What is meant by real interest of rate and nominal interest rate? (3)
Why YTM is important? (5)
How investors use hedging by using futures(5)
aik 5 no ka beta say related conceptual question tha.
ar baqi 3 no k 2 question mjay yad ni han.
Another Paper:-
FINALTERM EXAMINATION
Spring 2010
FIN630- Investment Analysis & Portfolio Management
Question No: 1 ( Marks: 1 ) - Please choose one
__________ are those stocks whose results are tied with the overall state of the national economy. ► Growth stocks
► Income stocks
► Cyclical stocks
► Blue chip stocks
Question No: 2 ( Marks: 1 ) - Please choose one
Companies that have capitalization amounts between $500 million and $2billion are known as _________. ► Small cap companies
► Mid cap companies
► Growth companies
► Large cap companies
Question No: 3 ( Marks: 1 ) - Please choose one
Current ratio is also known as: ► Working capital ratio
► Acid test ratio
► Debt coverage ratio
► Dividend yield ratio
Question No: 4 ( Marks: 1 ) - Please choose one
Which of the following is a basket of stocks that tracks a particular sector, investment style, geographical area, or the market as a whole? ► Exchange traded fund
► Open-end fund
► Closed-end fund
► Unit investment trust
Question No: 5 ( Marks: 1 ) - Please choose one
Positive abnormal returns for corporate insiders constitute a violation of: ► Weak form efficiency
► Semi-strong form efficiency
► Strong-form efficiency
► Weak and strong form of efficiency
Question No: 6 ( Marks: 1 ) - Please choose one
Which of the following states that investors with loss will increase their risk tolerance in future transactions? ► Loss aversion
► Prospect theory
► Illusion of control
► Anchoring
Question No: 7 ( Marks: 1 ) - Please choose one
Which of the following equity market indicator is composed of 30 blue-chip stocks? ► NYSE Composite Index
► Dow-Jones Industrial Average
► NASDAQ Composite Index
► Standard & Poor's 500 Index
Question No: 8 ( Marks: 1 ) - Please choose one
Which of the following is NOT included in money market securities? ► Treasury Bill
► Certificate of deposit
► Commercial paper
► Future
Question No: 9 ( Marks: 1 ) - Please choose one
LSE captures _____________ of the market capitalization. ► 45%
► 50%
► 53%
► 66%
Question No: 10 ( Marks: 1 ) - Please choose one
The estimated percentage change in the value of a bond derived from the duration rule: ► Is less than the actual price change when the yield decreases
► Is less than the actual price change when the yield increases
► Is greater than the actual price change when the yield decreases
► Is always greater than the actual price change
Question No: 11 ( Marks: 1 ) - Please choose one
Which of the following bonds are characterized by high yields and high risks? ► Junk bonds
► Convertible bonds
► Municipal bonds
► Government bonds
Question No: 12 ( Marks: 1 ) - Please choose one
Systematic risk is also known as: ► Market risk
► General risk
► Un-diversifiable risk
► All of the given options
Question No: 13 ( Marks: 1 ) - Please choose one
Which of the following is the only way to protect investors from nonsystematic risk? ► Sector rotation
► Securitization
► Diversification
► Risk aversion
Question No: 14 ( Marks: 1 ) - Please choose one
If correlation coefficient (rmn) between two securities is -1.0, what does it represents? ► There is a positive relationship between security m and n
► There is a negative relationship between security m and n
► There is no relationship between security m and n
► The given data is not sufficient to arrive at any result
Question No: 15 ( Marks: 1 ) - Please choose one
Which of the following measure has values in the interval of [+1, -1]? ► Correlation coefficient
► Covariance
► Regression
► Standard deviation
Question No: 16 ( Marks: 1 ) - Please choose one
Who was the developer of CAPM? ► Gerald Appel
► Markowitz
► Joseph Granville
► John Bollinger
Question No: 17 ( Marks: 1 ) - Please choose one
The average value of beta for all stocks in the market is: ► 0.5
► 1.0
► 1.5
► 2.0
Question No: 18 ( Marks: 1 ) - Please choose one
Which of the following involves dividing an investment portfolio among different financial assets? ► Securitization
► Sector rotation
► Asset allocation
► Risk aversion
Question No: 19 ( Marks: 1 ) - Please choose one
Which of the following are regulated by Commodity Futures Trading Commission (CFTC)? ► Options
► Futures
► Swaps
► Forwards
Question No: 20 ( Marks: 1 ) - Please choose one
Which of the following is defined as a market for the immediate sale and delivery of assets? ► Laissez-faire market
► Future market
► Spot market
► Forward market
Question No: 21 ( Marks: 1 ) - Please choose one
Which of the following statement is FALSE regarding forward contracts? ► Forward contracts are traded on over- the-counter market
► There is no surety/guarantee of the trade settlement
► There are no pre determined standards in future contracts
► Forward contracts involve a process known as marking to market
Question No: 22 ( Marks: 1 ) - Please choose one
Program trading calls for which of the following? ► Computerized trigger points for trades
► The use of short hedge position
► The use of only call option
► The use of long hedge position
Question No: 23 ( Marks: 1 ) - Please choose one
S & P 500 future stock index closes at $ 275 and spot price is $ 230. What is its basis? ► 40
► 45
► 50
► 55
Question No: 24 ( Marks: 1 ) - Please choose one
The average price of a security or currency over a specified time period used to spot pricing trends by smoothing out the large fluctuations is known as: ► Moving Average
► Standard deviation
► Variance
► Beta
Question No: 25 ( Marks: 1 ) - Please choose one
