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MCQOPTIONS
This section includes 141 Mcqs, each offering curated multiple-choice questions to sharpen your Financial Management/Financial Markets knowledge and support exam preparation. Choose a topic below to get started.
| 51. |
The type of premium asked by the investors for bearing the risk on average stock is classified as |
| A. | average premium |
| B. | market risk premium |
| C. | stock premium |
| D. | buying discount |
| Answer» C. stock premium | |
| 52. |
The type of risk in which beta is equal to one is classified as |
| A. | multiple risk stock |
| B. | varied risk stock |
| C. | total risk stock |
| D. | average risk stock |
| Answer» E. | |
| 53. |
The rational traders immediately sell the stock when the price is |
| A. | conditional |
| B. | inefficient portfolio |
| C. | too low |
| D. | too high |
| Answer» E. | |
| 54. |
The yield on bond is 7% and the market required return is 14% then market risk premium would be |
| A. | 0.02 |
| B. | 0.21 |
| C. | 0.005 |
| D. | 0.07 |
| Answer» E. | |
| 55. |
The correct measure of risk of stock is called |
| A. | alpha |
| B. | beta |
| C. | variance |
| D. | market relevance |
| Answer» C. variance | |
| 56. |
The stocks in the market portfolio are graphically represented with |
| A. | dashed line |
| B. | straight line |
| C. | market line |
| D. | risk line |
| Answer» B. straight line | |
| 57. |
An amount invested is $1500 and an amount received is $2000 then the dollar return would be |
| A. | 500 |
| B. | −$500 |
| C. | 3500 |
| D. | −$3500 |
| Answer» B. −$500 | |
| 58. |
The beta coefficient is used to measure market risk which is an index of |
| A. | coefficient risk volatility |
| B. | market risk volatility |
| C. | stock market volatility |
| D. | portfolio market portfolio |
| Answer» D. portfolio market portfolio | |
| 59. |
A portfolio consists of all the stocks in a market is classified as |
| A. | market portfolio |
| B. | return portfolio |
| C. | correlated portfolio |
| D. | diversified portfolio |
| Answer» B. return portfolio | |
| 60. |
The market risk and diversifiable risk are two components of |
| A. | stock's risk |
| B. | portfolio risk |
| C. | expected return |
| D. | stock return |
| Answer» B. portfolio risk | |
| 61. |
Mostly in financials, the risk of portfolio is smaller than that of asset's |
| A. | mean |
| B. | weighted average |
| C. | mean correlation |
| D. | negative correlation |
| Answer» C. mean correlation | |
| 62. |
An estimation by marginal investor, a higher expected return is earned on |
| A. | more riskier securities |
| B. | less riskier securities |
| C. | less premium |
| D. | high premium |
| Answer» B. less riskier securities | |
| 63. |
The case in which average investors risk aversion is greater then the slope of line and risk premium respectively is |
| A. | steeper, greater |
| B. | steeper, smaller |
| C. | steeper, zero |
| D. | both a and b |
| Answer» B. steeper, smaller | |
| 64. |
The external factors such as expiration of basic patents and industry competition effect |
| A. | patents premium |
| B. | competition premium |
| C. | company's beta |
| D. | expiry premium |
| Answer» D. expiry premium | |
| 65. |
In capital asset pricing model, an amount of risk that stock contributes to the portfolio of market is classified as |
| A. | stand-alone coefficient |
| B. | relevant coefficient |
| C. | alpha coefficient |
| D. | beta coefficient |
| Answer» E. | |
| 66. |
The sum of market risk and diversifiable risk are classified as total risk which is equivalent to |
| A. | Sharpe's alpha |
| B. | standard alpha's |
| C. | alpha's variance |
| D. | variance |
| Answer» E. | |
| 67. |
The stock issued by company have higher rate of return because of |
| A. | low market to book ratio |
| B. | high book to market ratio |
| C. | high market to book ratio |
| D. | low book to market ratio |
| Answer» C. high market to book ratio | |
| 68. |
The betas that are constantly adjusted to reflect changes in capital structure and firms operations are classified as |
| A. | fundamental structure |
| B. | fundamental adjustment |
| C. | fundamental betas |
| D. | fundamental operations |
| Answer» D. fundamental operations | |
| 69. |
The type of relationship exists between an expected return and risk of portfolio is classified as |
| A. | non-linear |
| B. | linear |
| C. | fixed and aggregate |
| D. | non-fixed and non-aggregate |
| Answer» C. fixed and aggregate | |
| 70. |
An average return of portfolio divided by its standard deviation is classified as |
| A. | Jensen's alpha |
| B. | Treynor's variance to volatility ratio |
| C. | Sharpe's reward to variability ratio |
| D. | Treynor's reward to volatility ratio |
| Answer» D. Treynor's reward to volatility ratio | |
| 71. |
According to capital asset pricing model assumptions, the variances, expected returns and covariance of all assets are |
| A. | identical |
| B. | not identical |
| C. | fixed |
| D. | variable |
| Answer» B. not identical | |
| 72. |
In an individual stock, the relevant risk is classified as |
| A. | alpha coefficient |
| B. | beta coefficient |
| C. | stand-alone coefficient |
| D. | relevant coefficient |
| Answer» C. stand-alone coefficient | |
| 73. |
The 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 |
| Answer» C. undiversified portfolio | |
| 74. |
The formula written as market risk premium divided by standard deviations of returns on market portfolio is used to calculate |
| A. | capital market line |
| B. | security market line |
