FIN630 midterm past papers

Download FIN630 mid term 1.pdf FIN630 midterm past papers FIN630 - Investment Analysis & Portfolio Management Download FIN630 mid term 1.pdf FIN630 midterm past papers FIN630 - Investment Analysis & Portfolio Management
Download FIN630 mid term 1.pdf FIN630 midterm past papers FIN630 - Investment Analysis & Portfolio Management Download FIN630 mid term 1.pdf FIN630 midterm past papers FIN630 - Investment Analysis & Portfolio Management
Download FIN630 mid term 1.pdf FIN630 midterm past papers FIN630 - Investment Analysis & Portfolio Management Download FIN630 mid term 1.pdf FIN630 midterm past papers FIN630 - Investment Analysis & Portfolio Management
Download FIN630 mid term 1.pdf FIN630 midterm past papers FIN630 - Investment Analysis & Portfolio Management Download FIN630 mid term 1.pdf FIN630 midterm past papers FIN630 - Investment Analysis & Portfolio Management
Download FIN630 mid term 1.pdf FIN630 midterm past papers FIN630 - Investment Analysis & Portfolio Management Download FIN630 mid term 1.pdf FIN630 midterm past papers FIN630 - Investment Analysis & Portfolio Management

Question No: 1 ( Marks: 1 ) – Please choose one

________ are qualified and regulated professionals who trade shares and other securities through market makers on behalf of investors.

  • Stock brokers
  • Members
  • Specialists
  • Day traders

A stock broker is a qualified and regulated professional who buys and sells shares and other securities through market makers on behalf of investors. http://onlinetradingtutorial.org/brief-description-basics-of-online-share-trading Question No: 2 ( Marks: 1 ) – Please choose one

Which of the following function removes the fear of buying or selling at rip off price?

  • Fair pricing function
  • Continuous pricing function
  • ►      Economic function
  • Exchange function

(handout page 7) The fair price function removes the fear of buying or selling at rip off

price.

Question No: 3 ( Marks: 1 ) – Please choose one

Which function of capital market facilitates transfer of money from savers to borrowers?

  • Economic function
  • Fair pricing function
  • Exchange function
  • Continuous pricing function

(Handout page 5) The most important function is the economic function. This mechanism facilitates the transfer of money from savers to borrowers.

Question No: 4 ( Marks: 1 ) – Please choose one

___________ is a computerized device that relays financial information to investors around the world, including the stock symbol, the latest price and the volume of securities as they are traded.

  • Super Dot
  • NYSE Direct
  • Ticker tape
  • Trading Curb

ticker tape Computerized device that relays to investors around the world the stock symbol and

the latest price and volume on securities as they are traded.

Question No: 5 ( Marks: 1 ) – Please choose one

Companies that have historically paid a larger than average percentage of their profit as dividend to their shareholders is known as:

  • Blue chip companies
  • Cyclical companies
  • Growth companies
  • Income companies

(Handout page 24) Income stocks are those that have historically paid a larger than average percentage of their NIAT as dividend to their shareholders.

Question No: 6 ( Marks: 1 ) – Please choose one

_________ think that supply and demand factors play the most important part.

  • Ratio analysts
  • Technical analysts
  • Research analysts
  • Fundamental analysts

(Handout page 40) Technical analysts think supply and demand factors play the most important role.

Question No: 7 ( Marks: 1 ) – Please choose one

According to Dow Theory, primary trend is a:

  • Short term trend
  • Long term trend
  • Medium term trend
  • None of the given options

(Handout page 67) The primary trend is the long-term direction of the market and is

the most important.

Question No: 8 ( Marks: 1 ) – Please choose one

Which of the following statement is FALSE about Elliot Wave Theory?

  • It made extensive use of Fibonacci series
  • It is based on repeating 8 waves’ cycles
  • It identified three movements in security prices
  • It was proposed by R.N. Elliot

Technical Analysis

R.N. Elliot formulated this idea in a series of articles in Financial World in 1939. Elliot believed that the market has a rhythmic regularity that can be used to predict future prices.

The Elliot Wave Principle is based on a repeating 8-wave cycle, and each cycle is made up of similar shorter-term cycles (“Big fleas have little fleas upon their backs to bite ’em – little fleas have smaller fleas and so on ad infinitem”).

Elliot Wave adherents also make extensive use of the Fibonacci series

Question No: 9 ( Marks: 1 ) – Please choose one

The idea of long term business cycle with a period of 50-60 years was proposed in which of the following theory?

  • Kondratev Wave Theory
  • Dow Theory
  • Elliot Wave Theory
  • None of the given options

(Handout page 68) Kondratev wave theory states there is a 50- to 60-year business cycle.

Question No: 10 ( Marks: 1 ) – Please choose one

Current ratio is also known as:

  • Working capital ratio
  • Acid test ratio
  • Debt coverage ratio
  • Dividend yield ratio

(Handout page 82) current ratio is also known as the working capital ratio and is normally presented as a real ratio.

Question No: 11 ( Marks: 1 ) – Please choose one

A ratio that indicates the extent to which a firm could pay its current liabilities without relying on the sale of inventory is known as:

  • Current ratio
  • Quick ratio
  • Inventory turnover ratio
  • Debt coverage ratio

Quick Ratio: Quick ratio focuses on immediate liquidity (i.e., cash, accounts receivable, etc.) but specifically ignores inventory. Also called the acid test ratio, it indicates the extent to which you could pay current liabilities without relying on the sale of inventory.

