Security Analysis MCQs Part I

BCOM (H) 603: SECURITY ANALYSIS

Multiple Choice Questions

1. Investment is the _______________.

A. net additions made to the nation’s capital stocks

B.  person’s commitment to buy a flat or house

C. employment of funds on assets to earn returns

D. employment of funds on goods and services that are used in production process

 

2. Market value of the shares is decided by ____________.

A. the respective companies

B. the investment market

C. the government

D. shareholders

 

3. Which one of the following is not a money market securities?

A. Treasury bills

B. National savings certificate

C. Certificate of deposit

D. Commercial paper

 

4. ___________ are financial assets.

A. Bonds

B. Machines

C. Stocks

D. A and C

 

5. An example of a derivative security is ______.

A. a common share of General Motors

B. a call option on Mobil stock

C. a commodity futures contract

D. B and C

 

6. Most investors are risk averse which means____________.

A. they will assume more risk only if they are compensated by higher expected return

B. they will always invest in the investment with the lowest possible risk

C. they will always invest in the investment with the lowest possible risk

D. they avoid the stock market due to the high degree of risk

 

7. Which of the following would be considered a risk-free investment?

A. Gold

B. Equity in a house

C. High-grade corporate bonds

D. Treasury bills

 

8. The largest single institutional owner of common stocks is________.

A. mutual funds

B. insurance companies

C. pension funds

D. commercial banks

 

9. The decision to invest a substantial sum in any business venture expecting to earn a minimum return is called ____________.

A. working capital decision

B. an investment decision

C. a production decision

D. a sales decision

 

10. Savings accounts are___________ but are not__________.

A. negotiable; liquid

B. marketable; liquid

C. liquid; personal

D. liquid; marketable

 

11. Treasury bills are traded in the __________.

A. money market

B. capital market

C. government market

D. regulated market

 

12. If an investor states that Intel is overvalued at 65 times, he is referring to___________.

A. earnings per share

B. dividend yield

C. book value

D. P/E ratio

 

13. The most popular type of Investment Company is a ________.

A. unit investment trust

B. mutual fund

C. closed-end investment company

D. real estate investment trust

 

14. An unmanaged fixed income security portfolio handled by an independent trustee is known as a______________.

A. junk bond fund

B. closed-end investment company

C. unit investment trust

D. hedge fund

 

15. Which of the following generally traded on stock exchanges?

A. Unit investment trusts

B. Closed-end investment companies

C. Open-end investment companies

D. All trade on stock exchanges

 

16. A group of mutual funds with a common management are known as______________.

A. fund syndicates

B. fund conglomerates

C. fund families

D. fund complexes

 

17. The ___________ is a window through which the investor can see the company.

A. Syndicate offer

B. IPO

C. Prospectus

D. Shelf rule

 

18. For which of the following factors are the debentures more attractive to the investors?

A. The principal is redeemable at maturity

B. A debenture-holder enjoys prior claim on the assets of the company over its shareholders in the event of liquidation

C. trustee is appointed to preserve the interest of the debenture holders

D. All the above.

 

19. Investment bankers operate in the ______________.

A. primary market

B. secondary market

C. A and B both

D. None of above

 

20. Shares having no face value are known as

A. no par stock

B. at par stock

C. equal stock

D. debt equity stock

 

20. Ownership securities are represented by _______.

A. stock

B. loan

C. debt

D. debentures

 

21. Which of the following has helped to eliminate the use of stock certificates by placing stock transactions on computers?

A. Demat account

B. Securities Exchange Commission

C. Depository Trust Company

D.Federal Depository Insurance Corporation.

