Top 350+ Solved Security Analysis and Investment Management MCQ Questions Answer
Q. If a firm's beta was calculated as 0.6 in a regression equation, Merrill Lynch would state the adjusted beta at a number
a. Less than 0.6 but greater than zero.
b. Between 0.6 and 1.0.
c. Between 1.0 and 1.6.
d. Greater than 1.6.
Q. Rosenberg and Guy found that __________helped to predict a firm's beta.
a. the firm's financial characteristics
b. the firm's industry group
c. firm size
d. A, B andC all helped to predict betas.
Q. 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.
Q. The market risk, beta, of a security is equal to
a. the covariance between the security's return and the market return divided by the variance of the market's returns.
b. the covariance between the security and market returns divided by the standard deviation of the market's returns.
c. the variance of the security's returns divided by the covariance between the security and market returns.
d. the variance of the security's returns divided by the variance of the market's returns.
Q. 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.
Q. 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.
Q. 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.
Q. Standard deviation and beta both measure risk, but they are different in that
a. beta measures both systematic and unsystematic risk.
b. beta measures only systematic risk while standard deviation is a measure of total risk.
c. beta measures only unsystematic risk while standard deviation is a measure of total risk.
d. beta measures both systematic and unsystematic risk while standard deviation measures only systematic risk.
Q. If investors do not know their investment horizons for certain
a. the CAPM is no longer valid.
b. the CAPM underlying assumptions are not violated.
Q. One of the assumptions of the CAPM is that investors exhibit myopic behavior. What does this mean?
a. They plan for one identical holding period.
b. They are price-takers who can't affect market prices through their trades.
c. They are mean-variance optimizers.
d. They have the same economic view of the worl
Q. Passive management is a process of holding a well diversified portfolio for
a. Short term with buy and hold approach
b. Long term with buy and hold approach
c. Short term with buy and sell approach
d. Long term with buy and sell approach
Q. Aggressive portfolio consists of bonds: stock in the ratio of
a. 60:40
b. 70:30
c. 40:60
d. 50:50