Question No: 12 ( Marks: 1 ) – Please choose one

Which of the following ratio depicts a firm’s ability to cover its short-term obligations?

  • Dividend yield ratio
  • Return on assets ratio
  • Debt coverage ratio
  • Current ratio
FIN630 midterm past papers FIN630 - Investment Analysis & Portfolio Management

(Handout page 83) Positive working capital means that the company is able to pay off its

short-term liabilities

Question No: 13 ( Marks: 1 ) – Please choose one

Which of the following ratios would NOT be used to draw a conclusion about a company’s managerial effectiveness?

  • Return on investment
  • Return on equity
  • Net margin
  • Price-Earnings ratio

(question 7)http://highered.mcgraw-hill.com/sites/0073526797/student_view0/chapter13/multiple_choice_quiz.html

Question No: 14 ( Marks: 1 ) – Please choose one

Which of the following functions do mutual fund companies perform for their investors?

  • Record keeping and administration
  • Professional management
  • Diversification and divisibility
  • All of the given options

(question 4)http://highered.mcgraw-hill.com/sites/007338237x/student_view0/chapter4/multiple_choice_quiz.html

Question No: 15 ( Marks: 1 ) – Please choose one

Which of the following is defined as an unmanaged, fixed-income security portfolio put together by a sponsor and handled by an independent trustee?

  • Unit investment trust
  • Closed-endinvestment
  • Open-endinvestment
  • Money market fund

(Handout page 131)Unit Investment Trusts:

An alternative form of. Investment Company that deviates from the normal managed type is the unit -investment trust, (OIT), which typically is an unmanaged, fixed-income security portfolio put together by a sponsor and handled by an independent trustee.

Question No: 16 ( Marks: 1 ) – Please choose one

Which of the following stocks would be expected to adversely impact during periods of high interest rates?

  • Consumer durable shocks
  • Interest-sensitivestocks
  • Capital goods stocks
  • Defensive stocks

(handout page 140)interest-sensitive stocks would be expected to be adversely impacted during periods of high interest rates, arid such periods tend to occur at the latter stages

of the business cycle.

Question No: 17 ( Marks: 1 ) – Please choose one

If an investor wants to avoid transaction costs, which of the following strategy should he select?

  • Active strategy
  • Defensive strategy
  • Buy and hold strategy
  • ectorS rotation

(page 138)Buy-And-Hold Strategy:

A buy-and-hold strategy means exactly that an investor buys stocks and basically holds them until some future time in order to meet some objective. The emphasis is on avoiding transaction costs, additional search costs, and so forth.

Question No: 18 ( Marks: 1 ) – Please choose one

Technical analysts ______________ fundamental analysis.

  • Always incorporate
  • Does not deny the value of
  • Reject the value of
  • Have no connection with

(question 8)http://highered.mcgraw-hill.com/sites/0073405175/student_view0/chapter9/multiple_choice_quiz.html

Question No: 19 ( Marks: 1 ) – Please choose one Who was the grand father of technical analysis?

  • Harry Markowitz
  • William Sharpe
  • Charles Dow
  • Benjamin Graham

(Handout page 67)Charles Dow was one of the founders of Dow Jones & Co. (DJ, NYSE), publisher of The Wall Street Journal.

(Question 18) http://webcache.googleusercontent.com/search?q=cache:iQ6jd_D_GPQJ:www2.cob.ilstu.edu/gnnaidu/Tb/Chap012.RTF+Who+was+the+grand+father+of+technical+an alysis%3F&cd=3&hl=en&ct=clnk&source=www.google.com

Question No: 20 ( Marks: 1 ) – Please choose one

The direct trade between large institutional investors takes place in which of the following market?

  • Primary market
  • Secondary market
  • Third market
  • Fourth market

(Handout page 12)Direct trades between large institutional investors comprise the

fourth market.

Question No: 21 ( Marks: 1 ) – Please choose one

Which of the following statement is TRUE about value investors?

  • They are patient
  • They seek rapidly growing companies
  • Theyrespeculators
  • They seek slow growing companies

(page 88)http://books.google.com/books?id=-J3rVW9qydEC&pg=PA88&lpg=PA88&dq=%22value+investors+are+patient%22 &source=bl&ots=nFYEE-hIjy&sig=CEXXKS47PUmo8FNm7mIacKcT_aA&hl=en&ei=oQt9Tf_xNpDIrQeRx Yj-Dg&sa=X&oi=book_result&ct=result&resnum=7&sqi=2&ved=0CDsQ6AEwBg#v= onepage&q=%22value%20investors%20are%20patient%22&f=false

Question No: 22 ( Marks: 1 ) – Please choose one In point and figure chart, what does X indicates?

  • Market pri ce is going up
  • Market price is going down
  • Market price remains constant
  • Market price is fluctuating

(Handout page 56) The X represents the prices increase and the O represents the price decline. http://www.incrediblecharts.com/technical/point_figure_chart.php

Question No: 23 ( Marks: 1 ) – Please choose one

Which of the following statement about a security is true, if it’s beta > 1.0?

  • Security is more risky than the market
  • Security is less risky than market
  • Security is exactly as risky as maket
  • It is not possible to predict riskiness of

(Handout page 137) A stock with a beta lower than 1.0 has a required rate of return below kM, because its risk (beta) is less than that of the market. On the other hand, a stock with a beta greater than 1.0 has a required rate of return greater than that of the market.

Question No: 24 ( Marks: 1 ) – Please choose one

Which of the following is a characteristic of line chart?

