McqMate
These multiple-choice questions (MCQs) are designed to enhance your knowledge and understanding in the following areas: Master of Business Administration (MBA) .
Chapters
| 1. |
A liquid asset may |
| A. | be converted into cash |
| B. | be converted into cash with little chance of loss |
| C. | not be converted into cash |
| D. | not be converted without loss |
| Answer» B. be converted into cash with little chance of loss | |
| 2. |
A negatively sloped yield curve suggests that |
| A. | short-term rates exceed long-term rates, and the Federal Reserve is following a tight monetary policy |
| B. | short-term rates exceed long-term rates, and the Federal Reserve is following an easy monetary policy |
| C. | long-term rates exceed short-term rates, and the Federal Reserve is following a tight monetary policy |
| D. | long-term rates exceed short-term rates, and the Federal Reserve is following an easy monetary policy |
| Answer» A. short-term rates exceed long-term rates, and the Federal Reserve is following a tight monetary policy | |
| 3. |
The market price of a bond depends on the |
| A. | coupon rate, and terms of the indenture |
| B. | coupon rate, and maturity date |
| C. | terms of the indenture, and maturity date |
| D. | coupon rate, terms of the indenture, and maturity date |
| Answer» D. coupon rate, terms of the indenture, and maturity date | |
| 4. |
While bond prices fluctuate, |
| A. | yields are constant |
| B. | coupons are constant |
| C. | the spread between yields is constant |
| D. | short-term bond prices fluctuate even more |
| Answer» B. coupons are constant | |
| 5. |
If interest rates rise, the price of preferred stock |
| A. | is not affected |
| B. | rises |
| C. | falls |
| D. | may rise or fall |
| Answer» C. falls | |
| 6. |
Municipal government debt |
| A. | pays more interest than corporate debt |
| B. | is often purchased by individuals with high incomes |
| C. | is exempt from estate taxation |
| D. | is not subject to interest rate risk |
| Answer» B. is often purchased by individuals with high incomes | |
| 7. |
The use of financial leverage by a firm may be measured by the |
| A. | ratio of debt to total assets |
| B. | firm’s beta coefficient |
| C. | firm’s retention of earnings |
| D. | ratio of the price of the firm’s stock price to its earnings |
| Answer» A. ratio of debt to total assets | |
| 8. |
An example of a depreciable asset is |
| A. | Land |
| B. | Cash |
| C. | Accounts receivable |
| D. | Equipment |
| Answer» D. Equipment | |
| 9. |
As the debt ratio increases, |
| A. | Fewer assets are debt-financed, and the ratio of debt-to-equity increases |
| B. | Fewer assets are debt-financed, and the ratio of debt-to-equity decreases |
| C. | More assets are debt-financed, and the ratio of debt-to-equity increases |
| D. | More assets are debt-financed, and the ratio of debt-to-equity decreases |
| Answer» C. More assets are debt-financed, and the ratio of debt-to-equity increases | |
| 10. |
The net asset value of a mutual fund investing in stock rises with |
| A. | Higher stock prices |
| B. | Lower equity values |
| C. | An increased number of shares |
| D. | Increased liabilities |
| Answer» A. Higher stock prices | |
| 11. |
Which of the following helps determine the relationship between the expected return and risk for individual securities? |
| A. | Security market line |
| B. | Capital market line |
| C. | Markowitz model |
| D. | (a) and (b) |
| Answer» A. Security market line | |
| 12. |
A call is an option to |
| A. | Sell stock at a specified price |
| B. | Buy stock at a specified price |
| C. | Sell stock on a specified date |
| D. | Buy stock on a specified date |
| Answer» B. Buy stock at a specified price | |
| 13. |
Which of the following is on the horizontal axis of the Security Market Line? |
| A. | Standard deviation |
| B. | Beta |
| C. | Expected return |
| D. | Required return |
| Answer» B. Beta | |
| 14. |
You own a large orange grove and will be harvesting from November through April. To hedge against price risks you should |
| A. | sell orange juice contracts with a November delivery |
| B. | buy orange juice contracts with a November delivery |
| C. | sell orange juice contracts with delivery dates between November and April |
| D. | buy orange juice contracts with delivery dates between November and April |
| Answer» C. sell orange juice contracts with delivery dates between November and April | |
| 15. |
Financial leverage may increase a corporation’s risk because |
| A. | operating income may stabilize |
| B. | the firm has fixed obligations to meet |
| C. | more common stock is outstanding |
| D. | dividends must be paid |
| Answer» B. the firm has fixed obligations to meet | |
| 16. |
