Broadening Formation slide 9api.ning.com/files/rvuAdm-PR1YBI3pEHgLZ*Z1... · Moving Average...

FIN630 - Investment Analysis & Portfolio Management QUIZ’S

All Mid Term Fall 2009 Solved MCQs With Reference of FIN630

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Which of the following is NOT the technical indicator? Select correct option: Moving Average Convergence/Divergence Relative Strength Index On Balance Volume Broadening Formation slide 9 Question # 3 of 15 ( Start time: 10:17:22 PM ) Total Marks: 1 Buying power of an investor is calculated as: Select correct option: Assets – liabilities Equity – debt balance Short term debt – long tem debt Current assets – current liabilities Ref:B = [1/m-1] E-D Where B = buying powera M = initial margin requirement D = debt E = equity With the current 50 percent initial requirement, the formula for determining buying power is simply the account equity minus the debt balance. With a 50% initial margin, buying power = equity – debit balance

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Question # 4 of 15 ( Start time: 10:18:01 PM ) Total Marks: 1 Which of the following is a pattern that occurs during high volatility, when a security shows great movement with little direction? Select correct option: Broadening Formation Relative Strength Index

On Balance Volume Bollinger Bands Ref: A pattern that occurs during high volatility, when a security shows great movement with little direction. The formation is identified by a series of higher pivot highs and lower pivot lows. A trend line drawn over the pivot highs and under the pivot lows frames out the widening pattern. It looks like a megaphone and, in fact, it is also known by that name Question # 5 of 15 ( Start time: 10:19:17 PM ) Total Marks: 1 Companies that have capitalization amounts of more than $2 billion are known as _________. Select correct option: Small cap companies Mid cap companies Growth companies Large cap companies for more contents visit . Question # 6 of 15 ( Start time: 10:19:53 PM ) Total Marks: 1 All of the following are the sentiment indicators, EXCEPT: Select correct option: Quick Asset Ratio Odd Lot Short Ratio Shares Sold Short Short Interest Ratio Ref:A general term used to describe indicators that gauge investor attitudes toward the market.Quick asset ratio do not gauge investors attitude towards market. Question # 7 of 15 ( Start time: 10:21:18 PM ) Total Marks: 1 Which of the following analysts think that supply and demand factors play the most important part ? Select correct option: Ratio analysts Fundamental analysts Technical analysts Research analysts


Ref:Technical analysts like to use charts. They believe that supply and demand determines

security prices, that changes in supply and demand cause prices to change, and that charts can be used to predict changes in supply and demand and in investor behavior. Question # 10 of 15 ( Start time: 10:24:54 PM ) Total Marks: 1 All of the following are characteristics of stop orders EXCEPT: Select correct option: Protecting profits Minimizing losses Rapid execution Ref:The most important use of a stop order is to protect a profit and minimize losses. for more contents visit . Question # 11 of 15 ( Start time: 10:26:19 PM ) Total Marks: 1 Which of the following function removes the fear of buying or selling at rip off price? Select correct option: Fair pricing function Economic function Exchange function Continuous pricing function Ref:The greater the number of participants and the more formal the marketplace, the “fairer” the price Question # 12 of 15 ( Start time: 10:27:28 PM ) Total Marks: 1 Which of the following promotes investment education and ethical behavior among those involved in the investment business? Select correct option: Securities Investor Protection Corporation (SIPC) Licensed International Financial Analyst (LIFA) Chartered Financial Analyst Institute (CFAI) Securities and Exchange Commission (SEC)


Question # 14 of 15 ( Start time: 10:30:10 PM ) Total Marks: 1 What is inferred in case the share price is moving above the simple moving average line? Select correct option: Share is inferior Price is increasing Market is positive Company is good Ref: A buy signal is generated when the closing price of the stock crosses above the simple moving average. This is indicative that the current price has broken somewhat of a downtrend. However, if the stock is trading in a near term sideways trend I would avoid buying on the signal since it will most likely bounce back and forth across the moving average line a number of times. It is best to look for trades where the price and average are in a downward slope before the stock price breaks above the average. Question # 15 of 15 ( Start time: 10:31:16 PM ) Total Marks: 1 Which of the following shows the relationship between two moving averages of prices? Select correct option: Moving Average Convergence/Divergence Relative Strength Index On Balance Volume Bollinger Bands Ref: The MACD (Moving Average Convergence Divergence) is a trend-following momentum indicator that shows the relationship between two moving averages of prices

