The most widely used monetary tool is ___________.

altering the reserve requirements

The risk that investment bankers normally face

Lower for small OTCEI stocks than for large NSE stocks

The risk associated with secondary market transactions

The risk increases whenever interest rates increase

Stock A has a beta of 1.0 and very high unique risk. If the expected return on the market is 20%, then according to the CAPM the expected return on Stock A will be:

the answer cannot be found without knowing the risk-free rate of interest.

the answer cannot be found without knowing Stock A’s correlation or covariance with the market.

more than 20% because of Stock A’s very high unique risk.

the answer cannot be found without knowing the risk-free rate of interest.

is what an investor expects to obtain from his investment at the end of the investment period.

is what an investor actually obtains from his investment at the end of the investment period.

is what an investor expects to obtain from his investment at the end of the investment period.

is equivalent to risk free rate of return.

is what a creditor actually obtains from his investment at the end of the investment period.

The Black-Litterman model and Treynor-Black model are

contradictory models can not be use together; therefore, portfolio managers must choose which one suits their needs.

nice in theory but practically useless in modern portfolio management.

complementary tools that should be used in portfolio management.

contradictory models can not be use together; therefore, portfolio managers must choose which one suits their needs.

not useful due to their complexity.

If investors do not know their investment horizons for certain

the CAPM underlying assumptions are not violated.

the implications of the CAPM are not violated as long as investors' liquidity needs are not pric

Rosenberg and Guy found that __________helped to predict a firm's beta.

the firm's financial characteristics

A, B andC all helped to predict betas.

As diversification increases, the total variance of a portfolio approaches ____________.

The variance of the market portfolio

The risk-free rate for the next year is 3%, and the market risk premium is expected to be 10%. The beta of Acme’s stock is 1.5. If you believe that Acme’s stock will actually return 18.2% over the next year, then according to the CAPM you should:

sell the stock because it is overpric

be indifferent between buying and selling the stock.

buy the stock because it is under priced.

sell the stock because it is overpric

You own a large orange grove and will be harvesting from November through April. To hedge against price risks you should

buy orange juice contracts with delivery dates between November and April

sell orange juice contracts with a November delivery

buy orange juice contracts with a November delivery

sell orange juice contracts with delivery dates between November and April

buy orange juice contracts with delivery dates between November and April

If interest rates are expected to rise, you would expect

Bond prices to rise more than stock prices

Bond prices to fall more than stock prices

Bond prices to rise more than stock prices

Stock prices to fall more than bond prices

Stock prices to rise and bond prices to fall

The balance sheet of a company is a snapshot of the ______ of the firm at a point in time.

the sources and applications of funds of the company.

_________ above which it is difficult for the market to rise.

A book value and a resistance level are values

Avalanche effect in cryptography

Is undesirable property of cryptographic algorithm

Is desirable property of cryptographic algorithm

Is undesirable property of cryptographic algorithm

Has no effect on encryption algorithm

411 + Mcqs in Security Page 7 McqOptions

301.	The most widely used monetary tool is ___________.
A.	altering the discount rate
B.	altering the reserve requirements
C.	open market operations
D.	altering marginal tax rates
Answer» D. altering marginal tax rates

Discussion

302.	Suppose you estimate the characteristic line for Stock X. You find that the standard deviation of X’s error term is 7%, X’s beta is 1.4, and the standard deviation of the market is 12%. What is the total standard deviation for Stock X?
A.	18.2%
B.	19.0%
C.	23.8%
D.	30.5%
Answer» B. 19.0%

Discussion

303.	The commitment of current funds in anticipation of receiving a larger future flow of funds iscalled
A.	A financial asset
B.	A real asset
C.	An investment
D.	Gambling
Answer» D. Gambling

Discussion

304.	The __________ is the indicated dividend divided by the closing price of the stock.
A.	Income
B.	Share
C.	Yield
D.	Earning
Answer» C. Yield

Discussion

305.	At the prevailing environment, the Capital Market Line (CML) equation for a portfolio is given as E(ri),% = 8 + 0.36 ?i The ex-ante SML equation for the same portfolio i is E(ri),% = 8 + 5.50 ?i Therefore, the variance of market portfolio is approximately
A.	30(%)2
B.	64(%)2
C.	126(%)2
D.	233(%)2
Answer» E.

