Investment Management MCQ Questions and Answers Part – 1
1. Investment is the ___________________
A. net additions made to the nations capital stocks
B. persons commitment to buy a flat or house
C. employment of funds on assets to earn returns
D. employment of funds on goods and services that are used in production process
2. speculator is a person ___________________
A. who evaluates the performance of the company
B. who uses his own funds only
C. who is willing to take high risk for high returns
D. who considers heresays and market behaviours
3. which one of the following is not a money market securities?
A. Treasury bills
B. National savings certificate
C. Certificate of deposit
D. Commercial paper
4. Commercial papers are ____________________
A. unsecured promissory notes
B. secured promissory notes
C. sold at a premium
D. issued for a period of 1 to 2 years
5. Registrar to the issue _________________________
A. helps in the appointment of lead managers
B. drafts the prospectus
C. recommends the basis of allotment
D. directs the various agencies involved in the issue
6. The underwriter has to take up _________________________________
A. the fixed portions of the issue capital
B. the agreed portion of the unsubscribed part
C. the agreed portion or can refuse if
D. the unfixed portions of the issue capital
7. ___________ are financial assets
D. A and C
8. An example of a derivative security is ______
A. a common share of General Motors
B. a call option on Mobil stock.
C. a commodity futures contract
D. B and C
9. Which of the following investment areas is heavily tied to work using mathematical and statistical
A. security analysis.
B. portfolio management.
C. institutional investing.
D. retirement planning.
10. Most investors are risk-averse which means____________.
A. they will assume more risk only if they are compensated by higher expected return.
B. they will always invest in the investment with the lowest possible risk.
C. they will always invest in the investment with the lowest possible risk.
D. they avoid the stock market due to the high degree of risk.
11. Which of the following would be considered a risk-free investment?
B. Equity in a house.
C. High-grade corporate bonds.
D. Treasury bills.
12. _______ are financial assets.
13. Investment decision making traditionally consists of two steps______________.
A. investment banking and security analysis.
B. buying and selling.
C. risk and expected return.
D. security analysis and portfolio management.
14. The rise of the Internet has_____________.
A. greatly increased the cost of security trading.
B. significantly democratized the flow of investment information.
C. led to fewer number of discount brokers.
D. led to large amounts of security fraud.
15. The largest single institutional owner of common stocks is________.
A. mutual funds.
B. insurance companies.
C. pension funds.
D. commercial banks.
16. Savings accounts are___________ but are not__________.
A. negotiable; liquid.
B. marketable; liquid.
C. liquid; personal.
D. liquid; marketable.
17. Treasury bills are traded in the __________.
A. money market.
B. capital market.
C. government market.
D. regulated market.
18. Which of the following would not be considered as capital market security?
A. A corporate bond.
B. A common stock.
C. A 6-month Treasury bill.
D. A mutual fund share.
19. The coupon rate is another name for the__________.
A. market interest rate.
B. current yield.
C. stated interest rate.
D. yield to maturity.
20. Dividends are paid________________.
21. If an investor states that Intel is overvalued at 65 times, he is referring to___________.
A. earnings per share.
B. dividend yield.
C. book value.
D. p/e ratio.
22. If a preferred stock issue is cumulative, this means____________.
A. dividends are paid at the end of the year.
B. dividends is legally binding on the corporation.
C. unpaid dividends will be paid in the future.
D. unpaid dividends are never repaid.
23. Which of the following is not a characteristic of investments companies?
A. pooled investing.
C. managed portfolios.
D. reduced expenses.
24. In order to avoid paying income taxes, an investment company must_____________.
A. be classified as a non-profit organization.
B. invest only in municipal bonds.
C. pass on interest, dividends, and capital gains to the stockholders.
D. be registered as a closed-end investment company.
25. The most popular type of investment company is a________.
A. unit investment trust.
B. mutual fund.
C. closed-end investment company.
D. real estate investment trust.
26. An unmanaged fixed income security portfolio handled by an independent trustee is known as
A. junk bond fund.
B. closed-end investment company.
C. unit investment trust.
D. hedge fund.
27. A major difference between a closed-end investment company and an open-end investment company is that_______________.