 

22. If market interest rates are expected to rise, you would expect___________.

A. bond prices to fall more than stock prices

B. bond prices to rise more than stock prices

C. stock prices to fall more than bond prices

D. stock prices to rise and bond prices to fall.

 

23. Political stability is the major factor concerning_______________.

A. exchange risk

B. systematic risk

C. non-systematic risk

D. country risk

 

24. Liquidity risk_____________.

A. is the risk that investment bankers normally face

B. is lower for small OTCEI stocks than for large NSE stocks

C. is the risk associated with secondary market transactions

D. increases whenever interest rates increase.

 

25. This type of risk is avoidable through proper diversification.

A. portfolio risk

B. systematic risk

C. unsystematic risk

D. total risk

 

26. Shareholder wealth in a firm is represented by___________.

A. the number of people employed in the firm

B. the book value of the firm's assets less the book value of its liabilities

C. the amount of salary paid to its employees

D. the market price per share of the firms common stock

 

27. In order to determine the expected return of a portfolio, all of the following must be known except______________.

A. probabilities of expected returns of individual assets

B. weight of each individual asset to total portfolio value

C. expected return of each individual asset

D. all of the above must be known in order to determine the expected return of a portfolio

 

28. Which of the following is true regarding the expected return of a portfolio?

A. It is a weighted average only for stock portfolios

B. It can only be positive

C. It can never be above the highest individual return

D. All of the above are true

 

29. The relevant risk for a well-diversified portfolio is____________.

A. interest rate risk

B. inflation risk

C. business risk

D. market risk

 

30. The market price of a share of common stock is determined by ___________.

A. the board of directors of the firm

B. the stock exchange on which the stock is listed

C. the president of the company

D. individuals buying and selling the stock

 

31. The optimal portfolio is the efficient portfolio with the______________.

A. lowest risk

B. highest risk

C. highest utility

D. least investment

 

32. Non-systematic risk is also known as_____________.

A. riskless

B. market risk

C. random risk

D. company-specific risk

 

33. If a market is inefficient, as new information is received about a security____________.

A. nothing will happen

B. the stock price will fall at first and then later rise

C. there will be a lag in the adjustment of the stock price

D. there will be negative demand for the stock

 

34. The highest level of market efficiency is_____________.

A. weak form efficiency

B. semi-strong form efficiency

C. random walk efficiency

D. strong form efficiency

 

35. The weak form of the EMH is supported if successive price changes over time are________.

A. independent of each other

B. negative

C. positive

D. lagged

 

36. If an investor searches for patterns in security returns by examining various techniques applied to a set of data, this is known as__________.

A. fundamental analysis

B. technical analysis

C. data mining

D. random-walk theory

 

37. The last step in fundamental analysis is__________.

A. economic analysis

B. industry analysis

C. company analysis

D. technical analysis

 

38. The risk that arises due to change in the purchasing power is called ?

A. Financial risk

B. Interest rate risk

C. Business risk

D. Inflation risk

 

39. Unsystematic risk is______.

A. the risk associated with movements in security prices

B. reduced through diversification

C. higher when interest rates rise

D. the risk of loss of purchasing power

 

40. ________________ factors lead to activity of stock market.

A. Money supply

B. Per capita income

C. Unemployment rate

D. Manufacturing and Trade

 

41. Stocks which has lower book for market ratio are considered as

A. optimistic

B. more risky

C. less risky

D. pessimistic

 

42. An individual stock required return is equal to risk free rate plus bearing risk premium is an explanation of

A. security market line

B. capital market line

C. aggregate market line

D. beta market line

 

43. Future beta is needed to calculate in most situations is classified as

A. historical betas

B. adjusted betas

C. standard betas

D. varied betas

 

44. An efficient set of portfolios represented through graph is classified as an

A. attained frontier

B. efficient frontier

C. inefficient frontier

D. unattained frontier

 

45. Rational traders immediately buy stock when price is

A. too low

B. too high

C. conditional

D. inefficient portfolio

 

46. If market value is greater than book value then investors for future stock are considered as

A. experienced

B. inexperienced

C. pessimistic

D. optimistic

 

47. A theory which states that assets are traded at price equal to its intrinsic value is classified as

A. efficient money hypothesis

B. efficient market hypothesis

C. inefficient market hypothesis

D. inefficient money hypothesis

 

48. Rational traders immediately sell stock when price is

A. conditional

B. inefficient portfolio

C. too low

D. too high

 

49. Riskless rate in addition with risk premium is multiplied by standard deviation of portfolio for using to calculate expected return rate on

