxTbHEJontrAeegOHOBQ&sa=X&oi=book_result&ct=result&resnum=2&ve
d=0CCwQ6AEwAQ#v=onepage&q&f=false
(page 4)
http://wenku.baidu.com/view/af3706f7ba0d4a7302763add.html
Question No: 28 ( Marks: 1 ) - Please choose one
Which of the following statements regarding life cycle of an industry is MOST
accurate?
► In the pioneering phase, profits are small or negative.
► In the mature growth phase, sales growth falls below normal for the first time.
► During the stabilization phase, growth rates are still above the growth rates in
economy.
► The growth of the substitute products increases total market share & causes
profits to increase in the deceleration phase.
(Handout page 98)
http://www.wiziq.com/tutorial/23582-Equities (slide #8) http://www.ysapak.com/YSAforum/index.php/topic,4418.new.html#new
Spring 2010
FIN630- Investment Analysis & Portfolio Management (Session - 5)
Question No: 1 ( Marks: 1 ) - Please choose one
_________ provides an automatic execution of limit orders up to 1,099 shares at
the best bid or offer.
► SuperDOT► NASDAQ
► Auction market
► NYSE direct
https://www.nyse.com/marketinfo/hybmarket/1126821290345.html
NYSE Direct+, an automatic-execution service for limit orders of up to 1,099 shares,
enables users to opt for an immediate execution at the best bid or offer, without a
fee and with anonymity and speed. The average execution time is 0.36 seconds
http://www.nyse.com/about/history/timeline_technology.html
Question No: 2 ( Marks: 1 ) - Please choose one
The trading of listed securities in the NASDAQ market is known as:
► Primary market
► Third market
► Secondary market
► Fourth market
(page 12) The trading of listed securities in the NASDAQ market is known as the
third market.
Question No: 3 ( Marks: 1 ) - Please choose one
A self-regulatory body that licenses brokers and generally oversees the trading
practices of Over the counter(OTC) securities is known as __________ .
► Securities and Exchange Commission (SEC)
► National Association of Security Dealers (NASD)
► Initial Public Offering (IPO)
► Offered for Sale (OFS)
(page 14) The National Association of Securities Dealers (NASD) is a self-regulatory
body that licenses brokers and generally oversees trading practices.
Question No: 4 ( 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
(page 25)Income stocks are those that have historically paid a larger than average
percentage of their NIAT as dividend to their shareholders
(page 289)http://books.google.com/books?id=fkrYsLrekAC&pg=PA289&lpg=PA289&dq=Companies+that+have+historically+paid
+a+larger+than+average+percentage+of+their+profit+as+dividend+to+their+share
holders&source=bl&ots=MPpAv1ms9w&sig=Q7JYowrauH8NATYUPhlJo_iGUFQ
&hl=en&ei=aMZ9Tda8IcfprQfs06XMBQ&sa=X&oi=book_result&ct=result&resn
um=8&ved=0CEsQ6AEwBw#v=onepage&q=Companies%20that%20have%20hist
orically%20paid%20a%20larger%20than%20average%20percentage%20of%20th
eir%20profit%20as%20dividend%20to%20their%20shareholders&f=false
Question No: 5 ( Marks: 1 ) - Please choose one
Which of the following is suitable for analyzing short term investments?
► Horizontal analysis
► Fundamental analysis
► Technical analysis
► Ratio analysis
For short term investment goals technical analysis is more suitable.http://www.getmoneyrich.com/how-to-predict-future-price-of-stocks/
Question No: 6 ( Marks: 1 ) - Please choose one
A procedure for valuing the price of a stock by using predicted dividends and
discounting them back to present value is known as.
► Dividend Discount Model
► The Residual Earning Model
► None of the given options
► Capital Asset Pricing Model
A procedure for valuing the price of a stock by using predicted dividends and
discounting them back to present value. The idea is that if the value obtained from
the DDM is higher than what the shares are currently trading at, then the stock is
undervalued.
http://www.investopedia.com/terms/d/ddm.asp
Question No: 7 ( Marks: 1 ) - Please choose one
A good time is characterized by which of following situation?
Market prices moving above the moving average
Market prices moving below the moving average
Market prices exactly same as moving average
None of the given options
bullish signal is generated when prices move above the moving
average. A bearish signal is generated when prices move below the
moving average
http://stockcharts.com/school/doku.php?id=chart_school:technical_in
dicators:moving_averages
(page 29)
http://books.google.com.pk/books?id=ZproZYDvKqsC&pg=PA29&lpg=P
A29&dq=A+good+time+is+characterized+by+%EF%80%A0Market+pri
ces+moving+below+the+moving+average%EF%80%A0%EF%80%A0
%EF%80%A0%EF%80%A0%EF%80%A0%EF%80%A0%EF%80%A0
%EF%80%A0&source=bl&ots=AJA0WzNsN6&sig=yYccUFz63m4SDXCN
h5N0N6fwzQk&hl=en&ei=Rvl9TajvCMiWhQfvlM3yBg&sa=X&oi=book_re
sult&ct=result&resnum=8&ved=0CEEQ6AEwBw#v=onepage&q&f=false
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 ►
Question No: 9 ( Marks: 1 ) - Please choose one
Which of the following depicts ratio of share price to stockholder equity?
