McqMate
These multiple-choice questions (MCQs) are designed to enhance your knowledge and understanding in the following areas: Master of Business Administration (MBA) .
Chapters
| 51. |
Which of the following is not a characteristic of a risk averter? |
| A. | A risk averter will not buy lottery tickets because the expected payoffs are less than the cost of the tickets. |
| B. | A risk averter will be ready to pay a higher price for an asset whose variance increases. |
| C. | A risk averter always prefers a certain investment over an uncertain investment if the expected returns on the two investments are identical. |
| D. | To be induced to take risk, a risk averter must be offered a risk premium. |
| Answer» B. A risk averter will be ready to pay a higher price for an asset whose variance increases. | |
| 52. |
Which of the following statements is incorrect? |
| A. | The variance is the square root of the standard deviation. |
| B. | All assets would have the same rate of return if the future were known with certainty. |
| C. | The risk of the investment is the uncertainty concerning the expected return. |
| D. | The geometric mean cannot be larger than the arithmetic mean. |
| Answer» A. The variance is the square root of the standard deviation. | |
| 53. |
Arbitrage trading strategy implies that: |
| A. | profits are made by investing in riskless securities. |
| B. | large profits are made by undertaking high risk investments. |
| C. | profits are made with no risk and no investment. |
| D. | arbitrage opportunities will continue to exist in equilibrium. |
| Answer» C. profits are made with no risk and no investment. | |
| 54. |
Which of the following is a measure of the dispersion of returns around the mean? |
| A. | Variance. |
| B. | Risk premium. |
| C. | Correlation. |
| D. | Expected return. |
| Answer» A. Variance. | |
| 55. |
Investors who completely ignore an asset’s variance and only consider the asset’s expected return are called: |
| A. | value-seeking investors. |
| B. | growth-oriented investors. |
| C. | risk-neutral investors. |
| D. | risk averters. |
| Answer» C. risk-neutral investors. | |
| 56. |
Underlying all investments is the tradeoff between |
| A. | Expected return and actual return |
| B. | Low risk and high risk |
| C. | Actual return and high risk |
| D. | Expected return and risk. |
| Answer» A. Expected return and actual return | |
| 57. |
Which of the following investment areas is heavily tied to work using mathematical and statistical models? |
| A. | Security analysis |
| B. | Portfolio management |
| C. | Institutional investing |
| D. | Retirement planning. |
| Answer» A. Security analysis | |
| 58. |
This type of risk is avoidable through proper diversification. |
| A. | portfolio risk |
| B. | systematic risk |
| C. | unsystematic risk |
| D. | total risk |
| Answer» C. unsystematic risk | |
| 59. |
Liquidity risk |
| A. | The risk that investment bankers normally face |
| B. | Lower for small OTCEI stocks than for large NSE stocks |
| C. | The risk associated with secondary market transactions |
| D. | The risk increases whenever interest rates increase |
| Answer» D. The risk increases whenever interest rates increase | |
| 60. |
If 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 |
| Answer» A. Bond prices to fall more than stock prices | |
| 61. |
The one-period rate of return from a stock or bond which may or may not be realized can be described by using the term |
| A. | Holding-period return. |
| B. | Yield. |
| C. | Random variable |
| D. | Market return |
| Answer» A. Holding-period return. | |
| 62. |
If the dispersion around a security's return is larger |
| A. | The expected return is smaller |
| B. | The standard deviation is smaller |
| C. | The stock's price is higher |
| D. | The security's risk is higher |
| Answer» A. The expected return is smaller | |
| 63. |
Who popularized the dividend discount model, which is sometimes referred to by his name? |
| A. | Myron Gordon |
| B. | Frederick Macaulay |
| C. | Harry Markowitz |
| D. | Marshall Blume |
| Answer» A. Myron Gordon | |
| 64. |
A group of mutual funds with a common management are known as: |
| A. | Fund syndicates. |
| B. | Fund conglomerates |
| C. | Fund families. |
| D. | Fund complexes |
| Answer» C. Fund families. | |
| 65. |
Markowitz's main contribution to portfolio theory is |
| A. | That risk is the same for each type of financial asset |
| B. | That risk is a function of credit, liquidity and market Factors |
| C. | Risk is not quantifiable |
| D. | Insight about the relative importance of variances and co variances in determining portfolio risk |
| Answer» B. That risk is a function of credit, liquidity and market Factors | |
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