Which of the formula is TRUE for calculating retained earnings? ► Retained Earnings = Net Earnings – Dividends
► Retained Earnings = Net Earnings + Long term debt
► Retained Earnings = Net Earnings + Short term debt
► Retained Earnings = Net Earnings + Dividend
Question No: 26 ( Marks: 1 ) - Please choose one
The Dow Jones Industrial Average (DJIA) is an example of which of the following index? ► Price weighting index
► Capitalization weighting index
► Volume based index
► Fixed income index
Question No: 27 ( Marks: 1 ) - Please choose one
Which of the following is a measure of the volatility of stock prices or returns? ► ROR
► Beta
► ROI
► Risk premium
Question No: 28 ( Marks: 1 ) - Please choose one
Active portfolio managers try to construct a risky portfolio with ______________. ► A higher Sharpe measure than a passive strategy
► A lower Sharpe measure than a passive strategy
► The same Sharpe measure as a passive strategy
► Very few securities
Question No: 29 ( Marks: 1 ) - Please choose one
Which of the following is the CORRECT formula for calculating the buying power of investors? ► Assets – liabilities
► Equity – debt
► Short term debt – long tem debt
► Current assets – current liabilities
Question No: 30 ( Marks: 1 ) - Please choose one
When a company’s market value is divided by sales, it is known as: ► Net income margin
► Price-to-market value ratio
► Price-to-book value ratio
► Price-to-sales ratio
Question No: 31 ( Marks: 1 ) - Please choose one
Which of the following statements is FALSE about Earnings per Share? ► It is calculated by dividing Net income over number of shares outstanding.
► Earnings per share is a ratio, which is used for share price evaluation.
► Earnings per share relate income with ownership.
► It is a liquidity measure.
Question No: 32 ( Marks: 1 ) - Please choose one
Which form of the Efficient Market Hypothesis implies that an investor can achieve positive abnormal returns on average by using technical analysis? ► Strong form
► Weak form
► Semi-strong form
► None of the given options
Question No: 33 ( Marks: 1 ) - Please choose one
A straight-line would have convexity of: ► -1
► 0
► +1
► +2
Question No: 34 ( Marks: 1 ) - Please choose one
Bonds that are NOT contracted to make periodic payments are called: ► Deferred coupon bonds
► Eurobonds
► Corporate bonds
► Zero-coupon bonds
Question No: 35 ( Marks: 1 ) - Please choose one
Which of the following statements about exchange traded derivatives is LEAST accurate? ► They are liquid.
► They are standardized contracts.
► They carry significant default risk.
► They have no credit risk.
Question No: 36 ( Marks: 1 ) - Please choose one
Which of the following is LEAST likely to a purpose served by the derivative markets? ► Arbitrage opportunities
► Price discovery
► Risk management
► Market efficiency
Question No: 37 ( Marks: 1 ) - Please choose one
The MOST likely reason derivative markets have flourished is that: ► Derivatives are easy to understand and use.
► Derivatives have relatively low transaction costs.
► The pricing of derivatives is relatively straightforward.
► Derivative markets are very strong all over the world.
Question No: 38 ( Marks: 1 ) - Please choose one
As the number of stocks in a portfolio increases, the portfolio’s systematic risk: ► Can increase or decrease
► Decrease at a decreasing rate
► Decrease at an increasing rate
► Increase at an increasing rate
Question No: 39 ( Marks: 1 ) - Please choose one
Which of the following is LEAST likely a component of an investor’s required rate of return on a stock? ► The real risk-free rate
► The expected inflation rate
► A growth premium
► A risk premium
Question No: 40 ( Marks: 1 ) - Please choose one
An industry has the following characteristics:§ Sales growth is near the average growth rate of the economy.
§ Profit margins are narrow.
§ Return on equity is close to the economy wide average.
This industry is MOST likely in which phase (s) of its life cycle?
► Deceleration of growth and decline
► Stabilization and market maturity
► Mature growth
► Pioneering
Question No: 41 ( Marks: 1 ) - Please choose one
Which of the following statements regarding life cycle of an industry is MOST accurate? ► In the pioneering phase, profits are small or negative.
► In the mature growth phase, sales growth falls below normal for the first time.
► During the stabilization phase, growth rates are still above the growth rates in economy.
► The growth of the substitute products increases total market share & causes profits to increase in the deceleration phase.
Question No: 42 ( Marks: 1 ) - Please choose one
Which of the following is LEAST likely an assumption underlying technical analysis? ► The laws of the supply and demand drive stock prices.
► Stock prices move in trends that persist for long time periods.
► Shifts in supply and demand can be observed in market price behavior.
► Supply is driven by the rational behavior of the firms offering their shares while demand is driven by the irrational behaviors of the investors.
Question No: 43 ( Marks: 3 )
Describe how bond duration is related to coupons?Question No: 44 ( Marks: 3 )
What is the advantage of Markowitz diversification?Question No: 45 ( Marks: 3 )
Define call options.Question No: 46 ( Marks: 5 )
Describe the general types of risk in detail.Question No: 47 ( Marks: 5 )
Describe the mechanics of trading in future market. Question No: 48 ( Marks: 5 )
The correlation coefficient between the returns of the stock and the market is 0.85. The variance of stock’s returns is 0.75 and variance of market returns is 0.22. Calculate the covariance of market and stock’s returns.
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