Debt coverage ratio ►
Price-to-sales ratio ►
Price-to-market value ratio►
Price-to-book value ratio ►
http://books.google.com.pk/books?id=fJ9dj4kCo0AC&pg=PA100&dq=
Price-to-market+value+ratio&hl=en&ei=lf19TcPHOIWnrAeGwYTDg&sa=X&oi=book_result&ct=result&resnum=3&ved=0CDUQ6AEwAg#
v=onepage&q&f=falseThe price-to-book ratio, or P/B ratio, is a financial ratio used to compare a
company's book value to its current market price. Book value is an accounting term
denoting the portion of the company held by the shareholder
http://en.wikipedia.org/wiki/P/B_ratio
Question No: 10 ( Marks: 1 ) - Please choose one
On which of the following financial statements, revenues and expenses can be
found?
► Balance sheet
► Income statement
► Statement of cash flows
► Statement of changes in equity
(page 115) (the result after all revenues and expenses have been accounted for, also
known as the "bottom line").
Question No: 11 ( Marks: 1 ) - Please choose one
Which of the following is a basket of stocks that tracks a particular sector,
investment style, geographical area, or the market as a whole?
► Exchange traded fund
► Open-end fund
► Closed-end fund
► Unit investment trust
(page 135) An ETF is a basket of stocks that tracks a particular sector, investment
style, geographical area, or the market as a whole.
Question No: 12 ( Marks: 1 ) - Please choose one
Which of the following is defined as an investment strategy that involves ongoing
buying and selling actions by the investors?
► Make or Buy strategy
► Active strategy
► Passive strategy
► Buy-and-Hold strategy
An active investment strategy involves ongoing buying and selling
actions by the investor. http://www.boomerandecho.com/how-toinvest-your-money-part-three-finding-your-strategy/
http://www.investopedia.com/terms/a/activeinvesting.asp
Question No: 13 ( Marks: 1 ) - Please choose one
Which of the following is an example of brokerage fee charged by a stockbroker?
► Margin profit
► Insurance premium
► Transaction cost
► Capital expenditure
(Q#13)http://highered.mcgrawhill.com/sites/0073523097/student_view0/chapter3/quiz_1.html
Question No: 14 ( Marks: 1 ) - Please choose one
Which of the following would be considered as the most bullish indicator?
► A price decrease with heavy volume
► A price increase with small volume
► A price increase on heavy trading
► No change in price but an increase in volume
Question No: 15 ( Marks: 1 ) - Please choose oneFinancial securities with a maturity of less than a year from their original issue
date are sold in which of following market?
► Money market
► Bond market
► Equity market
► Derivative market
(page233)
http://books.google.com/books?id=QVoxIhN_y1gC&pg=PA233&dq=Fi
nancial+securities+with+a+maturity+of+less+than+a+year&hl=en&ei
=iwZTduUBsP3rQeThaDGBQ&sa=X&oi=book_result&ct=result&resnum=1&v
ed=0CCcQ6AEwAA#v=onepage&q=Financial%20securities%20with%2
0a%20maturity%20of%20less%20than%20a%20year&f=false
Question No: 16 ( Marks: 1 ) - Please choose one
_____________ enables market participants to get accurate and up-to-date
price information.
► Fair pricing function
► Continuous pricing function
► Economic function
► Exchange function
(page 6)The continuous price function enables market participants to get accurate, up-todate price information.
Question No: 17 ( Marks: 1 ) - Please choose one
The average price of a security or currency over a specified time period used to
spot pricing trends by smoothing out the large fluctuations is known as:
► Moving Average
► Standard deviation
► Variance
► Beta
(EMA) — The average price of a security or currency over a specified
time period used to spot pricing trends by smoothing out the large
fluctuations. The exponential variety assigns more value or weight to
the most recent data
http://www.metaglossary.com/meanings/248146/
Question No: 18 ( Marks: 1 ) - Please choose one
An investor will purchase shares of companies in the development stage for:
► Current income
► Current income and capital gains
► Passive losses to offset other income
► Capital gains only
An investor will purchase shares of companies in the development stage
for:
A) Current income only
B) Current income and capital gains
C) Capital gains only
D) Passive losses to offset other income
Answer: C
http://www1.emath.pu.edu.tw/chchang/test006.pdfQuestion No: 19 ( Marks: 1 ) - Please choose one
Which of the following industry is NOT sensitive to business cycle and price
changes?
