Top 350+ Solved Investment Management MCQ Questions Answer
Q. If a firm increases its plowback ratio, this will probably result in _______ P/E ratio.
a. Higher
b. Lower
c. Unchanged
d. Can’t be determined
Q. The accounting measure of a firm's equity value generated by applying accounting principlesto asset and liability acquisitions is called ________.
a. Book Value
b. Market value
c. Liquidation Value
d. Tobins q
Q. The price-to-sales ratio is probably most useful for firms in which phase of the industry lifecycle?.
a. Start-up phase
b. Consolidation
c. Maturity
d. Relative decline
Q. A stock has an intrinsic value of $15 and an actual stock price of $13.50. You know that thisstock
a. has a Tobin's q value < 1
b. signals buy opportunity
c. has an expected return less than its required return
d. has a beta > 1
Q. If a stock is correctly priced, then you know that ____________.
a. the dividend payout ratio is optimal
b. the stock's required return is equal to the growth rate in earnings and dividends
c. the sum of the stock's expected capital gain and dividend yield is equal to the stock's required rate of return
d. the present value of growth opportunities is equal to the value of assets in place
Q. Bill, Jim, and Shelly are all interested in buying the same stock that pays dividends. Bill plans on holding the stock for 1 year. Jim plans on holding the stock for 3 years. Shelly plans on holding the stock until she retires in 10years. Which one of the following statements is correct?
a. Bill will be willing to pay the most for the stock because he will get his money back in 1 year when he sells.
b. Shelly should be willing to pay the most for the stock because she will hold it the longest and hence will get the most dividends.
c. All three should be willing to pay the same amount for the stock regardless of their holding period.
d. None of these
Q. The constant-growth dividend discount model (DDM) can be used only when the ___________.
a. growth rate is equal to the required return
b. growth rate is greater than or equal to the required return
c. growth rate is less than the required return
d. growth rate is greater than the required return
Q. You want to earn a return of 10% on each of two stocks, A and B. Each of the stocks is expected to pay a dividend of $4 in the upcoming year. The expected growth rate of dividends is 6% for stock A and 5% for stock B. Using the constant-growth DDM, the intrinsic value of stockA _________.
a. will be higher than the intrinsic value of stock B
b. will be the same as the intrinsic value of stock B
c. will be less than the intrinsic value of stock B
d. The answer cannot be determined from the information given.
Q. You are considering acquiring a common share of Sahali Shopping Center Corporation that you would like to hold for 1 year. You expect to receive both $1.25 in dividends and $35 from the sale of the share at the end of the year. The maximum price you would pay for a share today is __________ if you wanted to earn a 12% return.
a. $31.25
b. $32.37
c. $38.47
d. $41.32
Q. An efficient market is defined as one in which
a. all participants have the same opportunity to make the make the same returns.
b. all participants have the same legal rights and transactions costs.
c. securities’ prices quickly and fully reflect all available information.
d. securities’ prices are completely in line with the intrinsic value.
Q. Weak form market efficiency
a. implies that the expected return on any security is zero.
b. incorporates semi-strong form efficiency.
c. involves price and volume information.
d. is compatible with technical analysis
Q. The highest level of market efficiency is
a. weak form efficiency.
b. semi-strong form efficiency.
c. random walk efficiency.
d. strong form efficiency.
Q. The random walk hypothesis is most related to the:
a. weak-form EMH
b. semistrong-form EMH
c. semiweak-form EMH
d. strong-form EMH
Q. According to the semi-strong form of the EMH, investors who invest in a stock after a highly positive announcement concerning the stock can expect to earn a(n)
a. normal return because the stock will be fairly priced when purchased.
b. extraordinary return because the new information will not affect the price until later.
c. loss because things often are not what they seem.
d. zero return because the next price is expected to be the same as the last price
Q. Which of the following is not a method employed by fundamental analysts?
a. Analyzing the Fed's next interest rate move
b. Relative strength analysis
c. Earnings forecasting
d. Estimating the economic growth rate