Security Analysis MCQs Part II

 

BCOM (H) 603: SECURITY ANALYSIS


 

  1. 1. What is the primary difference between investment, speculation, and gambling? a) Investment involves calculated risk-taking and long-term wealth accumulation, while speculation and gambling are based on chance and short-term gains. b) Investment, speculation, and gambling all involve risk-taking, but investment focuses on long-term growth, while speculation and gambling prioritize short-term gains. c) Investment and speculation are both based on informed decisions and long-term strategies, while gambling relies solely on chance and short-term outcomes. d) Investment and gambling both involve risk-taking, but investment aims for financial growth, while gambling seeks immediate returns without regard for long-term consequences.


  3. 2. What is the investment decision-making process? a) Identifying investment options, choosing the riskiest option, and making impulsive decisions. b) Setting investment goals, conducting research, analyzing options, making informed decisions, and monitoring performance. c) Following the advice of friends and family, investing based on emotions, and ignoring market trends. d) Investing in high-risk assets without considering personal financial situation or goals.


  5. 3. Which of the following is not a type of investment? a) Stocks b) Bonds c) Real estate d) Lottery tickets


  7. 4. What are the key features of the Indian securities market? a) Centralized trading, limited regulations, and lack of transparency b) Decentralized trading, high regulations, and transparency c) Decentralized trading, limited regulations, and lack of transparency d) Centralized trading, high regulations, and transparency


  9. 5. What is the function of market indices in the securities market? a) To track the performance of individual securities b) To measure the overall performance of the market or specific segments of the market c) To predict future market trends d) To facilitate trading between buyers and sellers


  11. 6. What is the risk-return relationship in investing? a) Higher risk always guarantees higher returns b) Lower risk always guarantees lower returns c) Higher risk may lead to higher returns, but it also increases the likelihood of losses d) Lower risk may lead to higher returns, but it also increases the likelihood of losses


  13. 7. Who are the participants in the securities market? a) Only individual investors b) Only institutional investors c) Both individual and institutional investors, as well as intermediaries such as brokers and market makers d) Only government entities


  15. 8. What is the primary function of investing in the securities market? a) To speculate on short-term price movements b) To earn interest income c) To achieve capital appreciation and grow wealth over the long term d) To engage in gambling for entertainment purposes


  17. 9. What is the primary difference between stocks and bonds? a) Stocks represent ownership in a company, while bonds represent debt owed by a company or government. b) Stocks pay fixed interest payments, while bonds pay dividends based on company performance. c) Stocks are low-risk investments, while bonds are high-risk investments. d) Stocks have guaranteed returns, while bonds have variable returns.


  19. 10. Which of the following is considered a low-risk investment? a) Government bonds b) Penny stocks c) Cryptocurrency d) Futures contracts

Answers:

  1. a) Investment involves calculated risk-taking and long-term wealth accumulation, while speculation and gambling are based on chance and short-term gains.
  2. b) Setting investment goals, conducting research, analyzing options, making informed decisions, and monitoring performance.
  3. d) Lottery tickets
  4. b) Decentralized trading, high regulations, and transparency
  5. b) To measure the overall performance of the market or specific segments of the market
  6. c) Higher risk may lead to higher returns, but it also increases the likelihood of losses
  7. c) Both individual and institutional investors, as well as intermediaries such as brokers and market makers
  8. c) To achieve capital appreciation and grow wealth over the long term
  9. a) Stocks represent ownership in a company, while bonds represent debt owed by a company or government.
  10. a) Government bonds


  1. 1. What does EIC analysis stand for in the context of fundamental analysis? a) Equity, Industry, and Currency analysis b) Economic, Industry, and Company analysis c) External, Internal, and Competitive analysis d) Efficiency, Investment, and Capital analysis


  3. 2. Which of the following is a key economic variable commonly analyzed in EIC analysis? a) Customer satisfaction b) Gross Domestic Product (GDP) c) Employee turnover rate d) Advertising expenditure


  5. 3. What does Porter's model primarily focus on in industry analysis? a) Market share analysis b) Competitive advantage and industry structure c) Cost analysis d) Revenue projection


  7. 4. What is the characteristic of the decline stage in the industry life cycle? a) High growth and increasing competition b) Declining sales and profits c) Introduction of new products and technologies d) Stable market conditions


  9. 5. Which of the following is NOT one of Porter's five forces in his model for industry analysis? a) Bargaining power of buyers b) Threat of new entrants c) Rivalry among competitors d) Market share of the company

  1. 6. What is the primary focus of technical analysis? a) Analyzing financial statements b) Evaluating economic indicators c) Studying historical market data and price trends d) Assessing industry growth prospects


  3. 7. According to the Efficient Market Theory, what is the implication for technical analysis? a) Technical analysis is highly reliable for predicting future stock prices. b) Technical analysis is ineffective as all available information is already reflected in stock prices. c) Technical analysis is useful only for short-term trading but not for long-term investing. d) Technical analysis can help identify undervalued stocks in an efficient market.