Discussion

306.	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» E.

Discussion

307.	According to the Capital Asset Pricing Model (CAPM) a well diversified portfolio'srate of return is a function of
A.	market risk
B.	unsystematic risk
C.	unique risk.
D.	reinvestment risk.
Answer» B. unsystematic risk

Discussion

308.	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.

Discussion

309.	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» C. Rs 1

Discussion

310.	Even low-quality forecasts have proven to be valuable because R-squares of only ____________ in regressions of analysts' forecasts can be used to substantially improve portfolio performance.
A.	0.656
B.	0.452
C.	0.258
D.	0.001
Answer» E.

Discussion

311.	Stock A has a beta of 1.0 and very high unique risk. If the expected return on the market is 20%, then according to the CAPM the expected return on Stock A will be:
A.	the answer cannot be found without knowing Stock A’s correlation or covariance with the market.
B.	more than 20% because of Stock A’s very high unique risk.
C.	exactly 20%.
D.	the answer cannot be found without knowing the risk-free rate of interest.
Answer» D. the answer cannot be found without knowing the risk-free rate of interest.

Discussion

312.	The realized return
A.	is what an investor actually obtains from his investment at the end of the investment period.
B.	is what an investor expects to obtain from his investment at the end of the investment period.
C.	is equivalent to risk free rate of return.
D.	is what a creditor actually obtains from his investment at the end of the investment period.
Answer» B. is what an investor expects to obtain from his investment at the end of the investment period.

Discussion

313.	You invest 55% of your money in security A with a beta of 1.4 and the rest of your money in security B with a beta of 0.9. The beta of the resulting portfolio is
A.	1.466
B.	1.157
C.	0.968
D.	1.175
Answer» E.

Discussion

314.	The Black-Litterman model and Treynor-Black model are
A.	nice in theory but practically useless in modern portfolio management.
B.	complementary tools that should be used in portfolio management.
C.	contradictory models can not be use together; therefore, portfolio managers must choose which one suits their needs.
D.	not useful due to their complexity.
Answer» C. contradictory models can not be use together; therefore, portfolio managers must choose which one suits their needs.

Discussion

315.	If investors do not know their investment horizons for certain
A.	the CAPM is no longer valid.
B.	the CAPM underlying assumptions are not violated.
C.	the implications of the CAPM are not violated as long as investors' liquidity needs are not pric
Answer» D.

Discussion

316.	What is the risk-free rate in an environment where the real rate is 3% and inflation is running at 3%? Use either method found in chapter one.
A.	14.5% or just 14%
B.	10.21% or just 10%
C.	6.09% or just 6%
D.	9.09% or just 9%
Answer» D. 9.09% or just 9%

Discussion

317.	Rosenberg and Guy found that __________helped to predict a firm's beta.
A.	the firm's financial characteristics
B.	the firm's industry group
C.	firm size
D.	A, B andC all helped to predict betas.
Answer» E.

Discussion

318.	Sharpe ratio and Treynor ratio measures which of the following:
A.	Standard Deviation
B.	Risk adjusted returns
C.	Beta
D.	Alpha factor
Answer» C. Beta

Discussion

319.	Information processing errors consist ofI. 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.

Discussion

320.	______ are a fixed income security.
A.	Equities
B.	Forex
C.	Derivatives
D.	Bonds
Answer» E.

Discussion

321.	An example of a highly cyclical industry is ________.
A.	the automobile industry
B.	the tobacco industry
C.	the food industry
D.	A and B
Answer» B. the tobacco industry

Discussion

322.	The beta of the risk-free asset is:
A.	0.5
B.	0
C.	2.0
D.	1.0
Answer» C. 2.0

Discussion

323.	___________ is a device to overcome the uncertainty connected with a stop order.
A.	Stop limit order
B.	Stay limit order
C.	Halt limit order
D.	End limit order
Answer» B. Stay limit order

Discussion

324.	Particulars Falcon International Triumph InternationalAverage 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

Discussion

325.	What is the beta of a portfolio that is invested 25 percent in the market portfolio, 25 percent in an asset with twice as much systematic risk as the market portfolio and the rest in a risk-free asset?
A.	0.25
B.	0.50
C.	0.75
D.	1.00
Answer» D. 1.00

Discussion

326.	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.