A. efficient portfolio

B. inefficient portfolio

C. attributable portfolio

D. non-attributable portfolio

 

50. Realized and required return for individual stocks are classified as function of fundamental

A. arbitrage factors

B. economic factors

C. portfolio factors

D. realized theory factors

 

51. A line which shows relationship between an expected return and risk on efficient portfolio is considered as

A. efficient market line

B. attributable market line

C. capital market line

D. security market line

 

52. Relationship between total risk of stock, diversifiable risk and market risk is classified as

A. total risk

B. standard deviation

C. standard alpha

D. treynor alpha

 

53. Risk affects any firm with factors such as war, recessions, inflation and high interest rates is classified as

A. diversifiable risk

B. market risk

C. stock risk

D. portfolio risk

 

54. Risk on a stock portfolio which cannot be eliminated or reduced by placing it in diversified portfolio is classified as

A. diversifiable risk

B. market risk

C. stock risk

D. portfolio risk

 

55. A portfolio consists of all stocks in a market is classified as

A. market portfolio

B. return portfolio

C. correlated portfolio

D. diversified portfolio

 

56. Risk which is caused by events such as strikes, unsuccessful marketing programs and other lawsuits is classified as

A. stock risk

B. portfolio risk

C. diversifiable risk

D. market risk

 

57. Risk on a stock portfolio which can be reduced by placing it in diversified portfolio is classified as

A. stock risk

B. portfolio risk

C. diversifiable risk

D. market risk

 

58. If stock has a great risk related to it than a required return is

A. higher

B. lower

C. zero

D. all of above

 

59. A risk which is classified as its contribution to risk of portfolio is classified as

A. classified risk

B. contributed risk

C. irrelevant risk

D. relevant risk

 

60. Chance of happening any unfavourable event in near future is classified as

A. chance

B. event happening

C. probability

D. risk

 

61. Risk in average individual stock can be reduced by placing an individual stock in

A. low risk portfolio

B. diversified portfolio

C. undiversified portfolio

D. high risk portfolio

 

62. Chance of occurrence of any event is classified as

A. probability

B. risk

C. chance

D. event happening

 

63. When changes in patents and industry competition occur, required rate of return

A. changes

B. does not change

C. becomes zero

D. becomes one

 

64. Portfolio which consists of perfectly positive correlated assets having no effect of

A. negativity

B. positivity

C. correlation

D. diversification

 

65. Market risk and diversifiable risk are two components of

A. stock's risk

B. portfolio risk

C. expected return

D. stock return

 

66. Rate of return which considers riskiness and an available returns on investments is classified as

A. constant dividend

B. constant rate

C. maximum rate of return

D.minimum acceptable rate of return

 

67. Stock market theory which states that stocks are in equilibrium and impossible for investors to beat market is classified as an

A. inefficient market hypothesis

B. efficient market hypothesis

C. efficient stock hypothesis

D. inefficient stock hypothesis

 

68. An efficient market hypothesis states all public information which is reflected in current market prices is classified as

A. weak form efficiency

B. strong form efficiency

C. market efficiency

D. semi strong efficiency

 

69. Value of stock as concluded with help of analysis by particular investor is classified as

A. particular value

B. intrinsic value

C. fundamental value

D. Both B and C

 

70. An efficient market hypothesis states in which all public or private information is reflected in current market prices is classified as

A. market efficiency

B. semi strong efficiency

C. weak form efficiency

D. strong form efficiency

 

71. Owners of corporation having certain rights and privileges are considered as

A. special stockholders

B. common stockholders

C. public stocks

D. enactive stocks

 

72. Stockholders having right to elect directors and in smaller firms have high post are classified as

A. public stocks

B. inactive stocks

C. special stockholders

D. common stockholders

 

73. According to investors point of view, an expected rate of return is rate on stocks which they

A. receive in future

B. received in past

C. yearly growth

D. semi-annual growth

 

74. Second step in calculating value of stock with non-constant growth rate is to find out an

A. expected intrinsic stock

B. extrinsic stock

C. expected price of stock

D. intrinsic stock

 

