Reference no: EM133306330
Questions
1. According to the Markowitz model
a) an efficient frontier for all assets can be drawn
b) international diversification is not allowed
c) only assets with negative correlations are included
d) a minimum variance portfolio draws the boundary between the efficient and the inefficient frontier.
2. Security A and B have a correlation coefficient of -0.25. If Security A's return is expected to increase by 4%, Security B's return
a) should also increase by 4%. b) should decrease by 1%.
c) should also decrease by 4%. d) should increase by 1%
3. Treasury Bill is an example of a
a) equity security b) money market security
c) publicly issued security d) fixed income security.
4. Which of the following bonds would you expect to have the least price volatility?
a) 10%, 10 year bond b) 10%, 5 year bond c) 5%, 10 year bond d) 5%, 5 year bond
5. The daily settlement system at the futures exchange requires that
a. for every contract, the participant has to open an account with the maintenance margin
b. the opening futures price of that asset will be used everyday to find profits/losses for the client
c. the client must be able to keep the balance above the margin requirement
d. all of the above are true.
6. If an asset is placed _________ the security market line, it is said to be ______________
a) over, overpriced b) under, overpriced c) both (a) and (b) are true d) none of these are true.
7. The M-square measure is
a. just a number with no units. b. a percentage that shows excess volatility
c. a measure of excess return over market portfolio d. risk adjusted excess return per unit of risk.
8. The curved segment that contains the set of best possible combinations of stocks is known as the:
a) characteristic line. b) new frontier.
c) efficient frontier. d) security market line.
9. For a closed-ended investment fund
a) investors purchase new shares directly from the investment company without the help of brokers
b) share prices can be different than the NAV
c) prices are always equal to the NAV
d) only (a) and (c) are true.
10. The body that authorizes the sale of new securities in the primary market in the USA is called the
a) SEC b) ETF c) OSC d) NASDAQ
11. The _________ market is an off-exchange market for securities listed on an organized exchange where institutional
investors trade with each other.
a) fourth b) third c) secondary d) primary
12. Asset A has a return of 14% and its risk is 16%. Asset B's return is 24% and its risk is 28%. In terms of coefficient of variation,
the choice for the investor should be
a) Asset B b) Asset A c) either asset A or B d) none of these.
13. When a common stock is listed in more than one secondary market, it is referred to as a ______________ stock.
a) derivative b) multi-national c) cross listed d) hybrid
14. Which of the following statements is true regarding a call writer?
a) The call writer expects the stock to move upward.
b) The call writer expects the stock to remain the same or move down.
c) The call writer expects the stock to split.
d) The call writer expects to sell the stock prior to expiration of the option.
15. An asset has an expected return of 8% and a standard deviation of 4%. If the returns are normally distributed, this would mean that
a) there is a 95% chance that the actual return will fall somewhere in the 4% to 12% range
b) the actual return in the next year will be 10%
c) there is a 95% chance that the actual return will fall somewhere in the 0% to 16% range
d) none of the above are true.
16. The non-systematic risk is also called the ________ risk
a. market b. perceived c. non-diversifiable d. diversifiable
17. How does the primary market for securities operate?
18. What are the costs associated with investing in mutual funds?