8. Which of the following is a current market in which all buying and selling is done on cash or margin basis? Select correct option: Target market Historic market


Regular market slide 5

Borough market 24. Which of the following statements hold TRUE for bid price? Select correct option: It is the price at which a broker is willing to sell a certain security It is the price at which an investor can buy units from the funded company It is the price asked by a seller of securities from buyers It is the price at which a broker is willing to buy a certain security 1. In which of the following cases resistance occurs? Select correct option: Inability to break below prior high Inability to break below prior low Inability to surpass prior high http://www.google.com.pk/search?hl=en&q=+Inability+to+surpass+prior+high+is+the+case+in+which+resistance+occurs%3F&aq=f&aqi=&aql=&oq=&gs_rfai= Inability to repair beyond prior low 2. What does the abbreviation MACD stands for? Select correct option: Moving Average Convergence/Divergence Murray Alliance of Construction Department Montréal Association of Contraction Districts Michigan Appliance for Counseling Development 3. Which of the following represents an unusually risky stock? Select correct option: Blue chip stock Growth stock Penny stock slide 4


None of the given options

4. Which of the following lines in charts are the prices formed from the trend lines? Select correct option: Support lines slides Resistance lines Tangent lines Interval lines http://en.wikipedia.org/wiki/Trend_lines_%28technical_analysis%29 5. Which of the following statements hold TRUE for Fibonacci series? Select correct option: It is an eight part series that left an indelible mark in developing strategy It ia a sequence of numbers where each successive number is the sum of the two previous numbers slide 10 It is a sequence of numerical data points in successive order occurring in uniform intervals It is a series for which the ratio of each two consecutive terms is a constant function 6. Which of the following is the theories searching the patterns in randomness? Select correct option: Elliott wave theory Chaos theory sldie 10 Portfolio theory Valuation theory 7. Which of the following statements hold TRUE for spread? Select correct option: It is the price asked by a seller of securities from buyers It is the quoted price in an order to buy shares of a company It is the rate at which a dealer will buy the base currency It is the difference between the bid and ask price sure


Ref: In bid and ask, the bid price stands in contrast to the ask price or "offer", and the difference between the two is called the bid/ask spread. http://en.wikipedia.org/wiki/Bid_price 9. Which of the following trading systems is used by the Islamabad Stock Exchange? Select correct option: LOTS PETS ISECTS book KATS 11. Which of the following terms is used synonymously for equity? Select correct option: Share Distribution Section Division 12. Elliott believed that the market has a rhythmic regularity that can be used to do which of the following? Select correct option: Predict future prices slide 10 Implicate past trends Associate past with future Define current shares 13. Which of the following trading systems is used by the Karachi Stock Exchange? Select correct option: ISECTS LOTS KATS PETS


14. Which of the following is applied on the whole market? Select correct option: Cyclical curb Personal curb Allusive curb Trading curb 17. If a company decides to issue new securities, these should be issued in: Select correct option: Primary market Secondary market Third market Fourth market http://en.wikipedia.org/wiki/Primary_market 18. The Elliott Wave Theory is based on which of the following? Select correct option: A repeating 2 wave cycle A repeating 4 wave cycle A repeating 8 wave cycle slide 10 A repeating 16 wave cycle 19. Black body candle in a candlestick chart depicts that the prices are moving. Select correct option: Up Constant Down slide 7 Fluctuating 20. Which of the following charts give the economic information on weekly or yearly basis? Select correct option:


Line charts

Bar charts slide 7 Pie charts Symbol charts 21. What does the abbreviation RSI stands for? Select correct option: Repetitive String Instruments Relative Strength Index slide 9 Rapid Succession Intrigues Review of Symbolic Inquests 22. Derivatives are assets that include all of the following, EXCEPT: Select correct option: Future Option Forward Pay order page 243 23. Which of the following analysts think that supply and demand factors play the most important part? Select correct option: Ratio analysts Fundamental analysts Technical analysts slide 8 Research analysts 24. Which of the following statements hold TRUE for bid price? Select correct option: It is the price at which a broker is willing to sell a certain security It is the price at which an investor can buy units from the funded company It is the price asked by a seller of securities from buyers It is the price at which a broker is willing to buy a certain security investopedia links