  • It is efficient in showing more details
  • It is simplest and most familiar chart
  • It show the highest degree of accuracy
  • It can be used for comparing three values

(Handout page 55)The line chart is the simplest and most familiar.

Question No: 25 ( Marks: 1 ) – Please choose one

In a candlestick chart, what does black body candle depict?

  • Prices are moving up
  • Prices are moving down
  • Prices are constant
  • Prices are fluctuating

(page 56) The principle difference between a daily candlestick chart and a bar chart is the white and black candles augmenting the daily trading range lines. White candles represent stock advances, with black candle representing declines.

Question No: 26 ( Marks: 1 ) – Please choose one

Who has introduced the On Balance Volume technique of technical analysis?

  • Charles Dow
  • Joseph Granville
  • John Bollinger

► Welles Wilder

(Page 150) http://books.google.com/books?id=AmQh8Zm34zgC&pg=PA150&dq=introduced+the+ On+Balance+Volume+technique+of+technical+analysis&hl=en&ei=JgV1TemZMYPpr Qe1iaH9Bg&sa=X&oi=book_result&ct=result&resnum=1&ved=0CC0Q6AEwAA#v=on epage&q&f=false

(PAGE 416) http://books.google.com/books?id=I5SgX5q5sQEC&pg=PA416&dq=introduced+the+On +Balance+Volume+technique+of+technical+analysis&hl=en&ei=JgV1TemZMYPprQe1 iaH9Bg&sa=X&oi=book_result&ct=result&resnum=4&ved=0CD0Q6AEwAw#v=onepa ge&q&f=false

Question No: 27 ( Marks: 1 ) – Please choose one

Which of the following is calculated by dividing gross profit by net sales?

  • Gross margin
  • Operating margin
  • Net margin
  • Profit margin

(Handout page 83)Gross Profit Margin = Gross Profit / Net Sales * 100

Question No: 28 ( Marks: 1 ) – Please choose one

When a company’s market value is divided by sales, it is known as:

  • Netncomemargin
  • Price-to-market value ratio
  • Price-to-book value ratio
  • Price-to-salesratio

(Handout page 107)Net income margin = Net income/Sales

Question No: 29 ( Marks: 1 ) – Please choose one

Which of the following is TRUE regarding price earning ratio?

  • P/E=Earnings available to common stockhold
  • P/E=Market price per share/dividend per sh
  • P/E=Market price per share/earning per sha
  • P/E=Dividend per share/earning per share

(Handout page 86)P/E = Current Market Share Price / EPS

Question No: 30 ( Marks: 1 ) – Please choose one

Which of the following situations implies an upward sloping curve?

  • Accelerating economic activity
  • Static economic activity
  • Slowing economic activity
  • A recession period

Economy/Market Analysis

Upward sloping and steepening curve implies accelerating economic activity

Paper 2

MIDTERM EXAMINATION

Spring 2009

FIN630- Investment Analysis & Portfolio Management (Session – 2)

Question No: 1 ( Marks: 1 ) – Please choose one

Which one of the following financial instruments represents an ownership share in a corporation?

  • Common stock
  • Bond
  • Preferred stock
  • Term Finance certificates

(Handout page 24) common shares represent an ownership interest in the company

(page173) http://books.google.com/books?id=YqBzDH1rBZMC&pg=PA173&dq=financ ial+instruments+represents+an+ownership+share+in+a++corporation?&hl= en&ei=mR52TcroEcnhrAf167G_Cg&sa=X&oi=book_result&ct=result&resnu m=2&ved=0CCwQ6AEwAQ#v=onepage&q=financial%20instruments%20rep resents%20an%20ownership%20share%20in%20a%20%20corporation%3F &f=false

Question No: 2 ( Marks: 1 ) – Please choose one

There are ____ broad categories of financial assets.

  • 2
  • 3
  • 4
  • 5

(page82)http://books.google.com/books?id=bjEhstG-JAMC&pg=PA82&dq=broad+categories+of+financial+assets&hl=en&ei=st5 5TeP2HY2nrAea5YDBBQ&sa=X&oi=book_result&ct=result&resnum=2&ved =0CDAQ6AEwAQ#v=onepage&q=broad%20categories%20of%20financial% 20assets&f=false

(page1-10) http://books.google.com/books?id=HUX-y4oXl04C&pg=SA1-PA10&lpg=SA1-

PA10&dq=There+are+3+broad+categories+of+financial+assets&source=bl& ots=qdm6kaAasY&sig=9HdQYSc9coWKc6EUF0hgD6dNH-s&hl=en&ei=Uw99TbSrEpDqrQfn4v23BQ&sa=X&oi=book_result&ct=result& resnum=10&ved=0CFwQ6AEwCQ#v=onepage&q=%20three%20broad%20c ategories%20of%20financial%20assets&f=false

Question No: 3 ( Marks: 1 ) – Please choose one

Shares of McDonald Corporation are an example of a (n):

  • Standardized financial instrument
  • Non-standardized financial instrument since their prices can differ over time
  • Standardized financial liability instrument
  • Open-end investment

(question6)http://highered.mcgraw-hill.com/sites/0073523097/student_view0/chapter3/quiz_1.html

Question No: 4 ( Marks: 1 ) – Please choose one

_____________ promotes investment education and ethical behavior among those

involved in the investment business.

