Top 350+ Solved Security Analysis and Investment Management MCQ Questions Answer
Q. Expected value is the:
a. Inverse of the standard deviation
b. Correlation between security’s risk and return
c. Weighted average of all possible outcomes
d. Same as the discrete probability distribution
Q. 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
Q. 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
Q. 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
Q. Which of the following assumptions is common between the pricing models of CAPM and APT?
a. A single period investment horizon
b. The investors can freely borrow and lend at risk-free rate
c. The investors select portfolios based on expected mean and variance of return
d. Investors have homogeneous expectations and are expected-utility-of-wealth maximizers.
Q. Which of the following statements is/are true with respect Capital Market Line (CML)?I. It is the line passing from risk-free rate through market portfolio. II. The slope of CML is called market price of risk. III. CML fails to express equilibrium pricing relationship between expected return and standard deviation for all efficient portfolios lying along the line.
a. Only (I) above
b. Only (II) above
c. Only (III) above
d. Both (I) and (II) above
Q. Which of the statements is/are false regarding Arbitrage Pricing Theory (APT)?I. APT assumes that return on any asset can be expressed as a linear function of a set of market factors or indexes. II. The arbitrage price line indicates relation between unsystematic risk and the expected return of an asset. III. While deriving the APT model, APT assumes that the error term can be reduced to zero through appropriate diversification.
a. Only (I) above
b. Only (II) above
c. Only (III) above
d. Both (I) and (II) above
Q. 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
Q. A company's __________ provide the most accurate information to its management and shareholders about its operations.
a. advertisements
b. financial statements
c. products
d. vision statement
Q. Which of the following accounting statements form the backbone of financial analysis of a company?
a. The income statement (profit & loss),
b. The balance sheet
c. Statement of cash flows
d. All of the above
Q. The Security Market Line (SML) is
a. the line that describes the expected return-beta relationship for well-diversified portfolios only.
b. also called the Capital Allocation Line.
c. the line that is tangent to the efficient frontier of all risky assets.
d. the line that represents the expected return-beta relationship.
Q. Empirical results regarding betas estimated from historical data indicate that
a. betas are constant over time.
b. betas of all securities are always greater than one.
c. betas are always near zero.
d. betas appear to regress toward one over time.
Q. A ________ provides an account of the total revenue generated by a firm during a period (usually a financial year, or a quarter)
a. Accounting analysis statement
b. financial re-engineering statement
c. promotional expenses statement
d. profit& loss statement
Q. 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