► Defensive industry
► Interest sensitive industry
► Growth industry
► Cyclical industry
defensive industries have little sensitivity to the business cycle. These are
the industries that produce goods for which sales and profits are least
sensitive to the state of economy.
http://webcache.googleusercontent.com/search?q=cache:8Ho6pX3s5CkJ:www.man
agementparadise.com/uploads_blog/210000/209942/0_2345.ppt+%22Defensive+indu
stry+is+NOT+sensitive+to+business+cycle+%22&cd=8&hl=en&ct=clnk&client=gm
ail&source=www.google.com
A defensive industry is one that is relatively insensitive to changes in the economic
environment.
http://www.stockboulevard.com/tutorial/index.php?action=tutorial10
Question No: 20 ( Marks: 1 ) - Please choose one
Which of the following categories is NOT a financial statement element?
► Cash flow
► Contributed capital
► Assets
► Distributions
(q#3)https://highered.mcgrawhill.com/sites/0073526770/student_view0/chapter1/online_quizzes.html
Question No: 21 ( 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: 22 ( Marks: 1 ) - Please choose one
A bad time in market will persist when the market prices move:
► Above the moving average
► Below the moving average
► Exactly same as moving average
► Firstly up then down the moving average
Question No: 23 ( Marks: 1 ) - Please choose one
What does price earning ratio indicate?
► It indicates how many interest payments could be made with a firm's
earnings.
► It indicates how much investors pay for Rs.1 earning of the company.
► It indicates the percentage of earnings paid to shareholders.
► It indicates the per share profit available for distribution to the shareholders.(page 86)The P/E ratio is a vital ratio for investors. Basically, it gives us an
indication of the confidence that investors have in the future prosperity of the business.
A P/E ratio of 1 shows very little confidence in that business whereas a P/E ratio of 20
expresses a great deal of optimism about the future of a business. Here's the formula;
P/E = Current Market Share Price / EPS
Question No: 24 ( 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
Question No: 25 ( Marks: 1 ) - Please choose one
Which of the following stock’s price move in opposite direction to that of interest
rates?
► Growth stock
► Value stock
► Interest sensitive stock
► Defensive stock
Interest-sensitive stock
A stock that tends to move in the opposite direction from that of interest
rates. http://www.infoplease.com/finance/tools/glossary.html
Question No: 26 ( Marks: 1 ) - Please choose one
Which of the following is NOT a component of ROA?
► Turnover
► Leverage
► Sales
► Net income margin
(page 107)ROA is an important measure of the firm’s profitability. It is a product of
two factors,
ROA = Net income margin × Turnover
Net income margin = Net income/Sales
Turnover = Sales/ Total Assets
Question No: 27 ( Marks: 1 ) - Please choose one
Which of the following statement about the types of the orders is LEAST
accurate?
► Market orders are orders to buy or sell at the best price available.
► Limit orders are orders to buy or sell at or away from the market price.
► A stop buy order is used to protect a short position in a security and is
placed below the current market price.
► Limit order must specify a price and a time limit.
(page141)
http://books.google.com/books?id=pagDs_H827IC&pg=PA141&dq=Li
mit+orders+are+orders+to+buy+or+sell+at+or+away+from+the+mar
ket+price.&hl=en&ei=kBlTfa_M9GxrAe4kszEBQ&sa=X&oi=book_result&ct=result&resnum=2&ve
d=0CCwQ6AEwAQ#v=onepage&q=Limit%20orders%20are%20orders%20to%20buy%20or%20sell%20at%20or%20away%20from%20the
%20market%20price.&f=false
http://en.wikipedia.org/wiki/Order_%28exchange%29
A buy stop order is typically used to limit a loss (or to protect an existing profit) on a
short sale.
[12]
A buy stop price is always above the current market price.
(page45)
http://books.google.com/books?id=vmhYIcuYB8cC&pg=PA43&dq=%E
2%96%BA+Market+orders+are+orders+to+buy+or+sell+at+the+best
+price+available.+%E2%96%BA+Limit+orders+are+orders+to+buy+o
r+sell+at+or+away+from+the+market+price.++%E2%96%BA+A+sto
p+buy+order+is+used+to+protect+a+short+position+in+a+security+a
nd+is+placed+below+the+current+market+price.+%E2%96%BA+Limi
t+order+must+specify+a+price+and+a+time+limit.&hl=en&ei=whxTbHEJontrAeegOHOBQ&sa=X&oi=book_result&ct=result&resnum=2&ve
d=0CCwQ6AEwAQ#v=onepage&q&f=false
(page 4)
http://wenku.baidu.com/view/af3706f7ba0d4a7302763add.html
Question No: 28 ( Marks: 1 ) - Please choose one
Which of the following statements regarding life cycle of an industry is MOST
accurate?
► In the pioneering phase, profits are small or negative.
► In the mature growth phase, sales growth falls below normal for the first time.
► During the stabilization phase, growth rates are still above the growth rates in
economy.
► The growth of the substitute products increases total market share & causes
profits to increase in the deceleration phase.
(Handout page 98)
http://www.wiziq.com/tutorial/23582-Equities (slide #8) http://www.ysapak.com/YSAforum/index.php/topic,4418.new.html#new