What is the value of a call on the expiration date, if on that date the price of the stock is Rs.25 and the exercise price is Rs.26? |
| A. | Rs.-1 |
| B. | Rs 0 |
| C. | Rs 1 |
| D. | Rs 25 |
| Answer» B. Rs 0 | |
| 17. |
Equity does NOT include |
| A. | cash and paid-in capital |
| B. | common stock and paid-in capital |
| C. | paid-in capital and retained earnings |
| D. | common stock, paid-in capital and retained earnings |
| Answer» A. cash and paid-in capital | |
| 18. |
What is the price of a stock estimated to pay a dividend of Rs.60 next year, if the dividend growth rate is 5% and the appropriate discount rate is 8%? |
| A. | Rs.18 |
| B. | Rs.19 |
| C. | Rs.20 |
| D. | Rs.21 |
| Answer» C. Rs.20 | |
| 19. |
If you were confident that the price of stock X would drop dramatically within two Months ,which of the following investment transactions would yield the highest return on your investment? |
| A. | Purchase stock X |
| B. | Sell stock X short |
| C. | Purchase a call on stock X |
| D. | Purchase a put on stock X |
| Answer» D. Purchase a put on stock X | |
| 20. |
In a private limited company, the maximum number ofmembers are limited to: |
| A. | 20 |
| B. | 50 |
| C. | 100 |
| D. | 200 |
| Answer» B. 50 | |
| 21. |
Shares which are not affected by market movements are known as: |
| A. | Offensive shares |
| B. | Growth shares |
| C. | Defensive shares |
| D. | Income shares |
| Answer» C. Defensive shares | |
| 22. |
Exposure indicates |
| A. | Sensitivity to changes in risk |
| B. | Sensitivity to changes in asset prices |
| C. | Sensitivity to changes in portfolio |
| D. | Sensitivity to changes in assets |
| Answer» D. Sensitivity to changes in assets | |
| 23. |
Which of the following securities is most liquid? |
| A. | Money market instruments |
| B. | Capital market instruments |
| C. | Gilt-edged securities |
| D. | Index Futures |
| Answer» B. Capital market instruments | |
| 24. |
Which of the following goals will be considered by the individuals who invest in upcoming companies and wait till the companies to grow and then harvest their profits and move on to other company? |
| A. | Short-term high priority goals |
| B. | Money making goals |
| C. | Long-term high priority goals |
| D. | Lower priority goals |
| Answer» C. Long-term high priority goals | |
| 25. |
A purely passive strategy is defined as |
| A. | One that uses only index funds. |
| B. | One that allocates assets in fixed proportions that do not vary with market conditions. |
| C. | One that is mean-variance efficient. |
| D. | Both A and B. |
| Answer» B. One that allocates assets in fixed proportions that do not vary with market conditions. | |
| 26. |
An industry in the expansion stage of its life cycle is indicated by its |
| A. | Low P/E Ratio. |
| B. | High P/E Ratio. |
| C. | High Dividend Pay-Out Ratio |
| D. | High Default |
| Answer» D. High Default | |
| 27. |
Which of the following is true of municipal government debt? |
| A. | It pays more interest than corporate debt. |
| B. | It is often purchased by individuals with high incomes. |
| C. | It is exempt from estate taxation. |
| D. | It is not subject to interest rate risk. |
| Answer» B. It is often purchased by individuals with high incomes. | |
| 28. |
The net asset value of a mutual fund investing in stock rises with |
| A. | Higher stock prices |
| B. | Lower equity values |
| C. | An increased number of shares |
| D. | Increased liabilities |
| Answer» B. Lower equity values | |
| 29. |
Which of the following is not among the important categories of real assets? |
| A. | Land and house property |
| B. | Art objects |
| C. | Units of UTI |
| D. | Bullion |
| Answer» A. Land and house property | |
| 30. |
Which of the following statements is true of Insured Asset Allocation? |
| A. | It is aimed at benefiting from short-term under pricing and over pricing of assets. |
| B. | In this strategy the risk tolerance of the investor are ignored. |
| C. | In this strategy long-term predictions regarding the capital markets are us |
| Answer» C. In this strategy long-term predictions regarding the capital markets are us | |
| 31. |
______ are a fixed income security. |
| A. | Equities |
| B. | Forex |
| C. | Derivatives |
| D. | Bonds |
| Answer» D. Bonds | |
| 32. |
Which of the following is/are true if a firm has a required rate of return equal to the ROE? I. The amount of earnings retained by the firm does not affect market price or the P/E. II. The firm can increase market price and P/E by increasing the growth rate. III. The P/E ratio is inversely proportional to the ROE of the firm. |
| A. | Only (I) above |
| B. | Both (I) and (II) above |
| C. | Both (I) and (III) above |
| D. | Both (II) and (III) above |
| Answer» D. Both (II) and (III) above | |
| 33. |