| C. | fixed market line |
| D. | variable market line |
| Answer» B. security market line | |
| 75. |
A range of probability distribution with 95.46% lies within |
| A. | ( + 1σ and -1σ) |
| B. | ( + 2σ and -2σ) |
| C. | ( + 3σ and -3σ) |
| D. | ( + 4σ and -4σ) |
| Answer» C. ( + 3σ and -3σ) | |
| 76. |
The betas tend to move towards 1.0 with the passage of time are classified as |
| A. | standard betas |
| B. | varied betas |
| C. | historical betas |
| D. | adjusted betas |
| Answer» E. | |
| 77. |
An opposite of perfect positive correlation + 1.0 is called |
| A. | negative correlation |
| B. | multiple correlation |
| C. | divisor correlation |
| D. | none of above |
| Answer» B. multiple correlation | |
| 78. |
An inflation free rate of return and inflation premium are the two components of |
| A. | quoted rate |
| B. | unquoted rate |
| C. | steeper rate |
| D. | portfolio rate |
| Answer» B. unquoted rate | |
| 79. |
The gross domestic product, the world economy strength and level of inflation are the factors which is used to determine |
| A. | market realized return |
| B. | portfolio realized return |
| C. | portfolio arbitrage risk |
| D. | arbitrage theory of return |
| Answer» B. portfolio realized return | |
| 80. |
The risk affects any firm with the 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 |
| Answer» C. stock risk | |
| 81. |
The greater chance of lower actual return than expected return and greater variation is indicated by |
| A. | smaller standard deviation |
| B. | larger standard deviation |
| C. | smaller variance |
| D. | larger variance |
| Answer» C. smaller variance | |
| 82. |
The two alternative expected returns are compared with the help of |
| A. | coefficient of variation |
| B. | coefficient of deviation |
| C. | coefficient of standard |
| D. | coefficient of return |
| Answer» B. coefficient of deviation | |
| 83. |
A model in which the behavior of asset returns is measured for set of risk factors and market risk is classified as |
| A. | factorization model |
| B. | Two factor model |
| C. | multifactor model |
| D. | quoted factor model |
| Answer» D. quoted factor model | |
| 84. |
The stock which has higher correlation with market tend to have |
| A. | high beta, less risky |
| B. | low beta, more risky |
| C. | high beta, more risky |
| D. | low beta, less risky |
| Answer» D. low beta, less risky | |
| 85. |
The chance of happening any unfavorable event in near future is classified as |
| A. | chance |
| B. | event happening |
| C. | probability |
| D. | risk |
| Answer» E. | |
| 86. |
The chance of occurrence of any event is classified as |
| A. | probability |
| B. | risk |
| C. | chance |
| D. | event happening |
| Answer» B. risk | |
| 87. |
If the market value is greater than book value then the investors for future stock are considered as |
| A. | experienced |
| B. | inexperienced |
| C. | pessimistic |
| D. | optimistic |
| Answer» E. | |
| 88. |
A high portfolio return is subtracted from low portfolio return to calculate |
| A. | HML portfolio |
| B. | R portfolio |
| C. | subtracted portfolio |
| D. | ML portfolio |
| Answer» B. R portfolio | |
| 89. |
The second step in determining efficient portfolios is to consider efficient subset from the set of |
| A. | attainable portfolios |
| B. | unattainable portfolios |
| C. | attributable portfolios |
| D. | non-attributable portfolio |
| Answer» B. unattainable portfolios | |
| 90. |
The rational traders immediately buy the stock when the price is |
| A. | too low |
| B. | too high |
| C. | conditional |
| D. | inefficient portfolio |
| Answer» B. too high | |
| 91. |
All the points lie on the line if the degree of dispersion is |
| A. | four |
| B. | one |
| C. | two |
| D. | five |
| Answer» C. two | |
| 92. |
The high portfolio return is 6.5% and the low portfolio return is 3.0% then the HML portfolio will be |
| A. | 0.0216 |
| B. | 0.095 |
| C. | 0.035 |
| D. | 0.4615 times |
| Answer» D. 0.4615 times | |
| 93. |
The future beta is needed to calculate in most situations is classified as |
| A. | historical betas |
| B. | adjusted betas |
| C. | standard betas |
| D. | varied betas |
| Answer» B. adjusted betas | |
| 94. |
An efficient set of portfolios represented through graph is classified as an |
| A. | attained frontier |
| B. | efficient frontier |
| C. | inefficient frontier |
| D. | unattained frontier |
| Answer» C. inefficient frontier | |
| 95. |
The stocks which has lower book for market ratio are considered as |
| A. | optimistic |
| B. | more risky |
| C. | less risky |
| D. | pessimistic |
| Answer» D. pessimistic | |
| 96. |
The stock portfolio with the lowest book for market ratios is considered as |
| A. | S portfolio |
| B. | B to M portfolio |
| C. | H portfolio |
| D. | L portfolio |
| Answer» E. | |
| 97. |
The coefficient of variation is used to identify an effect of |
| A. | risk |
| B. | return |
| C. | deviation |
| D. | both a and b |
| Answer» E. | |
| 98. |
A measure which is not included in Fama French Three-Factor model is |
| A. | realized risk free rate |
| B. | rate of return on market |
| C. | random error |
| D. | risk premium |
| Answer» E. | |
| 99. |
The required return is 15% and the premium for risk is 11% then the risk free return would be |
| A. | 0.26 |
| B. | 0.04 |
| C. | 165 |
| D. | 0.0136 |
| Answer» C. 165 | |
| 100. |
An analysis of decision making of investors and managers is classified as |
| A. | riskier finance |
| B. | behavioral finance |
| C. | premium finance |
| D. | buying finance |
| Answer» C. premium finance | |