Top 350+ Solved Security Analysis and Investment Management MCQ Questions Answer
Q. Which of the following statements is the most accurate concerning security returns over The eight decades since the 1920's?
a. Returns on large common stocks were very stable
b. Returns on long-term corporate bonds were very stable
c. Returns on long-term corporate bonds were very stable
d. All securities exhibited very unstable returns over the eight decades in question.
Q. A direct equity claim arises through investment in
a. Bonds and other debt instruments
b. Common stocks, warrants and options
c. Preferred stock and commodity futures
d. Mutual funds
Q. Investment in a mutual fund results in
a. An indirect equity claim
b. A direct equity claim
c. A creditor claim
d. None of the above.
Q. What factors must be considered in choosing between investment alternatives?
a. Risk and liquidity
b. Interest or dividends vs. capital gains
c. Time frame for managing funds and evaluating performance and tax effects
d. Safety of principle
Q. Which of the following examples involves objective probabilities?
a. Common stock rates of return.
b. Coin-flipping experiment.
c. Bond rates of return.
d. Both the first and second answer.
Q. The expected return is determined by:
a. probabilities.
b. rates of return on an asset.
c. correlations.
d. both a and b.
Q. If the future were known with certainty, which of the following statements would be wrong?
a. There is no dependency with other assets.
b. The risk premium is zero.
c. The mean return equals the riskless interest rate.
d. The variance is greater than zero.
Q. Which of the following statements about arbitrage is correct?
a. A risk averter will arbitrage because profits can be made with no risk and no investment.
b. A risk averter will never arbitrage because of the risk involved.
c. Arbitrage opportunity arises when profits can be made with low level of risk.
d. Arbitrage opportunities continue to exist in equilibrium.
Q. Which of the following statements about the mean-variance criterion is correct?
a. Investors select assets that provide the highest rate of return.
b. Investors select assets that provide the highest variance for the same or higher expected return.
c. Investors select assets that provide the lowest variance for the same or higher expected return.
d. The mean return equals the riskless interest.
Q. Which of the following is not a characteristic of a risk averter?
a. A risk averter will not buy lottery tickets because the expected payoffs are less than the cost of the tickets.
b. A risk averter will be ready to pay a higher price for an asset whose variance increases.
c. A risk averter always prefers a certain investment over an uncertain investment if the expected returns on the two investments are identical.
d. To be induced to take risk, a risk averter must be offered a risk premium.
Q. Which of the following statements is incorrect?
a. The variance is the square root of the standard deviation.
b. All assets would have the same rate of return if the future were known with certainty.
c. The risk of the investment is the uncertainty concerning the expected return.
d. The geometric mean cannot be larger than the arithmetic mean.
Q. Arbitrage trading strategy implies that:
a. profits are made by investing in riskless securities.
b. large profits are made by undertaking high risk investments.
c. profits are made with no risk and no investment.
d. arbitrage opportunities will continue to exist in equilibrium.
Q. Which of the following is a measure of the dispersion of returns around the mean?
a. Variance.
b. Risk premium.
c. Correlation.
d. Expected return.
Q. Investors who completely ignore an asset’s variance and only consider the asset’s expectedreturn are called:
a. value-seeking investors.
b. growth-oriented investors.
c. risk-neutral investors.
d. risk averters.
Q. Underlying all investments is the tradeoff between
a. Expected return and actual return
b. Low risk and high risk
c. Actual return and high risk
d. Expected return and risk.