QUESTION BANK-TYBBI (SEM VI)

SUBJECT: SECURITY ANALYSIS PORTFOLIO MANAGEMENT

1. The art of changing the mix of securities in a portfolio is called as portfolio .

a) Active revision
b) Revision
c) Evaluation

2. The sale and of assets in an existing portfolio over a certain period of time to maximize
returns and
Minimize risk is called portfolio
a) Active revision
b) Revision
c) Evaluation

3. strategy involves frequent and sometimes substantial adjustments to the portfolio.

a) Active revision
b) Revision
c) Evaluation
4. Under strategy, adjustment to the portfolio is carried out according to
certain predetermined rules and procedures designated as formula plans.
a) Active revision
b) Passive Revision
c) Evaluation

5. Portfolio is the last step in the process of portfolio management.

a) Active revision
b) Passive Revision
c) Evaluation
6. Portfolio evaluation refers to the evaluation of the of the portfolio.
a) Securities
b) Performance
c) Sector

7. Index is a ratio of return generated by the fund over and above risk free rate
of return, during a given period and systematic risk associated with it beta.

a) Treynor’s
b) Sharpe’s
c) Jenson’s
8. According to measure, it is the total risk of the fund that tie investors are
concerned about.So, the model evaluates funds on the basis of reward per unit of total
risk.

a) Treynor’s
b) Sharpe’s
c) Jenson’s

9. In measure the surplus between the two returns is called Alpha, which
measures the performance of a fund compared with the actual returns over the period.

a) Treynor’s
b) Sharpe’s
c) Jenson’s

10. A portfolio comprises several securities.

a) Individual

b) Group

c) Securities

11. A bond is a instrument

a) Long term

b) Short term
12. A bond’s terms and conditions are contained in a legal contract between the buyer and
the seller, known as the .

a) Provision

b) Agreement

c) Indenture

13. The of a bond is the price at which the bond is sold to investors when first issued.
a) Face Value
b) Future value
c) Current Price

14. The periodic interest payments promised to bond holders are computed as a fixed percentage
of the bond's face value; percentage is known as the .
a) Coupon rate
b) Hurdle rate
c) Dividend
15. A bond’s is the length of time until the principal is scheduled to be repaid.
a) Maculay period
b) Maturity

16. Many bonds contain a provision that enables the issuer to buy the bond back from the
bondholder at a pre-specified price prior to maturity. This price is known as the .

a) Put Price
b) Call Price

17. Some bonds contain a provision that enables the buyer to sell the bond back to the
issuer at a pre-specified price prior to maturity. This price is known as the .
a) Put Price
b) Call Price

18. A sinking fund reduces the possibility of .

a) Insolvency
b) Default

19. The of a bond is the rate of return that an investor would earn if he bought
the bond at its current market price and held it until maturity.

a) Current yield
b) Yield to maturity

20. The is the rate of return that an investor would earn if he bought a
callable bond at its current market price.

a) Current yield
b) Yield to maturity
c) Yield to call

21. The rate of interest used to discount the bond's cash flows is known as the .
a) Current yield
b) Yield to maturity
c) Yield to call

22. is risk that the issuer of the bond will not be able to pay the interest
or principal payments and you will lose some, or all of the money you have
invested.
a) Selection Risk

b) Default risk

c) Credit risk
23. The risk that an investor chooses a security that underperforms the market
for reasons that cannot be anticipated is called as .

a) Selection Risk

b) Default risk

c) Credit risk

24. is a measure of the weighted average life of a bond, which considers

the size and timing of each cash flow.

a) Macaulay duration
b) Duration
c) Maturity

25. The duration of a zero coupon bond in the same as its .

a) Macaulay duration
b) Modified duration
c) Maturity

26. analysis focuses on charts of price movement and various analytical

tools to evaluate a security's strength or weakness and forecast future price
changes.
a) Technical
b) Fundamental
c) Industry

27 analysts believe past trading activity and price changes of a security

are better indicators of the security's likely future price movements.
a) Technical
b) Fundamental
c) Industry

28. analysts believes that history tends to repeat itself.

a) Technical
b) Fundamental
c) Industry

29. analysis is done based on technical charts, graphs and diagrams.

a) Technical
b) Fundamental
c) Industry

30. chart is the simplest form of charting.

a) Candle stick
b) Flag
c) Line

31. In a chart, a thick bar called candle is drawn in the chaff

a) Candle stick
b) Flag
c) Line

32. level is the lower price level at which demand for shares gains
momentum.
a) Support
b) Resistance

33. level is the upper price level at which supply for the shares
gains momentum.

a) Support
b) Resistance

34. reflects resistance and support level in an upward moving market.

a) Head and shoulder

b) Inverse head and shoulder

35. reflects resistance and support level in a downward moving market.

a) Head and shoulder

b) Inverse head and shoulder

36. A is identified as a narrow movement of the market either after an

uptrend or a down trend.

a) Candle stick

b) Flag

c) Line

37. is one of the oldest technical methods which have been widely used.