  5. 8. What are mathematical indicators used for in technical analysis? a) Predicting future economic trends b) Identifying potential buy or sell signals based on mathematical calculations c) Analyzing industry growth rates d) Assessing a company's financial health


  7. 9. What do market indicators primarily measure in technical analysis? a) Economic variables b) Sentiment and investor behavior c) Company financial performance d) Industry growth potential


  9. 10. In the context of entrepreneurship, what is a key difference between fundamental and technical analysis? a) Fundamental analysis focuses on market sentiment, while technical analysis focuses on financial ratios. b) Fundamental analysis evaluates the intrinsic value of a company, while technical analysis relies on historical price data. c) Fundamental analysis is more suitable for long-term investing, while technical analysis is used for short-term trading. d) Fundamental analysis relies on mathematical indicators, while technical analysis assesses industry trends.

Answers:

  1. b) Economic, Industry, and Company analysis
  2. b) Gross Domestic Product (GDP)
  3. b) Competitive advantage and industry structure
  4. b) Declining sales and profits
  5. d) Market share of the company
  6. c) Studying historical market data and price trends
  7. b) Technical analysis is ineffective as all available information is already reflected in stock prices.
  8. b) Identifying potential buy or sell signals based on mathematical calculations
  9. b) Sentiment and investor behavior
  10. b) Fundamental analysis evaluates the intrinsic value of a company, while technical analysis relies on historical price data.




  1. 1. What is the primary difference between the Dividend Capitalization Model and the Equity Capitalization Model? a) The Dividend Capitalization Model is used for valuing growth stocks, while the Equity Capitalization Model is used for valuing dividend-paying stocks. b) The Dividend Capitalization Model discounts future dividends, while the Equity Capitalization Model discounts future earnings. c) The Dividend Capitalization Model discounts future dividends using a required rate of return, while the Equity Capitalization Model discounts future cash flows. d) There is no difference; both models are used interchangeably for valuing equity.


  3. 2. Which of the following factors is NOT considered in the Dividend Capitalization Model? a) Dividend growth rate b) Required rate of return c) Book value per share d) Current dividend per share


  5. 3. In the Equity Capitalization Model, what does the "capitalization rate" represent?

  6. a) The rate at which dividends are capitalized into the stock price b) The rate at which earnings are capitalized into the stock price c) The rate of return required by investors to invest in the stock d) The rate of return earned by the company on its investments

  1. 4. Which model is commonly used for valuing bonds? a) Dividend Capitalization Model b) Present Value Model c) Equity Capitalization Model d) Discounted Cash Flow Model


  3. 5. What does the Present Value Model for bond valuation discount? a) Future cash flows to the bondholder b) Dividends paid by the issuing company c) Future earnings of the issuing company d) Current market price of the bond


  5. 6. What is the Yield to Maturity (YTM) of a bond? a) The rate of return earned by the bondholder if the bond is held until maturity b) The rate at which the bond pays interest to the bondholder c) The rate at which the bond is issued by the company d) The rate of inflation that affects the bond's value


  7. 7. What does the Current Yield of a bond measure? a) The annual interest payments relative to the bond's current market price b) The annual interest payments relative to the bond's face value c) The annual interest payments relative to the bond's yield to maturity d) The annual interest payments relative to the bond's coupon rate


  9. 8. How does a bond's yield to maturity change if its market price decreases? a) Yield to maturity increases b) Yield to maturity decreases c) Yield to maturity remains constant d) Yield to maturity is unaffected by changes in market price

Answers:

  1. c) The Dividend Capitalization Model discounts future dividends using a required rate of return, while the Equity Capitalization Model discounts future cash flows.
  2. c) Book value per share
  3. b) The rate at which earnings are capitalized into the stock price
  4. b) Present Value Model
  5. a) Future cash flows to the bondholder
  6. a) The rate of return earned by the bondholder if the bond is held until maturity
  7. a) The annual interest payments relative to the bond's current market price
  8. a) Yield to maturity increases



  1. 1. What is SEBI? a) Securities and Exchange Board of India b) Securities and Economic Board of India c) Securities and Enforcement Board of India d) Securities and Exchange Bureau of India


  3. 2. When was SEBI established? a) 1947 b) 1969 c) 1988 d) 1991


  5. 3. What is the primary function of SEBI? a) Regulating the banking sector b) Regulating the insurance sector c) Regulating the securities market d) Regulating the real estate market


  7. 4. Which of the following is NOT within the regulatory purview of SEBI? a) Registration and regulation of stockbrokers b) Oversight of stock exchanges c) Enforcement of insider trading regulations d) Regulation of commercial banks

  8. 5. What are the powers of SEBI? a) Powers to issue regulations and guidelines b) Powers to investigate and penalize market manipulations c) Powers to impose fines and penalties d) All of the above


  10. 6. Which of the following activities does SEBI undertake to regulate the securities market? a) Monitoring capital market intermediaries b) Promoting investor education c) Preventing fraudulent practices d) All of the above


  12. 7. What is the recent development in the securities market overseen by SEBI? a) Introduction of new tax regulations b) Implementation of blockchain technology c) Launch of new mutual fund schemes d) Merger of stock exchanges


  14. 8. How does SEBI contribute to entrepreneurship and employability? a) By providing funding to start-ups b) By ensuring fair and transparent capital markets, which encourage investment and entrepreneurship c) By regulating employment practices in the securities industry d) By offering training programs for aspiring securities professionals

Answers:

  1. a) Securities and Exchange Board of India
  2. c) 1988
  3. c) Regulating the securities market
  4. d) Regulation of commercial banks
  5. d) All of the above
  6. d) All of the above
  7. b) Implementation of blockchain technology
  8. b) By ensuring fair and transparent capital markets, which encourage investment and entrepreneurship

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