Question:

Inferior investment alternatives are identified when:

A.

α < 0.

B.

β = 0.

C.

β > 1.

D.

β < 1.

Answer» c. β > 1.

Question:

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» c. 0.75

Question:

A negatively sloped yield curve suggests that

A.

short-term rates exceed long-term rates, and the Federal Reserve is following a tight monetary policy

B.

short-term rates exceed long-term rates, and the Federal Reserve is following an easy monetary policy

C.

long-term rates exceed short-term rates, and the Federal Reserve is following a tight monetary policy

D.

long-term rates exceed short-term rates, and the Federal Reserve is following an easy monetary policy

Answer» a. short-term rates exceed long-term rates, and the Federal Reserve is following a tight monetary policy

Question:

An industry in the expansion stage of its life cycle is indicated by its

A.

Low P/E Ratio.

B.

High P/E Ratio.

C.

High Dividend Pay-Out Ratio

D.

High Default

Answer» d. High Default

Question:

Which of the following helps determine the relationship between the expected return and risk for individual securities?

A.

Security market line

B.

Capital market line

C.

Markowitz model

D.

(a) and (b)

Answer» a. Security market line

Question:

Future on fixed Income securities are known as

A.

Stock Index futures

B.

Interest rate futures

C.

Mutual fund futures

D.

Stock market futures

Answer» d. Stock market futures

Question:

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» b. Rs 0

Question:

Which of the following goals will be considered by the individuals who invest in upcoming companies and wait till the companies to grow and then harvest their profits and move on to other company?

A.

Short-term high priority goals

B.

Money making goals

C.

Long-term high priority goals

D.

Lower priority goals

Answer» c. Long-term high priority goals

Question:

Which of the following statement(s) is/are true?I. A unique characteristic line is plotted for each security to determine the beta. II. For a characteristic line, the X-axis represents betas for different securities. III. The slope of the characteristic line is the difference between the market returns andrisk-free returns.

A.

Only (I) above

B.

Only (II) above

C.

Only (III) above

D.

Both (I) and (II) above

Answer» a. Only (I) above

Question:

Most favourable portfolio is proficient portfolio with the

A.

lowest risk

B.

highest risk

C.

highest utility

D.

least investment

Answer» d. least investment