Question:

Equity does NOT include

A.

cash and paid-in capital

B.

common stock and paid-in capital

C.

paid-in capital and retained earnings

D.

common stock, paid-in capital and retained earnings

Answer» a. cash and paid-in capital

Question:

Which of the following securities is most liquid?

A.

Money market instruments

B.

Capital market instruments

C.

Gilt-edged securities

D.

Index Futures

Answer» b. Capital market instruments

Question:

Ambiguity introduced by way by which organization finances its investments is

A.

country risk

B.

liquidity risk

C.

financial risk

D.

business risk

Answer» c. financial risk

Question:

The balance sheet of a company is a snapshot of the ______ of the firm at a point in time.

A.

the sources and applications of funds of the company.

B.

expenditure structure

C.

profit structure

D.

income structure

Answer» a. the sources and applications of funds of the company.

Question:

Which of the following is not among the important categories of real assets?

A.

Land and house property

B.

Art objects

C.

Units of UTI

D.

Bullion

Answer» a. Land and house property

Question:

Which of the following is on the horizontal axis of the Security Market Line?

A.

Standard deviation

B.

Beta

C.

Expected return

D.

Required return

Answer» b. Beta

Question:

At the prevailing environment, the Capital Market Line (CML) equation for a portfolio is given as E(ri),% = 8 + 0.36 ?i The ex-ante SML equation for the same portfolio i is E(ri),% = 8 + 5.50 ?i Therefore, the variance of market portfolio is approximately

A.

30(%)2

B.

64(%)2

C.

126(%)2

D.

233(%)2

Answer» d. 233(%)2

Question:

What is the expected return of a zero-beta security?

A.

The market rate of return.

B.

Zero rate of return.

C.

A negative rate of return.

D.

The risk-free rate.

Answer» d. The risk-free rate.

Question:

Which of the following statements is false about the Security Market Lines (SML)?

A.

SML represents normal trade-off between return and risk

B.

The vertical distance of the security‘s plot on the graph from the SML is called the security‘s alpha

C.

SML is same as the characteristic line for any security

D.

Ex-post SMLs are used to evaluate the performance of portfolio managers

Answer» c. SML is same as the characteristic line for any security

Question:

According to the Capital Asset Pricing Model (CAPM), the expected return of a well- diversified portfolio with abeta of 1.0 and positive ex-ante alpha (a) is

A.

The risk-free rate, rf

B.

ß (rœ r)mf

C.

Between rand rmf

D.

r+ a

Answer» d. r+ a