Question:

In a private limited company, the maximum number ofmembers are limited to:

A.

20

B.

50

C.

100

D.

200

Answer» b. 50

Question:

Which statement is not true regarding the Capital Market Line (CML)?

A.

The CML is the line from the risk-free rate through the market portfolio.

B.

CML is the best attainable capital allocation line.

C.

The CML is also called the security market line.

D.

The CML always has a positive slope.

Answer» c. The CML is also called the security market line.

Question:

If the risk free rate of return (Rf) is 7%, expected return on the market [E(Rm)] is 15%, and the return on stock X is 16%, the beta for the stock X using CAPM is

A.

0.85

B.

1.00

C.

1.14

D.

1.26

Answer» c. 1.14

Question:

Which statement is not true regarding the market portfolio?

A.

It includes all publicly traded financial assets.

B.

It lies on the efficient frontier.

C.

All securities in the market portfolio are held in proportion to their market values.

D.

It is the tangency point between the capital market line and the indifference curve.

Answer» d. It is the tangency point between the capital market line and the indifference curve.

Question:

In a well diversified portfolio

A.

market risk is negligible.

B.

systematic risk is negligible.

C.

unsystematic risk is negligible.

D.

nondiversifiable risk is negligible.

Answer» c. unsystematic risk is negligible.

Question:

Which of the following is true of municipal government debt?

A.

It pays more interest than corporate debt.

B.

It is often purchased by individuals with high incomes.

C.

It is exempt from estate taxation.

D.

It is not subject to interest rate risk.

Answer» b. It is often purchased by individuals with high incomes.

Question:

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» c. sell orange juice contracts with delivery dates between November and April

Question:

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» b. semistrong form.

Question:

According to the Capital Asset Pricing Model (CAPM), over priced securities

A.

have positive betas.

B.

have zero alphas.

C.

have negative betas.

D.

have positive alphas.

Answer» c. have negative betas.

Question:

A call is an option to

A.

Sell stock at a specified price

B.

Buy stock at a specified price

C.

Sell stock on a specified date

D.

Buy stock on a specified date

Answer» b. Buy stock at a specified price