► Licensed International Financial Analyst (LIFA)

  • ►  Securities Investor Protection Corporation (SIPC)
  • Chartered Financial Analyst Institute (CFAI)

Securities and Exchange Commission (SEC)

(page669)http://books.google.com/books?id=fk-

rYsLrekAC&pg=PA670&lpg=PA670&dq=promotes+investment+education+ and+ethical+behavior&source=bl&ots=MPpAvYfw7B&sig=A4E_HI-I5lEVqsKAJgsNXbRfwbo&hl=en&ei=Qel8TeznBsLsrQfvtdHRBQ&sa=X&oi= book_result&ct=result&resnum=4&ved=0CDIQ6AEwAw#v=onepage&q&f=f alse

(Another) ch25.ppt – www.swlearning.com

The CFA program began in 1959 when the Institute of Chartered Financial Analysts (ICFA) was formed

–  Promotes investment education and ethical behavior

–  Awarded the first charter in 1963

Question No: 5 ( Marks: 1 ) – Please choose one

Which of the following function removes the fear of buying or selling at rip off price?

  • Fair pricing function
  • Continuous pricing function
  • Economic function
  • Exchange function

(page 7) The fair price function removes the fear of buying or selling at rip off price

Question No: 6 ( Marks: 1 ) – Please choose one

The trading of listed securities in the NASDAQ market is known as:

  • Primary market
  • Third market
  • Secondary market
  • Fourth market
FIN630 midterm past papers FIN630 - Investment Analysis & Portfolio Management

(page 12) The trading of listed securities in the NASDAQ market is known as the third market.

Question No: 7 ( Marks: 1 ) – Please choose one

Stocks of well-established companies that have stable earnings and no extensive liabilities are known as _______.

  • Growth stocks
  • Income stocks
  • Defensive stocks
  • Blue chip stocks
FIN630 midterm past papers FIN630 - Investment Analysis & Portfolio Management

Ref: A blue chip stock is the stock of a well-established company having stable earnings and no extensive liabilities. http://en.mimi.hu/stockmarket/blue_chip.html

Question No: 8 ( Marks: 1 ) – Please choose one

Which of the following statement regarding short sales is NOT true?

► Short sales are done with the expectation that prices will rise (not sure)

  • ►  Short sales can be executed only on an uptrend
  • Short sales are all done on margin
  • Short sales may be executed by both individuals and market makers Question No: 9 ( 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

(Handout page 52) (page278)

http://books.google.com/books?id=J7flQ2HaOPEC&pg=PA278&dq=Mid+ca p+Companies+that+have+capitalization+amounts+between+$500+million+a nd+$2billion+are+known+as&hl=en&ei=BvB8TbrPJIPwrQf3_OGzBQ&sa=X& oi=book_result&ct=result&resnum=8&ved=0CEoQ6AEwBw#v=onepage&q& f=false

Question No: 10 ( Marks: 1 ) – Please choose one

A procedure for valuing the price of a stock by using predicted dividends and discounting them back to present value is known as.

  • Capital Asset Pricing Model
  • Dividend Discount Model
  • The Residual Earning Model
  • None of the given options

A procedure for valuing the price of a stock by using predicted dividends and discounting them back to present value. The idea is that if the value obtained from the DDM is higher than what the shares are currently trading at, then the stock is undervalued. http://www.investopedia.com/terms/d/ddm.asp

Question No: 11 ( Marks: 1 ) – Please choose one

In bar chart, which colour indicates share prices are going up?

  • Black
  • White
  • Blue
  • Red
  • Blue color indicates market or share price is going up.
  • Red color indicates market or share price is going down.

Question No: 12 ( Marks: 1 ) – Please choose one

In candlestick chart, what does white body candle depict?

  • Prices are moving down
  • Prices are moving up
  • Prices are constant
  • Prices are fluctuating
  • White body candle depicts when prices are moving up.
  • •      Black body candle will depicts when prices are moving down.

Question No: 13 ( Marks: 1 ) – Please choose one

On Balance Volume technique of technical analysis was developed by:

  • Charles Dow
  • Joseph Granville
  • John Bollinger
  • Welles Wilder

(Page 150) http://books.google.com/books?id=AmQh8Zm34zgC&pg=PA150&dq=introduced+t he+On+Balance+Volume+technique+of+technical+analysis&hl=en&ei=JgV1TemZ MYPprQe1iaH9Bg&sa=X&oi=book_result&ct=result&resnum=1&ved=0CC0Q6A EwAA#v=onepage&q&f=false

(PAGE 416) http://books.google.com/books?id=I5SgX5q5sQEC&pg=PA416&dq=introduced+th e+On+Balance+Volume+technique+of+technical+analysis&hl=en&ei=JgV1TemZM YPprQe1iaH9Bg&sa=X&oi=book_result&ct=result&resnum=4&ved=0CD0Q6AE wAw#v=onepage&q&f=false

Question No: 14 ( Marks: 1 ) – Please choose one

Which of the following is relevant to market breadth?

  • Specialist inventory
  • Advance/declining ratio
  • Fundamental analysis
  • Ticker tape

(page 71) The Advance-Decline Line (Breadth of the Market):

Ref: A technique used in technical analysis that attempts to gauge the direction of the overall market by analyzing the number of companies advancing relative to the number declining. Positive market breadth occurs when more companies are moving higher than are moving lower, and it is used to suggest that the bulls are in control of the momentum. Conversely, a disproportional number of declining securities is used to confirm bearish momentum.

Question No: 15 ( Marks: 1 ) – Please choose one

The Elliot Wave Theory is based on repeating ___________ waves cycle.

  • 4
  • 5
  • 7
  • 8

Technical Analysis

R.N. Elliot formulated this idea in a series of articles in Financial World in 1939. Elliot believed that the market has a rhythmic regularity that can be used to predict future prices.