Discussion

327.	According to the capital market line, the expected return of any efficient portfolio is afunction of:
A.	unique risk.
B.	systematic risk.
C.	unsystematic risk.
D.	total risk.
Answer» E.

Discussion

328.	In which form of the efficient market hypothesis do security prices reflect only past stock price and volume information?
A.	weak form.
B.	semistrong form.
C.	strong form.
D.	none of the above.
Answer» C. strong form.

Discussion

329.	An investment in common stock carries a higher return than a bank certificate of deposit. The difference in returns is called
A.	The risk-free rate
B.	The real rate of return
C.	The risk premium
D.	The beta
Answer» D. The beta

Discussion

330.	As diversification increases, the total variance of a portfolio approaches ____________.
A.	0
B.	1
C.	The variance of the market portfolio
D.	Infinity
Answer» D. Infinity

Discussion

331.	Which of the following is not a test of semi-strong form efficiency?
A.	stock splits.
B.	accounting changes.
C.	dividend announcements.
D.	insider transactions.
Answer» E.

Discussion

332.	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

Discussion

333.	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.

Discussion

334.	The risk-free rate for the next year is 3%, and the market risk premium is expected to be 10%. The beta of Acme’s stock is 1.5. If you believe that Acme’s stock will actually return 18.2% over the next year, then according to the CAPM you should:
A.	be indifferent between buying and selling the stock.
B.	buy the stock because it is under priced.
C.	sell the stock because it is overpric
Answer» C. sell the stock because it is overpric

Discussion

335.	Which of the following investments would theoretically always carry the highest risk premium?
A.	U.S. treasury bill
B.	Common stock
C.	Preferred stock
D.	Corporate bond
Answer» C. Preferred stock

Discussion

336.	What is the expected return of a zero-beta security?
A.	The market rate of return.
B.	Zero rate of return.
C.	A negative rate of return.
D.	The risk-free rate.
Answer» E.

Discussion

337.	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» D. buy orange juice contracts with delivery dates between November and April

Discussion

338.	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» B. Bond prices to rise more than stock prices

Discussion

339.	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

Discussion

340.	The balance sheet of a company is a snapshot of the ______ of the firm at a point in time.
A.	the sources and applications of funds of the company.
B.	expenditure structure
C.	profit structure
D.	income structure
Answer» B. expenditure structure

Discussion

341.	_________ above which it is difficult for the market to rise.
A.	A book value is a value
B.	A resistance level is a value
C.	A support level is a value
D.	A book value and a resistance level are values
Answer» C. A support level is a value

Discussion

342.	A security is said to be ________ if its current market price is over its intrinsic value.
A.	Under priced
B.	Over priced
C.	Rightly priced
D.	all
Answer» C. Rightly priced

Discussion

343.	If the Required rate of Return as per CAPM is 18% and expected return is 12%, what should be the investment decision?
A.	Hold
B.	Buy
C.	Sell
D.	Buy later
Answer» D. Buy later

Discussion

344.	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» D. Fund complexes

Discussion

345.	If a portfolio manager consistently obtains a high Sharpe measure, the manager's forecasting ability __________.
A.	is above average
B.	is average
C.	is below average
D.	does not exist.
Answer» B. is average

Discussion

346.	Avalanche effect in cryptography
A.	Is desirable property of cryptographic algorithm
B.	Is undesirable property of cryptographic algorithm
C.	Has no effect on encryption algorithm
D.	None of the above
Answer» B. Is undesirable property of cryptographic algorithm

Discussion

347.	Digital Certificates are described using _______ format.
A.	X.508
B.	X.509
C.	X.510
D.	X.409
Answer» C. X.510

Discussion

348.	In _______, other nodes verify the validity of the block by checking that the hash of the data of the block is less than a preset number.
A.	Proof of Burn
B.	Proof of STAKE
C.	Proof of Work
D.	All of the options
Answer» D. All of the options

Discussion

349.	In a system an RSA algorithm with p = 5 and q = 11, is implemented for data security. What is the value of the decryption key if the value of the encryption key is 27 ?
A.	3
B.	7
C.	27
D.	40
Answer» B. 7

Discussion

350.	Personal Computers generally should not be used for
A.	Online Shopping
B.	Ticket Booking
C.	Server
D.	Internet
Answer» D. Internet

Discussion

Explore topic-wise MCQs in Operating System.

