Investment Management Set 13
On This Page
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