The Elliot Wave Principle is based on a repeating 8-wave cycle, and each cycle is made up of similar shorter-term cycles (“Big fleas have little fleas upon their backs to bite ’em – little fleas have smaller fleas and so on ad infinitem”).

Elliot Wave adherents also make extensive use of the Fibonacci series

Question No: 16 ( Marks: 1 ) – Please choose one

Which of the following is correct formula for calculating short interest ratio?

  • Average shares sold short / Average daily trading volume
  • Total shares sold short / Average daily trading volume
  • None of the given options
  • Total shares sold short / Total daily trading volume

(page 72) Short interest ratio = Total shares sold short / Average daily trading volume

Question No: 17 ( Marks: 1 ) – Please choose one

ABC Furniture’s worth $51 million. What is another term for this?

  • Book value
  • Earning per share
  • Market value
  • Cost per share

Question No: 18 ( Marks: 1 ) – Please choose one

Which of the following is TRUE regarding price per earning ratio?

  • P/E=Earnings available to common stockholders/outstanding shares
  • P/E=Market price per share/dividend per share
  • P/E=Market price per share/earning per share
  • P/E=Dividend per share/earning per share

Question No: 19 ( Marks: 1 ) – Please choose one

When inflation and interest rates are low, Price per Earning (P/E) ratio tend to be:

  • High
  • Low
  • Minimum
  • Average

(Page 94) P/E ratios are generally depressed when the interest rates and the rates of inflation are high,

FIN630 midterm past papers FIN630 - Investment Analysis & Portfolio Management

such as around 1980-81. P/E ratios tend to be high when inflation and interest rates are low,

FIN630 midterm past papers FIN630 - Investment Analysis & Portfolio Management

such as the period of the mid –to-late-1990s, when P/E ratios were at quite high levels by

historical standards.

Question No: 20 ( Marks: 1 ) – Please choose one

Which of the following industry is sensitive to business cycle and price changes?

  • Growth industry
  • Cyclical industry
  • Defensive industry
  • Interest sensitive industry
FIN630 midterm past papers FIN630 - Investment Analysis & Portfolio Management

Cyclical Industry

A term describing an industry that is sensitive to the business cycle and price changes. Many cyclical industries produce durable goods such as raw materials and heavy equipment.

Question No: 21 ( Marks: 1 ) – Please choose one

Which of the following items will reduce stockholders’ equity?

  • ►  Purchase of equipment
  • Purchase of supplies
  • Receiving a loan
  • Payment of salaries

(Q#14)http://highered.mcgraw-hill.com/sites/0073136484/student_view0/chapter3/multiple_choice_quiz.ht ml

Question No: 22 ( Marks: 1 ) – Please choose one

Mutual funds pool the funds of savers and can be used to buy

  • Shares in mutual savings banks only
  • A variety of financial instruments
  • Shares in the Federal Reserve System
  • None of the given options

(Q#6)http://highered.mcgraw-hill.com/sites/0073523097/student_view0/chapter1/quiz_2.html (page20)http://books.google.com/books?id=jEaW-CReqZkC&pg=PA20&lpg=PA20&dq=variety+of+financial+instruments++use d+to+buy+Mutual+funds+pool+the+funds+of+savers&source=bl&ots=eD0-vuEiwC&sig=pLuh8Ym3_dM7PUvwjp6K2TRB1KI&hl=en&ei=fhh9TdiyNYeGr AfBoZ2_BQ&sa=X&oi=book_result&ct=result&resnum=5&ved=0CDUQ6AE wBA#v=onepage&q=variety%20of%20financial%20instruments%20%20use d%20to%20buy%20Mutual%20funds%20pool%20the%20funds%20of%20sa vers&f=falseQuestion No: 23 ( Marks: 1 ) – Please choose one

Which of the following is defined as an investment company whose capitalization constantly changes as new shares are sold and outstanding shares are redeemed?

  • Unit investment trust
  • Closed-end investment company
  • Exchange traded fund company
  • Open-end investment company

Ref: An open-ended mutual fund continuously issues and redeems units, so the number of units outstanding varies from day to day. Most mutual funds are open-ended.

(page78)http://books.google.com/books?id=ZtJXlvNDSc4C&pg=PA78&dq= Open-end+investment+company++investment+company+whose+capitalization+c onstantly+changes+as+new+shares+are+sold+and+outstanding+shares+ar e+redeemed&hl=en&ei=Ah19TZbSNcnsrAeVp8D-Dg&sa=X&oi=book_result&ct=result&resnum=1&ved=0CCwQ6AEwAA#v=o nepage&q=Open-end%20investment%20company%20%20investment%20company%20whos e%20capitalization%20constantly%20changes%20as%20new%20shares%2 0are%20sold%20and%20outstanding%20shares%20are%20redeemed&f=fal se

Question No: 24 ( Marks: 1 ) – Please choose one

Which of the following is defined as the total market value of securities in an investment company’s portfolio divided by the number of investing company fund shares currently outstanding?

  • Discounted value
  • Present value
  • Future cash flow value
  • Net asset value
  • Ref: Net asset value may represent the value of the total equity, or it may be divided by the number of shares outstanding held by investors and, thereby, represent the net asset value per share. http://www.google.com/search?tbm=bks&tbo=1&q=Net+asset+value++the+ total+market+value+of+securities+in+an+investment+company%E2%80%9 9s+portfolio+divided+by+the+number+of+investing+company+fund+shares +currently+outstanding&btnG=Search+Books#sclient=psy&hl=en&tbs=bks :1&q=Net+Asset+Value+%28NAV%29+The+total+market+value+of+the+sec urities+in+an+investment+company%27s+portfolio+divided+by+the+numb er+of+investment+company+fund+shares+currently+outstanding+Owners+ of+fund+shares+can+sell+them+back+to+the+company+…&aq=f&aqi=&aql =&oq=&pbx=1&bav=on.2,or.r_gc.r_pw.&fp=fdd35f689f495207

Question No: 25 ( Marks: 1 ) – Please choose one

Which of the following would be considered as the most bullish indicator?