25. Which of the following has been extensively used by the Elliott Wave adherents?

Select correct option: Napoleon series Economic time series Fibonacci series slide 10 Geometric series 26. Account that permits an investor to borrow part of the cost of investment firm a brokerage firm. Select correct option: Dealer account Option account Margin account slide 5 Cash account 27. In a bar chart what does the blue line represents? Select correct option: Stock prices are getting low Stock prices are getting high slide 7 Stock prices are closing Stock prices are opening 28. Which of the following trading systems is used by the Lahore Stock Exchange? Select correct option: ISECTS LOTS slide 2 KATS PETS 29. Which of the following is a type of hedge mechanism? Select correct option: Distance selling


Best selling

Target selling Short selling slide 5 30. Which of the following function removes the fear of buying or selling at rip off price? Select correct option: Fair pricing function slide 2 Economic function Exchange function Continuous pricing function 31. Which of the following statement is NOT true about Elliot Wave Theory? Select correct option: It is based on repeating 8 waves’ cycles It identified three movements in security prices slide 10 It was proposed by R.N. Elliot It made extensive use of Fibonacci series 32. Which of the following statement is not a characteristic of a line chart? Select correct option: It is simplest and most familiar chart It is efficient in showing more details It is an extension of a scatter graph slide 7 It is created by connecting a series of points 34. The Islamabad Stock exchange is a (n): Select correct option: Over the counter market Third market Primary market Secondary market http://www.msi.net.pk/ 35. In which of the following cases resistance occurs?


Select correct option: Inability to break below prior high Inability to break below prior low Inability to surpass prior high sldie 9 Inability to repair beyond prior low 36. the trend lines can have the following trends, EXCEPT: Select correct option: Upward trend Downward trend Trend range Round phase sldie 9 38. Which of the following is known as Secondary trend in Dow Theory? Select correct option: Wave slide 10 Triangle Tide Rounded bottom 39. In a bar chart what does the red line represents? Select correct option: Stock prices are getting high Stock prices are getting low slide 7 Stock prices are closing Stock prices are opening 40. Which of the following orders is used to secure your profits? Select correct option: Market order Stop order sldie 4 Limit order Mitigate order


41. Which of the following statements hold TRUE for ask price? Select correct option: It is the price at which a broker is willing to sell a certain security It is the price at which a broker is willing to buy a certain security It is the quoted price in an order to buy shares of a company It is the rate at which a dealer will buy the base currency 42. Which of the following lines in charts are the prices formed from the trend lines? Select correct option: Support lines Resistance lines Tangent lines Interval lines 44. Which of the following usually resembles a reverse version of a symmetrical triangle? Relative Strength Index On Balance Volume Broadening Formation Bollinger Bands http://thepatternsite.com/EWRevSymmetrical.html 45. In order to analyze long term investment, the most suitable analysis will be. Fundamental analysis Technical analysis Vertical analysis Horizontal analysis http://stockcharts.com/school/doku.php?id=chart_school:overview:fundamental_analysis


46. Which of the following includes fixed income securities?

Select correct option: Bonds Shares Derivatives None of the given options 47. What does the abbreviation SOES stands for? System of Organic and Effective Sciences Small Order Execution System sldie 2 Service Observation Execution Statistics Scotland Order Education School 48. In which of the following accounts the trading charges are high? Savings account System account Personal account Cash account http://www.bestcashcow.com/bank_rates/savings.html 49. What does EMH stands for? Eastern Marine Heritage European Market Healthcare Effective Market Hypothesis European Mayor House 50. According to Dow Theory, secondary trend is a: Long term trend Short term trend Medium term trend none of given options 51. All of the following are characteristics of stop orders EXCEPT:


Select correct option:

Protecting profits Minimizing losses Rapid execution sldie 4 It is seldom used by investors 53. An upward trend in share prices in a bar chart is represented by_______ color. Select correct option: White Black Red Blue 54. In which of the following cases support occurs? Select correct option: Inability to recede prior high Inability to break below prior low slide 8 Inability to surpass prior low Capacity to surpass prior high 55. Which of the following compares the magnitude of recent gains to recent losses in an attempt to determine overbought and oversold conditions of an asset? Select correct option: Moving Average Convergence/Divergence Relative Strength Index On Balance Volume Bollinger Bands\ http://www.investopedia.com/terms/r/rsi.asp 57. Which of the following is EXCLUDED from the reasons of investing?