A. closed-end investment companies are generally much riskier.
B. their security portfolios are substantially different.
C. closed-end investment companies are passive investments and open-ends are not.
D. closed-end companies have a more fixed capitalization.
28. Which of the following generally traded on stock exchanges?
A. Unit investment trusts
B. Closed-end investment companies
C. Open-end investment companies
D. All trade on stock exchanges.
29. It is not important to have a secondary market for mutual funds because_________.
A. investors hold the securities till maturity.
B. investors trade between themselves.
C. investors sell their shares back to the company.
D. banks will cash their shares as long as they have accounts at the bank.
30. A group of mutual funds with a common management are known as______________.
A. fund syndicates.
B. fund conglomerates.
C. fund families.
D. fund complexes.
31. Net asset value takes into account____________.
A. both realized and unrealized capital gains.
B. only realized capital gains.
C. only unrealized capital gains.
D. neither realized nor unrealized capital gains.
32. If NAV > market price of a fund, then the fund____________.
A. is selling at a discount.
B. is selling at a premium.
C. is an index fund.
D. is an exchange-traded fund.
33. Mutual funds may be affiliated with an underwriter. This means____________.
A. the underwriter has an exclusive right to distribute shares.
B. the underwriter selects the securities in the portfolio.
C. there is no risk to the issuer of the mutual fund.
D. there is no risk to the investor of the mutual fund.
34. In an underwriting arrangement, the risk is assumed by the_______________.
A. issuer of the security.
B. investment bankers.
C. commercial bankers.
D. institutional investors.
35. The ___________ is a window through which the investor can see the company.
A. Syndicate offer.
D. Shelf rule.
36. Investment bankers are compensated by___________.
A. the underwriting spread.
B. commissions paid by the buyers of the security.
C. commission paid by the sellers of the security.
D. guaranteed investment contracts.
37. Investment bankers operate in the______________.
A. primary market.
B. secondary market.
C. third market.
D. fourth market.
38. Which exchange member is assigned to a specific trading post?
A. Commission broker.
B. Floor trader.
39. A computerized trading network that matches buy and sell orders electronically entered by customers is a___________.
A. national markets system.
B. electronic communications networks.
C. internet investment service.
D. global investment network.
40. If an investor is attempting to buy a stock that is very volatile, it would be best to use___________.
A. market order.
B. limit order.
C. stop-loss order.
D. contingency order.
41. Which of the following has helped to eliminate the use of stock certificates by placing stock transactions on computers?
A. Demat account.
B. Securities Exchange Commission.
C. Depository Trust Company.
D. Federal Depository Insurance Corporation.
42. All new issues being offered for public sale are registered with_________________.
B. new issue market.
C. Maloney act of 1936.
D. securities investor protection act of 1970.
43. Total return is equal to________.
A. capital gain + price change.
B. yield + income.
C. capital gain – loss.
D. yield + price change.
44. The return component that gives periodic cash flows to the investor is known as the______________.
A. capital gain.
B. interest rate.
D. unrealized gain.
45. Investors should be willing to invest in riskier investments only________________.
A. if the term is short.
B. if there are no safe alternatives except for holding cash.
C. if the expected return is adequate for the risk level.
D. if they are true speculators.
46. If interest rates are expected to rise, you would expect___________.
A. bond prices to fall more than stock prices.
B. bond prices to rise more than stock prices.
C. stock prices to fall more than bond prices.
D. stock prices to rise and bond prices to fall.
47. Financial risk is most associated with_______________.
A. the use of equity financing by corporations.
B. the use of debt financing by corporations.
C. Equity investments held by corporations.
D. Debt investments held by corporations.
48. Political stability is the major factor concerning_______________.
A. exchange risk.
B. systematic risk.
C. Unsystematic risk.
D. country risk.
49. Liquidity risk_____________.
A. is the risk that investment bankers normally face.
B. is lower for small OTCEI stocks than for large NSE stocks.
C. is the risk associated with secondary market transactions.
D. increases whenever interest rates increase.
50. Which of the following is not related to overall market variability?
A. Financial risk.
B. Interest rate risk.
C. Purchasing power risk.
D. Market risk.