  • A price decrease with heavy volume
  • A price increase with small volume
  • A price increase on heavy trading
  • No change in price but an increase in volume
FIN630 midterm past papers FIN630 - Investment Analysis & Portfolio Management

Technician looks for price increase on heavy volume relative to the stocks normal trading volume as an indication of bullish activity

Question No: 26 ( Marks: 1 ) – Please choose one

Stocks can be purchased for a combination of cash and borrowed funds in:

  • Margin account
  • Cash account
  • IRA account
  • Option account

BUSINESS 751 (Q#17)

Question No: 27 ( 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

The average price of a security or currency over a specified time period used to spot pricing trends by smoothing out the large fluctuations. The exponential variety assigns more value or weight to the most recent data. http://www.metaglossary.com/meanings/248146/

Question No: 28 ( Marks: 1 ) – Please choose one

The use of the earnings multiplier model requires the use of forecast company earnings. How do investors obtain forecasts of company earnings?

  • Public companies are required to issue forecasts of quarterly earnings, going out three years
  • Securities analysts develop and publish earnings forecasts, based on

their understanding of the company, its industry, and the overall economy (not sure )

  • Securities analysts develop and publish earnings forecasts, based on sophisticated statistical techniques
  • Because these earnings will be announced in the future, no one can forecast them

The earnings multiplier approach is the most popular approach to forecasting the overall stock market.

Question No: 29 ( Marks: 1 ) – Please choose one

Which of the following is an intangible asset with an identifiable useful life?

  • Patent
  • Timber
  • Goodwill
  • Trademark

(Q#2)http://highered.mcgraw-hill.com/sites/0073526789/student_view0/chapter9/multiple_choice_quiz.ht ml

Question No: 30 ( Marks: 1 ) – Please choose one

Which of the following categories is NOT a financial statement element?

  • Cash flow
  • Contributed capital
  • Assets
  • Distributions

(q#3)https://highered.mcgraw-hill.com/sites/0073526770/student_view0/chapter1/online_quizzes.html

Paper 3

MIDTERM EXAMINATION

Spring 2010

FIN630- Investment Analysis & Portfolio Management (Session – 5) Question No: 1 ( Marks: 1 ) – Please choose one

_________ provides an automatic execution of limit orders up to 1,099 shares at the best bid or offer.

► SuperDOT

  • ►  NASDAQ
  • Auction market
  • NYSE direct

NYSE Direct+, an automatic-execution service for limit orders of up to 1,099 shares, enables users to opt for an immediate execution at the best bid or offer, without a fee and with anonymity and speed. The average execution time is 0.36 seconds http://www.nyse.com/about/history/timeline_technology.html

Question No: 2  ( Marks: 1 )  – Please choose one

The trading of listed securities in the NASDAQ market is known as:

  • Primary market
  • Third market
  • Secondary market
  • Fourth market

(page 12) The trading of listed securities in the NASDAQ market is known as the

third market.

Question No: 3  ( Marks: 1 )  – Please choose one

A self-regulatory body that licenses brokers and generally oversees the trading practices of Over the counter(OTC) securities is known as __________ .

  • Securities and Exchange Commission (SEC)
  • National Association of Security Dealers (NASD)
  • Initial Public Offering (IPO)
  • Offered for Sale (OFS)

(page 14) The National Association of Securities Dealers (NASD) is a self-regulatory body that licenses brokers and generally oversees trading practices.

Question No: 4  ( Marks: 1 )  – Please choose one

Companies that have historically paid a larger than average percentage of their profit as dividend to their shareholders is known as:

  • Blue chip companies
  • Cyclical companies
  • Growth companies
  • Income companies

(page 25)Income stocks are those that have historically paid a larger than average percentage of their NIAT as dividend to their shareholders

(page 289)http://books.google.com/books?id=fk-rYsLrekAC&pg=PA289&lpg=PA289&dq=Companies+that+have+historically+paid +a+larger+than+average+percentage+of+their+profit+as+dividend+to+their+share holders&source=bl&ots=MPpAv1ms9w&sig=Q7JYowrauH8NATYUPhlJo_iGUFQ &hl=en&ei=aMZ9Tda8IcfprQfs06XMBQ&sa=X&oi=book_result&ct=result&resn um=8&ved=0CEsQ6AEwBw#v=onepage&q=Companies%20that%20have%20hist orically%20paid%20a%20larger%20than%20average%20percentage%20of%20th eir%20profit%20as%20dividend%20to%20their%20shareholders&f=false

Question No: 5  ( Marks: 1 )  – Please choose one

Which of the following is suitable for analyzing short term investments?

  • Horizontal analysis
  • Fundamental analysis
  • Technical analysis
  • Ratio analysis

For short term investment goals technical analysis is more suitable.

http://www.getmoneyrich.com/how-to-predict-future-price-of-stocks/ Question No: 6 ( Marks: 1 ) – Please choose one

A procedure for valuing the price of a stock by using predicted dividends and discounting them back to present value is known as.