Select correct option: To obtain capital gain To supplement their money To experience an excitement To gather market information page#3

58. Which of the following is also called the Gordon’s Growth Model? Select correct option: Dividend discount model slide 6 page#53 Binomial models finance Capital asset pricing model Black scholes model finance 59. In the point and figure charts all of the following will be NOT be present, EXCEPT: Select correct option: Data points Lines Bars Zeros page#56 slide 7 60. Which of the following theories states that five waves move in the direction of the main trend followed by three corrective waves? Select correct option: Portfolio theory Valuation theory Elliott wave theory Chaos theory 61. What does the abbreviation RSI stands for? Select correct option: Repetitive String Instruments Relative Strength Index Rapid Succession Intrigues Review of Symbolic Inquests 62. Companies that have capitalization amounts of more than $2 billion are known as_________.


Select correct option: Small cap companies

Mid cap companies Growth companies Large cap companies 64. __________ is a temporary restriction on program trading in a particular security or market, usually to reduce dramatic price movements. Select correct option: Super Dot NYSE direct Trading curb Ticker tape 66. the trend lines can have the following trends, EXCEPT: Select correct option: Upward trend Downward trend Trend range Round phase 67. Which function of capital market facilitates transfer of money from savers to borrowers? Select correct option: Fair pricing function Exchange function Economic function slide 2 Continuous pricing function


69. All of the following are the types of orders used extensively in stock markets, EXCEPT:

Select correct option: Market order Stop order Limit order Mitigate order 70. An account that permits an investor to borrow part of the cost of investment firm a brokerage firm Select correct option: Dealer account Option account Margin account page#31 Cash account 73. Which order will be executed automatically at the current bid or ask price? Select correct option: Limit order Market order page#26 Stop order Good till cancelled 74. A self-regulatory body that licenses brokers and generally oversees the trading practices of OTC securities is known as ________. Select correct option: Securities and Exchange Commission (SEC) Initial Public Offering (IPO) Offered for Sale (OFS) National Association of Security Dealers (NASD) 75. Which of the following programs propagate the ethics? Select correct option:


London Instruments Fiscal Attachment

Laurel Immigration Fairness Analysis Low Income Financial Association Licensed International Financial Analyst 81. Which of the following is NOT the type of moving averages? Select correct option: Exponential Density http://stockcharts.com/school/doku.php?id=chart_school:technical_indicators:moving_averages Simple Variable 82. Which of the following statements hold TRUE for ask price? Select correct option: It is the price at which a broker is willing to sell a certain security page#8,9 It is the price at which a broker is willing to buy a certain security It is the quoted price in an order to buy shares of a company It is the rate at which a dealer will buy the base currency 83. Which of the following promotes investment education and ethical behavior among those involved in the investment business? Select correct option: Securities Investor Protection Corporation (SIPC) Licensed International Financial Analyst (LIFA) Chartered Financial Analyst Institute (CFAI) Securities and Exchange Commission (SEC) 85. Elliott believed that the market has a rhythmic regularity that can be used to do which of the following?


