MCQOPTIONS
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MCQOPTIONS
This section includes 22 Mcqs, each offering curated multiple-choice questions to sharpen your Master of Business Administration (MBA) knowledge and support exam preparation. Choose a topic below to get started.
| 1. |
Information processing errors consist of I. forecasting errors II. overconfidence III. conservatism IV. framing |
| A. | I and II |
| B. | I and III |
| C. | III and IV |
| D. | I, II and III |
| Answer» E. | |
| 2. |
An Investor can form a portfolio that lies to the right of the optimal risky portfolio on asset allocation line by I. Lend some money at the risk free rate and invest the remainder in the optimal risky portfolio. II. Borrow some money at the risk free rate and invest in the optimal risky portfolio III. Such a portfolio cannot be formed IV. Invest only in risky assets |
| A. | Only (I) above |
| B. | Only (II) above |
| C. | Only (III) above |
| D. | Only (IV) above |
| Answer» C. Only (III) above | |
| 3. |
According to the Efficient Market Hypothesis (EMH) I. Stocks with smaller beta will be consistently overpriced. II. Stocks with higher beta will be consistently underpriced. III. Positive alphas on stocks will not remain for a longer period. |
| A. | Only (I) above |
| B. | Only (III) above |
| C. | Both (I) and (II) above |
| D. | Both (II) and (III) above |
| Answer» C. Both (I) and (II) above | |
| 4. |
Which of the statements is/are false regarding Arbitrage Pricing Theory (APT)? I. APT assumes that return on any asset can be expressed as a linear function of a set of market factors or indexes. II. The arbitrage price line indicates relation between unsystematic risk and the expected return of an asset. III. While deriving the APT model, APT assumes that the error term can be reduced to zero through appropriate diversification. |
| A. | Only (I) above |
| B. | Only (II) above |
| C. | Only (III) above |
| D. | Both (I) and (II) above |
| Answer» C. Only (III) above | |
| 5. |
Which of the following statements is/are true with respect Capital Market Line (CML)? I. It is the line passing from risk-free rate through market portfolio. II. The slope of CML is called market price of risk. III. CML fails to express equilibrium pricing relationship between expected return and standard deviation for all efficient portfolios lying along the line. |
| A. | Only (I) above |
| B. | Only (II) above |
| C. | Only (III) above |
| D. | Both (I) and (II) above |
| Answer» E. | |
| 6. |
Particulars Falcon International Triumph International Average Return (%) 10 8 Average Volatility (%) 12 15 For the portfolio to yield lower risk than the individual stocks, the correlation coefficient of stocks should be |
| A. | Less than 1.25 |
| B. | Less than 0.85 |
| C. | Less than 0.80 |
| D. | More than 0.83 |
| Answer» D. More than 0.83 | |
| 7. |
Analysis carried out on the performance of a fund for last year is compiled as under: Total selectivity 2.50% Net selectivity 1.53% of portfolio 0.90 Return on market index 13.00% Standard deviation of market returns 13.50% Risk free return, Rf 8.00% The total risk ( i) of portfolio is |
| A. | 11.1% |
| B. | 12.2% |
| C. | 13.8% |
| D. | 14.8% |
| Answer» E. | |
| 8. |
___________ market encompasses all securities not traded on national organized exchanges. |
| A. | Primary |
| B. | Money |
| C. | Capital |
| D. | Over the counter |
| Answer» E. | |
| 9. |
The commitment of current funds in anticipation of receiving a larger future flow of funds is called |
| A. | A financial asset |
| B. | A real asset |
| C. | An investment |
| D. | Gambling |
| Answer» D. Gambling | |
| 10. |
Fund managers generally want which of following objectives to be optimal? I. Stability of principle. II. Income. III. Growth of income. IV. Capital appreciation. |
| A. | Both (I) and (II) above |
| B. | Both (I) and (III) above |
| C. | Both (II) and (III) above |
| D. | All (I), (II), (III) and (IV) above |
| Answer» E. | |
| 11. |
_______ measures the percentage of net income not paid to the shareholders in the form of dividends. |
| A. | Withholding ratio |
| B. | Retention ratio |
| C. | Preservation ratio |
| D. | Maintenance ratio |
| Answer» C. Preservation ratio | |
| 12. |
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» D. risk averters. | |
| 13. |
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» B. Yield. | |
| 14. |
According to the Capital Asset Pricing Model (CAPM) a well diversified portfolio's rate of return is a function of |
| A. | market risk |
| B. | unsystematic risk |
| C. | unique risk. |
| D. | reinvestment risk. |
| Answer» B. unsystematic risk | |
| 15. |
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» E. | |
| 16. |
Analysts may use regression analysis to estimate the index model for a stock. When doing so, the slope of the regression line is an estimate of ______________. |
| A. | the of the asset |
| B. | the of the asset |
| C. | the of the asset |
| D. | the of the asset |
| Answer» C. the of the asset | |
| 17. |
Which of the following statement(s) is/are true? I. A unique characteristic line is plotted for each security to determine the beta. II. For a characteristic line, the X-axis represents betas for different securities. III. The slope of the characteristic line is the difference between the market returns andrisk-free returns. |
| A. | Only (I) above |
| B. | Only (II) above |
| C. | Only (III) above |
| D. | Both (I) and (II) above |
| Answer» B. Only (II) above | |
| 18. |
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» E. | |
| 19. |
According to the capital market line, the expected return of any efficient portfolio is a function of: |
| A. | unique risk. |
| B. | systematic risk. |
| C. | unsystematic risk. |
| D. | total risk. |
| Answer» E. | |
| 20. |
Depending upon the investor s preferences and the market opportunities an investor s portfolio is the portfolio that I. Maximizes her expected utility. II. Maximizes her risk. III. Minimizes both her risk and return. IV. Maximizes her expected profit. |
| A. | Only (I) above |
| B. | Only (II) above |
| C. | Only (III) above |
| D. | Only (IV) above |
| Answer» B. Only (II) above | |
| 21. |
Which of the following statements is/are true with respect to feasible set of portfolio? I. Feasible set is also known as opportunity set. II. It represents all the portfolios that could be formed from group of N securities. III. Feasible set is also called efficient set |
| A. | Only (I) above |
| B. | Only (II) above |
| C. | Only (III) above |
| D. | Both (I) and (II) above |
| Answer» E. | |
| 22. |
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» D. Both (I) and (II) above | |