  • Dividend Discount Model
  • The Residual Earning Model
  • None of the given options
  • Capital Asset Pricing Model

A procedure for valuing the price of a stock by using predicted dividends and discounting them back to present value. The idea is that if the value obtained from the DDM is higher than what the shares are currently trading at, then the stock is undervalued.

Question No: 7  ( Marks: 1 )  – Please choose one

A good time is characterized by which of following situation?

Market prices moving above the moving average

Market prices moving below the moving average

Market prices exactly same as moving average

None of the given options

bullish signal is generated when prices move above the moving

average. A bearish signal is generated when prices move below the moving average http://stockcharts.com/school/doku.php?id=chart_school:technical_in dicators:moving_averages

(page 29) http://books.google.com.pk/books?id=ZproZYDvKqsC&pg=PA29&lpg=P A29&dq=A+good+time+is+characterized+by+%EF%80%A0Market+pri ces+moving+below+the+moving+average%EF%80%A0%EF%80%A0 %EF%80%A0%EF%80%A0%EF%80%A0%EF%80%A0%EF%80%A0 %EF%80%A0&source=bl&ots=AJA0WzNsN6&sig=yYccUFz63m4SDXCN h5N0N6fwzQk&hl=en&ei=Rvl9TajvCMiWhQfvlM3yBg&sa=X&oi=book_re sult&ct=result&resnum=8&ved=0CEEQ6AEwBw#v=onepage&q&f=false

Question No: 8  ( Marks: 1 )  – Please choose one

Which of the following statement is FALSE about Elliot Wave Theory?

It made extensive use of Fibonacci series ►  
It is based on repeating 8 waves’ cycles ►  
It identified three movements in security prices
It was proposed by R.N. Elliot ►    
Question No: 9  ( Marks: 1 ) – Please choose one

Which of the following depicts ratio of share price to stockholder equity?

Debt coverage ratio ►

Price-to-sales ratio ►

Price-to-market value ratio

Price-to-book value ratio ► http://books.google.com.pk/books?id=fJ9dj4kCo0AC&pg=PA100&dq= Price-to-market+value+ratio&hl=en&ei=lf19TcPHOIWnrAeGwYT-Dg&sa=X&oi=book_result&ct=result&resnum=3&ved=0CDUQ6AEwAg# v=onepage&q&f=false

The price-to-book ratio, or P/B ratio, is a financial ratio used to compare a company’s book value to its current market price. Book value is an accounting term denoting the portion of the company held by the shareholder

Question No: 10  ( Marks: 1 )  – Please choose one

On which of the following financial statements, revenues and expenses can be found?

  • Balance sheet
  • Income statement
  • Statement of cash flows
  • Statement of changes in equity

(page 115) (the result after all revenues and expenses have been accounted for, also known as the “bottom line”).

Question No: 11  ( 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

(page 135) An ETF is a basket of stocks that tracks a particular sector, investment style, geographical area, or the market as a whole.

Question No: 12  ( Marks: 1 )  – Please choose one

Which of the following is defined as an investment strategy that involves ongoing buying and selling actions by the investors?

  • Make or Buy strategy
  • Active strategy
  • Passive strategy
  • Buy-and-Hold strategy

An active investment strategy involves ongoing buying and selling actions by the investor. http://www.boomerandecho.com/how-to-invest-your-money-part-three-finding-your-strategy/ http://www.investopedia.com/terms/a/activeinvesting.asp Question No: 13 ( Marks: 1 ) – Please choose one

Which of the following is an example of brokerage fee charged by a stockbroker?

  • Margin profit
  • Insurance premium
  • Transaction cost
  • Capital expenditure

(Q#13)http://highered.mcgraw-hill.com/sites/0073523097/student_view0/chapter3/quiz_1.html Question No: 14 ( Marks: 1 ) – Please choose one

Which of the following would be considered as the most bullish indicator?

  • A price decrease with heavy volume
  • A price increase with small volume
  • A price increase on heavy trading
  • No change in price but an increase in volume

Question No: 15  ( Marks: 1 )  – Please choose one

Financial securities with a maturity of less than a year from their original issue date are sold in which of following market?

  • Money market
  • Bond market
  • Equity market
  • Derivative market

(page233) http://books.google.com/books?id=QVoxIhN_y1gC&pg=PA233&dq=Fi nancial+securities+with+a+maturity+of+less+than+a+year&hl=en&ei =iwZ-TduUBsP3rQeThaDGBQ&sa=X&oi=book_result&ct=result&resnum=1&v ed=0CCcQ6AEwAA#v=onepage&q=Financial%20securities%20with%2 0a%20maturity%20of%20less%20than%20a%20year&f=false Question No: 16 ( Marks: 1 ) – Please choose one

_____________ enables market participants to get accurate and up-to-date price information.

  • Fair pricing function
  • Continuous pricing function
  • Economic function
  • Exchange function

(page 6)The continuous price function enables market participants to get accurate, up-to-date price information.

Question No: 17  ( 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

(EMA) — The average price of a security or currency over a specified time period used to spot pricing trends by smoothing out the large fluctuations. The exponential variety assigns more value or weight to the most recent data http://www.metaglossary.com/meanings/248146/

Question No: 18  ( Marks: 1 ) – Please choose one

An investor will purchase shares of companies in the development stage for:

  • Current income
  • Current income and capital gains
  • Passive losses to offset other income
  • Capital gains only

An investor will purchase shares of companies in the development stage for:

  1. Current income only
  2. Current income and capital gains
  3. Capital gains only
  • Passive losses to offset other income Answer: C

Question No: 19  ( Marks: 1 )  – Please choose one

Which of the following industry is NOT sensitive to business cycle and price changes?