a) Charles Dow

b) Elliot wave

38. believed in fundamental analysis.

a) Charles Dow

b) Elliot wave
39. theory attempts to develop a rationale for a long-term pattern in the
stock price movement.

a) Charles Dow

b) Elliot wave

40. A is an average of a shifting body of prices calculated over a

given number of days.

a) Moving average
b) Oscillators
c) Exponential moving average

41. is a weighted average of a price data which put a higher weight on recent
data point.
a) Moving average
b) Oscillators
c) Exponential moving average
42. An/a is a technical analysis tool that is banded between two
extreme values.

a) Moving average
b) Oscillator
c) Exponential moving average
43 is a momentum oscillator that measures the speed and change of price
movements.

a) Relative strength index

b) Market indicators
c) Exponential moving average
44. are a series of technical indicators used, by traders to predict the

direction of the major financial indexes.

a) Relative strength index

b) Market indicators
c) Exponential moving average
45. The tools used by the mathematical trading methods are moving
averages and .

a) Moving average
b) Oscillators
c) Exponential moving average
46. The states that prices already reflect all known information concerning a
stock or other security and that price rapidly adjust to any new information.

a) Random walk

b) Efficient Market

c) Efficient market hypothesis

47. hypothesis assumes that markets are efficient.

a) Random walk

b) Efficient Market

c) Efficient market hypothesis

48. The efficient market hypothesis assumes that the rates of return on the
market should be independent; past rates of return have no effect on future rates.
a) Semi strong form

b) Strong form

c) Weak-form

49. EMH assumes that the rates of return on the market are independent.

a) Semi strong form

b) Strong form

c) Weak-form

50. EMH implies that the market is efficient, reflecting all publicly
available information.

a) Semi strong form

b) Strong form

c) Weak-form

51. The EMH implies that the market is efficient; it reflects all
information both public and private.

a) Semi strong form

b) Strong form

c) Weak-form
52.5 walk.
2.
is a financial theory stating that stock market prices evolve as a random

a) Random walk hypothesis

b) Efficient Market

c) Efficient market hypothesis

53. As per theory, changes in stock prices are independent of each other.
a) Random walk

b) Efficient Market

c) Efficient market hypothesis

54. The theory states that market and securities prices are random and
not influenced by past events.

a) Efficient Market

b) Efficient market hypothesis

c) Random walk

55. The opportunity line is the:

a) Set of all portfolios with the same expected ratio of return but different standard
deviations
b) Set of portfolios among which the investor is indifferent
c) Set of investment opportunities made available by mixing a risky asset and
a risk-free asset
d) Set of investment opportunities made available by mixing two risky assets.

56. Consider a graph with standard deviation on the horizontal axis and expected
return on the vertical axis. The line that connects the risk free rate and the
optimal risky portfolio is called:

a) The security market line

b) The characteristic line
c) The capital market line
d) The indifference curve

57. Market risk is also called:

a) Unique risk and non diversifiable risk

b) Non diversifiable risk and systematic risk
c) Systematic risk and diversifiable risk
d) Systematic risk and unique risk
58. Suppose you estimate the characteristic line for Stock X. You find that the
standard deviation of X's error term is 7%, X's beta is 1.4, and the standard
deviation of the market is 12%. What is the total standard deviation for Stock
X?

a) 19.0%
b) 18.2%
c) 30.5%
d) 15.8%
e) 23.8%

59. The risk-free rate for the next year is 3%, and the market risk premium is
expected to be 10%. The beta of Acme's stock is 1.5. If you believe that Acme's
stock will actually return 18.2% over the next year, then according to the
CAPM you should:

a) Buy the stock because it is under priced

b) Sell the stock because it is under priced
c) Sell the stock because it is overpriced
d) Be indifferent between buying and selling the stock
e) Buy the stock because it is overpriced

60. Stock A has a beta of 1.0 and very high unique risk. If the expected return on
the market is 20%, then according to the CAPM the expected return on Stock A
will be:
a) More than 20% because of Stock A's very high unique risk
b) At least 20% if the investor holds only Stock A
c) The answer cannot be found without knowing Stock A's correlation
or covariance with themarket
d) Exactly 20%
e) The answer cannot be found without knowing the risk-free rate of interest

61. The beta of the market portfolio is:

a) 0.5
b) O
c) -1.0
d) 1.0

62. If an asset's expected return plots above the security market line, the asset is:

a) under-priced
b) Overpriced
c) Fairly priced (if it has an unusually large amount of unique risk)
d) Both the first and third answers
63. Which one of the following is true?

