FIN630 Midterm Solved 6 Papers and 200 MCQs by Asad

FIN630 6 Midterm Papers & 200 MCQS…

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Spring 2009 FIN630- Investment Analysis & Portfolio Management (Session - 2)

Q1. Which one of the following financial instruments represents an ownership share in a corporation? (1 marks)

Common stock

Bond Preferred stock Term Finance certificates

Q2. There are ____ broad categories of financial assets. (1 marks)

three broad categories of financial assets, viz. stocks bonds and cash. Stocks refer to equity and equity related instruments. Bonds are debt instruments that have a maturity of more than one year. Cash represents bank deposits and debt instruments that have a maturity of less than one year.

Q3. Shares of McDonald Corporation are an example of a (n): (1 marks)

Standardized financial instrument Non-standardized financial instrument since their prices can differ over time Standardized financial liability instrument Open-end investment

Q4. _____________ promotes investment education and ethical behavior among those involved in the investment business. (1 marks)

Licensed International Financial Analyst (LIFA) Securities Investor Protection Corporation (SIPC) Chartered Financial Analyst Institute (CFAI)

Securities and Exchange Commission (SEC)

The Chartered Financial Analyst (CFA) program promotes investment education and ethical behavior among those involved in the investment business.

Q5. Which of the following function removes the fear of buying or selling at rip off price? (1 marks)

Fair pricing function

Continuous pricing function Economic function Exchange function

The fair price function removes the fear of buying or selling at rip off price. The greater number of participants and the more formal the marketplace, the greater is the likelihood that you are getting a fair price.

Q6. The trading of listed securities in the NASDAQ market is known as: (1 marks)

Primary market

Third market

Secondary market Fourth market

The trading of listed securities in the NASDAQ market is known as the third market. The third market may offer greater trading flexibility than the exchanges, particularly with regard to trading rules and fees.

Q7. Stocks of well-established companies that have stable earnings and no extensive liabilities are known as _______. (1 marks)

Growth stocks Income stocks Defensive stocks

Blue chip stocks

Blue chip stocks are stocks of well-established companies that have stable earnings and no extensive liabilities. They have a track record of paying regular dividends, and are valued by investors seeking relative safety and stability. The name comes from the bluecolored chips in the game of poker, which are typically the most valuable.

Q8. Which of the following statement regarding short sales is NOT true? (1 marks)

Short sales are done with the expectation that prices will rise Short sales can be executed only on an uptrend Short sales are all done on margin Short sales may be executed by both individuals and market makers

When using a broker, you will need to set up an account. The account that's set up is either a cash account or a margin account. A cash account requires that you pay for your stock when you make the purchase, but with a margin account the broker lends you a portion of the funds at the time of purchase and the security acts as collateral.

When an investor goes long on an investment, it means that he or she has bought a stock believing its price will rise in the future. Conversely, when an investor goes short, he or she is anticipating a decrease in share price. Short selling is the selling of a stock that the seller doesn't own. More specifically, a short sale is the sale of a security that isn't owned by the seller, but that is promised to be delivered

Q9. Companies that have capitalization amounts between $500 million and $2billion are known as _________. (1 marks)

Small cap companies

Mid cap companies

Growth companies Large cap companies

Although no precise definition has been stated for these terms most analysts consider a firm with capitalization less than $500 million to be a small cap stock' Lipper Analytical Services defines a mid-cap firm as one with capitalization between $800 million and $2 billion. Others extend the mid-cap range up to $6 billion.

Q10. A procedure for valuing the price of a stock by using predicted dividends and discounting them back to present value is known as. (1 marks)

Capital Asset Pricing Model Dividend Discount Model The Residual Earning Model

Dividend Discount Model is a procedure for valuing the price of a stock by using predicted dividends and discounting them back to present value.

Q11. In bar chart, which color indicates share prices are going up? (1 marks)

Black [page 55]

White Blue