MCQOPTIONS
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MCQOPTIONS
This section includes 18 Mcqs, each offering curated multiple-choice questions to sharpen your Economics Mcqs knowledge and support exam preparation. Choose a topic below to get started.
| 1. |
Diversification of portfolio can ? |
| A. | reduce aggregate risk |
| B. | eliminate all risk |
| C. | increase the standard deviation of the portfolio’s return |
| D. | reduce idiosyncratic risk |
| Answer» E. | |
| 2. |
Speculative bubbles may occur in the shares market ? |
| A. | during periods of extreme pessimism because so many stocks become undervalued |
| B. | only when people are irrational |
| C. | when stocks are fairly valued |
| D. | because rational people may buy an overvalued share if they think they can sell it to someone for even more at a later date |
| Answer» D. because rational people may buy an overvalued share if they think they can sell it to someone for even more at a later date | |
| 3. |
Which of the following reduces risk in a portfolio the greatest ? |
| A. | Increasing the number of shares from 10 to 20 |
| B. | All of these answers provide the same amount of risk reduction |
| C. | Increasing the number of shares in the portfolio from 1 to 10 |
| D. | Increasing the number of shares from 20 to 30 |
| Answer» D. Increasing the number of shares from 20 to 30 | |
| 4. |
The study of a company’s accounting statements and future prospects to determine its value is known as ? |
| A. | information analysis |
| B. | risk management |
| C. | fundamental analysis |
| D. | diversification |
| Answer» D. diversification | |
| 5. |
Which of the following is an example of moral hazard ? |
| A. | After Gull buys fire insurance, he begins to smoke cigarettes in bed. |
| B. | None of these answers demonstrate moral hazard |
| C. | Mahmood has been feeling poorly lately so he seeks health insurance |
| D. | All of these answers demonstrate moral hazard |
| Answer» B. None of these answers demonstrate moral hazard | |
| 6. |
An increase in the prevailing interest rate ? |
| A. | increases the present value of future returns from investment and increases investment |
| B. | decreases the present value of future return from investment and decreases investment |
| C. | decreases the present value of future returns from investment and increase investment |
| D. | increases the present value of future returns from investment and decreases investment |
| Answer» C. decreases the present value of future returns from investment and increase investment | |
| 7. |
If a depositor puts Rs100 in a bank amount that earns 4 percent interest compounded annually, how much will be in the account after five years ? |
| A. | Rs400.00 |
| B. | Rs 104.00 |
| C. | Rs 121.67 |
| D. | Rs 123.98 |
| Answer» D. Rs 123.98 | |
| 8. |
It is difficult for an actively managed investment fund to outperform an index fund because ? |
| A. | stock markets tend to be inefficient |
| B. | all of these answers |
| C. | index funds are able to buy undervalued stocks |
| D. | actively managed funds trade more often and charge fees for their alleged expertise |
| Answer» E. | |
| 9. |
If people are risk averse, then ? |
| A. | None of these answers are true |
| B. | All of these answers are true |
| C. | They dislike bad things more than the like comparable good things |
| D. | The utility they would lose from losing a Rs50 bet would exceed the utility they would gain from winning a Rs 50 bet |
| E. | Their utility function exhibit the property of diminishing marginal utility of wealth |
| Answer» C. They dislike bad things more than the like comparable good things | |
| 10. |
Share prices will follow a random walk if ? |
| A. | shares are overvalued |
| B. | people behave irrationally when choosing shares |
| C. | markets reflect all available information in a rational way |
| D. | shares are undervalued |
| Answer» D. shares are undervalued | |
| 11. |
If two countries start with the same real GDP/person and one country grows at 2 percent while the other grows at 4 percent ? |
| A. | one country will always have 2 percent more real GDP/person than the other |
| B. | the standard of living in the country growing at 4 percent will start to accelerate away from the slower growing country due to compound growth |
| C. | the standard of living in the two countries will converge |
| D. | Next year the country growing at 4 percent will have twice the GDP/person as the country growing at 2 percent |
| Answer» C. the standard of living in the two countries will converge | |
| 12. |
If the efficient markets hypothesis is true, then ? |
| A. | shares tend to be overvalued |
| B. | the stock market is informationally efficient so share prices should follow a random walk |
| C. | All of these answers |
| D. | fundamental analysis is a valuable tool for increasing one’s returns from investing in shares |
| Answer» C. All of these answers | |
| 13. |
Which of the following should cause the price of a share of stock to rise ? |
| A. | None of these answers |
| B. | An increase in expected dividends |
| C. | A reduction in aggregate risk |
| D. | A reduction in the interest rate |
| E. | All of these answers |
| Answer» F. | |
| 14. |
Idiosyncratic risk is the ? |
| A. | uncertainty associated with the entire economy |
| B. | uncertainty associated with specific companies |
| C. | risk associated with adverse selection |
| D. | risk associated with moral hazard |
| Answer» C. risk associated with adverse selection | |
| 15. |
Compared to a portfolio composed entirely of shares a portfolio that is 50 percent government bonds and 50 percent shares will have a ? |
| A. | lower return and a lower level or risk |
| B. | lower return and a higher level of risk |
| C. | higher return and a lower level or risk |
| D. | higher return and a higher level of risk |
| Answer» B. lower return and a higher level of risk | |
| 16. |
Which of the following does not help reduce the risk that people face ? |
| A. | increasing the rate of return within their portfolio |
| B. | diversifying their portfolio |
| C. | All of these answers help reduce risk |
| D. | buying insurance |
| Answer» B. diversifying their portfolio | |
| 17. |
JCB (Which makes agricultural and construction equipment) has the opportunity to purchase a new factory today that will provide them with a Rs50 million return four years from now If prevailing interest rates are 6 percent, what is the maximum that the project can cost for JCB to be willing to undertake the project ? |
| A. | Rs 43,456,838 |
| B. | Rs 53,406,002 |
| C. | Rs 34,538,902 |
| D. | Rs 39,604,682 |
| Answer» E. | |
| 18. |
The amount today that would be needed, at prevailing interest rates, to produce a particular sum in the future is known as ? |
| A. | future value |
| B. | fair value |
| C. | present value |
| D. | compound value |
| E. | beginning value |
| Answer» D. compound value | |