a) Alpha is the slope of the characteristic line

b) Alpha is the slope of the opportunity line
c) Beta is the slope of the capital market line
e) Beta is the slope of the security market line

f) All of the above are false

64. The market risk premium is 15% and the risk-free rate is 5%. The beta of Asset
D is 0.2. What is expected return under CAPM?
a) 20%

b) 30%

c) 7%

d) 3%

e) 8%
65. The market risk premium is the slope of:
a) The capital market tine

b) The efficient frontier

c) The characteristic line

e) The opportunity line

f) The security market line

66. According to the CAPM, overpriced securities have:

a) Negative alphas

b) Zero alphas

c) Negative betas

d) Positive alphas

e) Zero betas
67. The beta of the risk-free asset is:

a) -1.0

b) 2.0

c) 1.0

d) O
68. Capital asset pricing theory asserts that portfolio returns are best explained by:
a) Specific risk
b) Diversification

c) Economic factors

d) Systematic risk
69. The market portfolio has a beta of:
a) -1.0

b) 2.0

c) 1.0

d) 0.5

70. According to security market line, the expected return of any security is a function
of:

a) Total risk

b) Systematic risk

c) Unsystematic risk

d) Diversifiable risk

e) Unique risk
71. According to the capital market line, the expected return of any efficient portfolio
is a function of:

a) Systematic risk

b) Unsystematic risk

c) Total risk

d) Beta

e) Unique risk
72. Which of the following statements about the market portfolio is false?

a) The market portfolio contains both systematic and unsystematic risk

b) The market portfolio lies on the capital market line

c) The market portfolio lies on the security market line

d) The market portfolio includes all risky assets in the world

e) The market portfolio is on the efficient frontier

73. The is a relationship explaining how assets should be priced in the capital
market.

a) Capital asset pricing Model

b) Diversification
c) SML

74. model is a model that describes the relationship between systematic

risk and expected return for assets, particularly.
a) Diversification
b) CML
c) CAPM

75. Return and are two important characteristics of every investment.

a) Return
b) Profit

76. helps to reduce risk.

a) SML
b) CML
c) Diversification
77. calculates a required return based on a risk measurement.
a) SML
b) CAPM
c) CML

78. The efficient frontier arising from a feasible set of portfolios of risky assets
is in shape.

a) Convex
b) Concave
c) Tangent

79. All portfolios of all investors will lie along this capital market line.
a) Optimal
b) Efficient

80. Capital Market Line (CML) is the line drawn from the point of the
risk-free asset to the feasible region for risky assets.
a) Convex
b) Concave
c) Tangent

81. is a linear relationship between expected return and systematic risk

(Beta) on which both portfolios and individual securities can lie.
a) SML
b) CML
c) CAPM
82. The SML has a slope, indicating that the expected return increases with
risk (ß).
a) Positive
b) Negative
83. is a model, which help in the identification of portfolios and
individual securities as undervalued or overvalued with the help of CML and
SML.
a) SML
b) CML
c) CAPM

84. The capital asset pricing model can also be used for evaluating the price of
.
a) Securities

b) Shares

c) Bonds

85. Believes that each security and portfolio has relationship (m)one factor and
this relationship affects the return of it.
a) Efficient Market theory

b) Arbitrage market theory

86. In case of the , the level of large numbers is used for infinite or large
number of securities.

a) Efficient Market theory

b) Arbitrage market theory

87. The mix of an investment portfolio determines its overall return.

a) Asset

b) Shares

c) Bonds

88. Which of the following is a financial investment?

a) Purchase a of shares.

b) Purchase of farm house

c) Purchase of car

d) Purchase of TV set
89. Which of the following is a tax saving investment?

a) Fixed Deposit

b) Shares

c) PPF.

d) Post office savings

90. All personal investing is designed to achieve certain?

a) Objectives.

b) Investment

c) Risk

d) Returns

91. This type of risk is avoidable through proper diversification.

a) Portfolio risk

b) Systematic risk

c) Unsystematic risk

d) Total risk

92. A statistical measure of the degree to which two variables (eg securities
returns) move together:

a) Coefficient of variation

b) Variance

c) Covariance

d) Certainly equivalent

93. An “aggressive” common stock would have a “beta”.

a) Equal to zero

b) Greater than one

c) Equal to one

d) Less than one

94. A line that describes the relationship between an individual security’s

returns and returns on the market portfolio

a) Characteristics line

b) Security market line

c) Capital market line

d) Beta

95. According to the capital asset pricing model (CAPM) a securities

expected (required) return is equal to the risk free rate plus a premium.

a) Equal to the securities beta

b) Based on the unsystematic risk of the security

c) Based on the total risk of the security

d) Based on the systematic risk of the security

96. BETA is the slope of.

a) The security market line

b) The capital market line

c) A characteristic line

d) The CAPM

97. is a measure of “risk per unit of expected return.”

a) Standard deviation

b) Coefficient of variation

c) Correlation coefficient

d) Beta

98. The greater the beta the of the security involved.

a) Greater the unavoidable risk

b) Greater the avoidable risk

c) Less the unavoidable risk

d) Less the avoidable risk

99. The fundamental analysis is a method of finding out?

a) Ratios

b) Value of a share

c) Tips

d) Future price of a security

100. Return on investment is determined by?

a) Net profit

b) Capital employed

c) Net worth

d) Net profit and capital employed