Consider these two investment strategies: Strategy ___ is the dominant strategy because __________. |
| A. | 1, it is riskless |
| B. | 1, it has the highest reward/risk ratio |
| C. | 2, its return is at least equal to Strategy 1 and sometimes greater |
| D. | 2, it has the highest reward/risk ratio |
| Answer» B. 1, it has the highest reward/risk ratio | |
| 34. |
Which of the following statements is/are not correct with respect to the ‘Constant Mix Strategies’ of asset allocation? I. Investors adopting these strategies tend to maintain an exposure to stocks that are in constant proportion of their wealth. II. The risk-tolerance level of the investors varies proportionately with the level of theirwealth. III. Reversals in stock markets oppose constant mix strategies over the buy and hold IV. strategies. |
| A. | Only (I) above |
| B. | Only (II) above |
| C. | Only (III) above |
| D. | Both (I) and (II) above |
| Answer» C. Only (III) above | |
| 35. |
The tracking error of an optimized portfolio can be expressed in terms of the ____________ of the portfolio and thus reveal ____________. |
| A. | return; portfolio performance |
| B. | total risk; portfolio performance |
| C. | beta; portfolio performance |
| D. | beta; benchmark risk |
| Answer» C. beta; portfolio performance | |
| 36. |
A portfolio comprises of two stocks A and B. Stock A gives a return of 8%and stock B gives a return of 7%. Stock A has a weight of 60% in the portfolio. What is the portfolio return? |
| A. | 9% |
| B. | 11% |
| C. | 10% |
| D. | 8% |
| Answer» D. 8% | |
| 37. |
Price movement between two Information Technology stocks would generally have a ______ co-variance. |
| A. | zero |
| B. | positive |
| C. | negative |
| D. | none |
| Answer» D. none | |
| 38. |
The two types of investments that provide the highest and lowest yields in the Ibbotson study of Stocks, Bonds, Bills and Inflation are |
| A. | Large company stocks; U.S. treasury bills |
| B. | Large company stocks; Long-term government bonds |
| C. | Small company stocks; U.S. Treasury bills |
| D. | Small company stocks; preferred stock |
| Answer» B. Large company stocks; Long-term government bonds | |
| 39. |
Which of the following is not a form of a financial asset? |
| A. | Commercial paper |
| B. | Commodity futures |
| C. | Warrants |
| D. | Personal residence |
| Answer» C. Warrants | |
| 40. |
Historically, the real rate of return in the U.S. economy has been |
| A. | 1-2% |
| B. | 2-3% |
| C. | 3-4% |
| D. | 4-5% |
| Answer» D. 4-5% | |
| 41. |
Which of the following is not a form of real asset? |
| A. | Rare paintings |
| B. | Baseball cards |
| C. | Diamonds |
| D. | Real estate |
| Answer» B. Baseball cards | |
| 42. |
Under the Economic Growth and Tax Reconciliation Act of 2001, when will estate taxes be eliminated? |
| A. | 2008 |
| B. | 2009 |
| C. | 2010 |
| D. | 2019 |
| Answer» D. 2019 | |
| 43. |
Program trading decreases market efficiency by exaggerating price discrepancies between the cash and futures markets |
| A. | True |
| B. | False |
| C. | all |
| D. | none |
| Answer» D. none | |
| 44. |
Capital Market Line is firstly initiated by |
| A. | Mohsin |
| B. | Linter |
| C. | Markowitz |
| D. | William Sharpe |
| Answer» B. Linter | |
| 45. |
Most favourable portfolio is proficient portfolio with the |
| A. | lowest risk |
| B. | highest risk |
| C. | highest utility |
| D. | least investment |
| Answer» D. least investment | |
| 46. |
Ambiguity introduced by way by which organization finances its investments is |
| A. | country risk |
| B. | liquidity risk |
| C. | financial risk |
| D. | business risk |
| Answer» C. financial risk | |
| 47. |
If generally interest rates in nation increase, a corporate bond with a fixed interest rate will usually |
| A. | increase in value |
| B. | remain unchanged |
| C. | decrease in value. |
| D. | be returned to corporation. |
| Answer» C. decrease in value. | |
| 48. |
Inferior investment alternatives are identified when: |
| A. | α < 0. |
| B. | β = 0. |
| C. | β > 1. |
| D. | β < 1. |
| Answer» C. β > 1. | |
| 49. |
Systematic risk is higher when: |
| A. | α > 0. |
| B. | α < 0. |
| C. | α > 1. |
| D. | β > 1 |
| Answer» A. α > 0. | |
| 50. |
In the stock-price beta estimation for the Coca-Cola Company, the dependent variable is the: |
| A. | return on Coca-Cola. |
| B. | price of Coca-Cola stock. |
| C. | return on the S&P 500. |
| D. | value of the S&P 500 Index. |
| Answer» D. value of the S&P 500 Index. | |
Done Studing? Take A Test.
Great job completing your study session! Now it's time to put your knowledge to the test. Challenge yourself, see how much you've learned, and identify areas for improvement. Don’t worry, this is all part of the journey to mastery. Ready for the next step? Take a quiz to solidify what you've just studied.