  • Defensive industry
  • Interest sensitive industry
  • Growth industry
  • Cyclical industry

defensive industries have little sensitivity to the business cycle. These are the industries that produce goods for which sales and profits are least sensitive to the state of economy. http://webcache.googleusercontent.com/search?q=cache:8Ho6pX3s5CkJ:www.man agementparadise.com/uploads_blog/210000/209942/0_2345.ppt+%22Defensive+indu stry+is+NOT+sensitive+to+business+cycle+%22&cd=8&hl=en&ct=clnk&client=gm ail&source=www.google.com

FIN630 midterm past papers FIN630 - Investment Analysis & Portfolio Management

A defensive industry is one that is relatively insensitive to changes in the economic environment. http://www.stockboulevard.com/tutorial/index.php?action=tutorial10

Question No: 20  ( Marks: 1 )  – Please choose one

Which of the following categories is NOT a financial statement element?

  • Cash flow
  • Contributed capital
  • Assets
  • Distributions

(q#3)https://highered.mcgraw-hill.com/sites/0073526770/student_view0/chapter1/online_quizzes.html

Question No: 21  ( Marks: 1 )  – Please choose one

Which of the following statement about a security is true, if it’s beta > 1.0?

  • Security is more risky than the market
  • Security is less risky than market
  • Security is exactly as risky as maket
  • It is not possible to predict riskiness of a security by beta

(Handout page 137) A stock with a beta lower than 1.0 has a required rate of return below kM, because its risk (beta) is less than that of the market. On the other hand, a stock with a beta greater than 1.0 has a required rate of return greater than that of the market.

Question No: 22  ( Marks: 1 )  – Please choose one

A bad time in market will persist when the market prices move:

  • Above the moving average
  • Below the moving average
  • Exactly same as moving average
  • Firstly up then down the moving average

Question No: 23  ( Marks: 1 )  – Please choose one

What does price earning ratio indicate?

► It indicates how many interest payments could be made with a firm’s earnings.

  • It indicates how much investors pay for Rs.1 earning of the company.
  • It indicates the percentage of earnings paid to shareholders.
  • It indicates the per share profit available for distribution to the shareholders.

(page 86)The P/E ratio is a vital ratio for investors. Basically, it gives us an indication of the confidence that investors have in the future prosperity of the business. A P/E ratio of 1 shows very little confidence in that business whereas a P/E ratio of 20 expresses a great deal of optimism about the future of a business. Here’s the formula; P/E = Current Market Share Price / EPS

Question No: 24  ( Marks: 1 )  – Please choose one

Which of the following is TRUE regarding price earning ratio?

  • P/E=Earnings available to common stockholders/outstanding shares
  • P/E=Market price per share/dividend per share
  • P/E=Market price per share/earning per share
  • P/E=Dividend per share/earning per share

Question No: 25  ( Marks: 1 )  – Please choose one

Which of the following stock’s price move in opposite direction to that of interest rates?

  • Growth stock
  • Value stock
  • Interest sensitive stock
  • Defensive stock

Interest-sensitive stock

A stock that tends to move in the opposite direction from that of interest rates. http://www.infoplease.com/finance/tools/glossary.html

Question No: 26  ( Marks: 1 )  – Please choose one

Which of the following is NOT a component of ROA?

  • Turnover
  • Leverage
  • Sales
  • Net income margin

(page 107)ROA is an important measure of the firm’s profitability. It is a product of two factors,

ROA = Net income margin × Turnover Net income margin = Net income/Sales Turnover = Sales/ Total Assets

Question No: 27  ( Marks: 1 )  – Please choose one

Which of the following statement about the types of the orders is LEAST accurate?

  • Market orders are orders to buy or sell at the best price available.
  • Limit orders are orders to buy or sell at or away from the market price.
  • A stop buy order is used to protect a short position in a security and is

placed below the current market price.

► Limit order must specify a price and a time limit.

(page141) http://books.google.com/books?id=pagDs_H827IC&pg=PA141&dq=Li mit+orders+are+orders+to+buy+or+sell+at+or+away+from+the+mar ket+price.&hl=en&ei=kBl-Tfa_M9GxrAe4kszEBQ&sa=X&oi=book_result&ct=result&resnum=2&ve d=0CCwQ6AEwAQ#v=onepage&q=Limit%20orders%20are%20orders

%20to%20buy%20or%20sell%20at%20or%20away%20from%20the %20market%20price.&f=false

A buy stop order is typically used to limit a loss (or to protect an existing profit) on a

short sale.[12] A buy stop price is always above the current market price.

(page45) http://books.google.com/books?id=vmhYIcuYB8cC&pg=PA43&dq=%E 2%96%BA+Market+orders+are+orders+to+buy+or+sell+at+the+best +price+available.+%E2%96%BA+Limit+orders+are+orders+to+buy+o r+sell+at+or+away+from+the+market+price.++%E2%96%BA+A+sto p+buy+order+is+used+to+protect+a+short+position+in+a+security+a nd+is+placed+below+the+current+market+price.+%E2%96%BA+Limi t+order+must+specify+a+price+and+a+time+limit.&hl=en&ei=whx-TbHEJontrAeegOHOBQ&sa=X&oi=book_result&ct=result&resnum=2&ve d=0CCwQ6AEwAQ#v=onepage&q&f=false

(page 4) http://wenku.baidu.com/view/af3706f7ba0d4a7302763add.html Question No: 28 ( 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.

Responses