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This set of Investment Management Multiple Choice Questions & Answers (MCQs) focuses on Investment Management Set 13

Q1 | ‐‐‐‐‐‐‐‐‐‐‐‐‐ is a barometer for market behavior.
  • Investment
  • Index
  • Arbitrage
  • None of These
Q2 | Devise adopted to make profit out of the difference in prices of a security in two different markets is called‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐.
  • Arbitrage
  • Margin Trading
  • Call Option
  • None of These
Q3 | Which of the following bonds has the shortest duration?
  • Coupon = 15%, time to maturity = 15 years, yield to maturity = 10%
  • Coupon = 12%, time to maturity = 20 years, yield to maturity = 10%
  • Coupon = 15%, time to maturity = 15 years, yield to maturity = 15%
  • Coupon = 10%, time to maturity = 20 years, yield to maturity = 10%
Q4 | An investor who expects increasing interest rates should purchase a bond that has a _____ coupon and a _____term to maturity.
  • high, short
  • zero, long
  • high, long
  • low, long
Q5 | The rate of return required by investors in the market for owning a bond is called the:
  • Coupon
  • Face value.
  • Maturity
  • Yield to maturity.
Q6 | The Yield to Maturity of a bond is the same as_____________?
  • The present value of the bond
  • The bonds internal rate of return
  • The future value of the bond
  • None of these
Q7 | If a firm increases its plowback ratio, this will probably result in _______ P/E ratio.
  • Higher
  • Lower
  • Unchanged
  • Can’t be determined
Q8 | The accounting measure of a firm's equity value generated by applying accounting principlesto asset and liability acquisitions is called ________.
  • Book Value
  • Market value
  • Liquidation Value
  • Tobins q
Q9 | The price-to-sales ratio is probably most useful for firms in which phase of the industry lifecycle?.
  • Start-up phase
  • Consolidation
  • Maturity
  • Relative decline
Q10 | A stock has an intrinsic value of $15 and an actual stock price of $13.50. You know that thisstock
  • has a Tobin's q value < 1
  • signals buy opportunity
  • has an expected return less than its required return
  • has a beta > 1
Q11 | If a stock is correctly priced, then you know that ____________.
  • the dividend payout ratio is optimal
  • the stock's required return is equal to the growth rate in earnings and dividends
  • the sum of the stock's expected capital gain and dividend yield is equal to the stock's required rate of return
  • the present value of growth opportunities is equal to the value of assets in place
Q12 | Bill, Jim, and Shelly are all interested in buying the same stock that pays dividends. Bill plans on holding the stock for 1 year. Jim plans on holding the stock for 3 years. Shelly plans on holding the stock until she retires in 10years. Which one of the following statements is correct?
  • Bill will be willing to pay the most for the stock because he will get his money back in 1 year when he sells.
  • Shelly should be willing to pay the most for the stock because she will hold it the longest and hence will get the most dividends.
  • All three should be willing to pay the same amount for the stock regardless of their holding period.
  • None of these
Q13 | The constant-growth dividend discount model (DDM) can be used only when the ___________.
  • growth rate is equal to the required return
  • growth rate is greater than or equal to the required return
  • growth rate is less than the required return
  • growth rate is greater than the required return
Q14 | You want to earn a return of 10% on each of two stocks, A and B. Each of the stocks is expected to pay a dividend of $4 in the upcoming year. The expected growth rate of dividends is 6% for stock A and 5% for stock B. Using the constant-growth DDM, the intrinsic value of stockA _________.
  • will be higher than the intrinsic value of stock B
  • will be the same as the intrinsic value of stock B
  • will be less than the intrinsic value of stock B
  • The answer cannot be determined from the information given.
Q15 | You are considering acquiring a common share of Sahali Shopping Center Corporation that you would like to hold for 1 year. You expect to receive both $1.25 in dividends and $35 from the sale of the share at the end of the year. The maximum price you would pay for a share today is __________ if you wanted to earn a 12% return.
  • $31.25
  • $32.37
  • $38.47
  • $41.32
Q16 | An efficient market is defined as one in which
  • all participants have the same opportunity to make the make the same returns.
  • all participants have the same legal rights and transactions costs.
  • securities’ prices quickly and fully reflect all available information.
  • securities’ prices are completely in line with the intrinsic value.
Q17 | Weak form market efficiency
  • implies that the expected return on any security is zero.
  • incorporates semi-strong form efficiency.
  • involves price and volume information.
  • is compatible with technical analysis
Q18 | The highest level of market efficiency is
  • weak form efficiency.
  • semi-strong form efficiency.
  • random walk efficiency.
  • strong form efficiency.
Q19 | The random walk hypothesis is most related to the:
  • weak-form EMH
  • semistrong-form EMH
  • semiweak-form EMH
  • strong-form EMH
Q20 | According to the semi-strong form of the EMH, investors who invest in a stock after a highly positive announcement concerning the stock can expect to earn a(n)
  • normal return because the stock will be fairly priced when purchased.
  • extraordinary return because the new information will not affect the price until later.
  • loss because things often are not what they seem.
  • zero return because the next price is expected to be the same as the last price
Q21 | Which of the following is not a method employed by fundamental analysts?
  • Analyzing the Fed's next interest rate move
  • Relative strength analysis
  • Earnings forecasting
  • Estimating the economic growth rate
Q22 | Which of the following is not a method employed by followers of technical analysis?
  • Charting
  • Relative strength analysis
  • Earnings forecasting
  • Trading around support and resistance levels
Q23 | If you believe in the __________ form of the EMH, you believe that stock prices reflect all publicly available information but not information that is available only to insiders.
  • Semi strong
  • Strong
  • Weak
  • Perfect