The most widely used monetary tool is ___________.

Suppose you estimate the characteristic line for Stock X. You find that the standard deviation of X’s error term is 7%, X’s beta is 1.4, and the standard deviation of the market is 12%. What is the total standard deviation for Stock X?

The commitment of current funds in anticipation of receiving a larger future flow of funds iscalled

The __________ is the indicated dividend divided by the closing price of the stock.

At the prevailing environment, the Capital Market Line (CML) equation for a portfolio is given as E(ri),% = 8 + 0.36 ?i The ex-ante SML equation for the same portfolio i is E(ri),% = 8 + 5.50 ?i Therefore, the variance of market portfolio is approximately

Liquidity risk

According to the Capital Asset Pricing Model (CAPM) a well diversified portfolio'srate of return is a function of

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?

Even low-quality forecasts have proven to be valuable because R-squares of only ____________ in regressions of analysts' forecasts can be used to substantially improve portfolio performance.

Stock A has a beta of 1.0 and very high unique risk. If the expected return on the market is 20%, then according to the CAPM the expected return on Stock A will be:

The realized return

You invest 55% of your money in security A with a beta of 1.4 and the rest of your money in security B with a beta of 0.9. The beta of the resulting portfolio is

The Black-Litterman model and Treynor-Black model are

If investors do not know their investment horizons for certain

What is the risk-free rate in an environment where the real rate is 3% and inflation is running at 3%? Use either method found in chapter one.

Rosenberg and Guy found that __________helped to predict a firm's beta.

Sharpe ratio and Treynor ratio measures which of the following:

Information processing errors consist ofI. forecasting errors II. overconfidence III. conservatism IV. framing

______ are a fixed income security.

An example of a highly cyclical industry is ________.

The beta of the risk-free asset is:

___________ is a device to overcome the uncertainty connected with a stop order.

Particulars Falcon International Triumph InternationalAverage 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

What is the beta of a portfolio that is invested 25 percent in the market portfolio, 25 percent in an asset with twice as much systematic risk as the market portfolio and the rest in a risk-free asset?

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

According to the capital market line, the expected return of any efficient portfolio is afunction of:

In which form of the efficient market hypothesis do security prices reflect only past stock price and volume information?

An investment in common stock carries a higher return than a bank certificate of deposit. The difference in returns is called

As diversification increases, the total variance of a portfolio approaches ____________.

Which of the following is not a test of semi-strong form efficiency?

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

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

The risk-free rate for the next year is 3%, and the market risk premium is expected to be 10%. The beta of Acme’s stock is 1.5. If you believe that Acme’s stock will actually return 18.2% over the next year, then according to the CAPM you should:

Which of the following investments would theoretically always carry the highest risk premium?

What is the expected return of a zero-beta security?

You own a large orange grove and will be harvesting from November through April. To hedge against price risks you should

If interest rates are expected to rise, you would expect

The balance sheet of a company is a snapshot of the ______ of the firm at a point in time.

_________ above which it is difficult for the market to rise.

A security is said to be ________ if its current market price is over its intrinsic value.

If the Required rate of Return as per CAPM is 18% and expected return is 12%, what should be the investment decision?

A group of mutual funds with a common management are known as:

If a portfolio manager consistently obtains a high Sharpe measure, the manager's forecasting ability __________.

Avalanche effect in cryptography

Digital Certificates are described using _______ format.

In _______, other nodes verify the validity of the block by checking that the hash of the data of the block is less than a preset number.

In a system an RSA algorithm with p = 5 and q = 11, is implemented for data security. What is the value of the decryption key if the value of the encryption key is 27 ?

Personal Computers generally should not be used for