75. Present value of dividends which is expected to be provided in future is classified as an

A. intrinsic value of stock

B. extrinsic value of stock

C. intrinsic bonds

D. extrinsic bonds

 

76. Information which is reflected in current market prices with help of past price movements is classified as

A. market efficiency

B. semi strong efficiency

C. weak form efficiency

D. strong form efficiency

 

77. A stock which is issued to meet specific needs of company is considered as

A. classified stock

B. specific stock

C. needed stock

D. meeting stock

 

78. In financial markets, period of maturity more than five years of financial instruments is classified as

A. intermediate term

B. capital term

C. short-term

D. long-term

 

79. Type of financial securities that matures in less than a year are classified as

A. money market securities

B. capital market securities

C. saving intermediaries

D. discounted intermediaries

 

80. Corporations that buy financial instruments with money accepted from savers are classified as

A. debit funds

B. credit funds

C. mutual funds

D. insurance funds

 

81. Markets which bring closer institutions needing funds and with surplus funds are classified as

A. financial markets

B. corporate institutions

C. hedge firms

D. retirement planners

 

82. Process of selling company stock at large to general public and get lending from banks is classified as an

A. initial public offering

B. external public offering

C. internal public offering

D. unprofessional offering

 

83. Markets in which corporations raise capital for creating market transaction which are classified as

A. commercial markets

B. residential markets

C. primary markets

D. consumer credit loans

 

84. Notes, mortgages, bonds, stocks, treasury bills and consumer loans are classified as

A. financial instruments

B. capital assets

C. primary assets

D. competitive instruments

 

85. In financial markets, period of maturity less than one year of financial instruments is classified as

A. short-term

B. long-term

C. intermediate term

D. capital term

 

86. A markets which deals with long-term corporate stocks are classified as

A. liquid markets

B. short-term markets

C. capital markets

D. money markets

 

87. Subset of primary market where firms go publicly by issuing stocks in financial markets is considered as

A. initial public offering market

B. stock market

C. issuance market

D. First stock market

 

88. Markets which deal with buying and selling of bonds, mortgages, notes and stocks are considered as

A. financial instruments

B. financial asset markets

C. physical asset markets

D. easy markets

 

89. Markets where assets are bought or sold within a few days or at some future dates are classified as

A. spot markets

B. future markets

C. Both A and B

D. financial instruments

 

90. Relevant information about stock market price if it is given, then this price is called

A. market price

B. intrinsic price

C. extrinsic price

D. unstable price

 

91. An attitude of investor towards dealing with risk determines the

A. rate of return

B. rate of exchange

C. rate of intrinsic stock

D. rate of extrinsic stock

 

92. Financial security with low degree risk and investment held by businesses is classified as

A. treasury bills

B. commercial paper

C. negotiable certificate of deposit

D. money market mutual funds

 

93. Ability to trade at net price very quickly is classified as

A. original trading

B. liquidity

C. offline trading

D. fixed price trading

 

94. In financial markets, period of maturity within one to five years of financial instruments is classified as

A. short-term

B. long-term

C. intermediate term

D. capital term

 

95. Collection of money from investors and spending money in other investment activities is classified as

A. future funds

B. hedge funds

C. retirement funds

D. pension funds

 

96. Markets for products such as wheat, rice, cotton, real estate and autos dealing is classified as

A. physical asset markets

B. intangible assets

C. competitive markets

D. easy markets

 

97. Price of stock that companies observe in financial markets is called

A. market price

B. intrinsic price

C. extrinsic price

D. fundamental price

 

98. Markets which deals with high liquid and short term debt securities are classified as

A. capital markets

B. money markets

C. liquid markets

D. short-term markets

 

99. Financial markets include

A. primary markets

B. capital markets

C. physical asset markets

D. all of above

 

100. Funds which are used as an interest-bearing checking accounts are classified as

A. money market funds

B. capital market funds

C. money mutual funds

D. insurance money funds

 

101. Markets in which outstanding securities are traded by investors are classified as

A. primary markets

B. secondary markets

C. initial public offering market

D. stock market