Select correct option: Predict future prices Implicate past trends

Associate past with future Define current shares 86. Which of the following is NOT the technical indicator? Select correct option: Moving Average Convergence/Divergence Relative Strength Index On Balance Volume Broadening Formation


87. Buying power of an investor is calculated as: Select correct option: Assets – liabilities Equity – debt balance Short term debt – long tem debt Current assets – current liabilities not sure Ref:B = [1/m-1] E-D Where B = buying powera M = initial margin requirement D = debt E = equity With the current 50 percent initial requirement, the formula for determining buying power is simply the account equity minus the debt balance. With a 50% initial margin, buying power = equity – debit balance 89. All of the following are the sentiment indicators, EXCEPT: Select correct option: Quick Asset Ratio The quick ratio - the quick assets ratio or the acid-test ratio - is a liquidity indicator that further refines the current ratio by measuring the amount of the most liquid current assets there are to cover current liabilities Odd Lot Short Ratio Shares Sold Short Short Interest Ratio 90. What is inferred in case the share price is moving above the simple moving average line? Select correct option: Share is inferior Price is increasing Market is positive Company is good


Ref: A buy signal is generated when the closing price of the stock crosses above the simple moving average. This is indicative that the current price has broken somewhat of a downtrend. However, if the stock is trading in a near term sideways trend I would avoid buying on the signal since it will most likely bounce back and forth across the moving

average line a number of times. It is best to look for trades where the price and average are in a downward slope before the stock price breaks above the average. 91. Which of the following shows the relationship between two moving averages of prices? Select correct option: Moving Average Convergence/Divergence http://www.investopedia.com/terms/m/macd.asp Relative Strength Index On Balance Volume Bollinger Bands 93. Companies that have historically paid a larger than average percentage of their profit as dividend to their shareholders is known as: Select correct option: Blue chip companies Cyclical companies Growth companies Income companies 1st line on page#25 94. In a bar chart what does the red line represents? Select correct option: Stock prices are getting high Stock prices are getting low Stock prices are closing Stock prices are opening 95. All of the following are the basic technical tools, EXCEPT: Select correct option: Recession Trend lines Indicators Cycles 96. Which of the following is a type of hedge mechanism?



Distance selling Best selling Target selling Short selling page#35 98. Which one of the following financial instruments represents an ownership share in a Corporation Common stock Bond Preferred stock Term Finance certificates 99. There are ____ broad categories of financial assets. 2 page #1 3 4 5 101. _____________ promotes investment education and ethical behavior among those involved in the investment business. Licensed International Financial Analyst (LIFA) page#14 Securities Investor Protection Corporation (SIPC) Chartered Financial Analyst Institute (CFAI) Securities and Exchange Commission (SEC) 104. Stocks of well-established companies that have stable earnings and no extensive liabilities are known as _______. Growth stocks Income stocks Defensive stocks Blue chip stocks http://www.google.com.pk/search?hl=en&source=hp&q=Stocks+of+well-established+companies+that+have+stable+earnings+and+no+extensive+liabilities+are+known+as+growth+stock&aq=o&aqi=&aql=&oq=&gs_rfai=


106. Companies that have capitalization amounts between $500 million and $2billion are known as _________.

Small cap companies Mid cap companies page#52 Growth companies Large cap companies 107. A procedure for valuing the price of a stock by using predicted dividends and discounting them back to present value is known as. Capital Asset Pricing Model Dividend Discount Model page#49 The Residual Earning Model None of the given options 108. In bar chart, which color indicates share prices are going up? Black White Blue reference #slide Red 109. in candlestick chart, what does white body candle depict? Prices are moving down Prices are moving up slide 7 Prices are constant Prices are fluctuating 110. On Balance Volume technique of technical analysis was developed by: Charles Dow Joseph Granville John Bollinger Welles Wilder http://www.google.com.pk/search?hl=en&q=On+Balance+Volume+technique+of+technical+analysis+was+developed+by%3F&aq=f&aqi=&aql=&oq=&gs_rfai= 112. The Elliot Wave Theory is based on repeating ___________ waves cycle. 4 5 7 8 http://www.market-harmonics.com/elliott_wave1.htm


114. ABC Furniture’s worth $51 million. What is another term for this?

Book value Earning per share Market value Cost per share Book value is an accounting measure and involves past values. It does not capture the dynamic value as seen by the market and what an investor is likely to pay. Because the two measures are different by nature, book value and market value are not highly correlated 116. When inflation and interest rates are low, Price per Earning (P/E) ratio tend to be: High http://answers.yahoo.com/question/index?qid=20091118001941AAyEwZl Low Minimum Average 117. Which of the following industry is sensitive to business cycle and price changes? Growth industry Cyclical industry Defensive industry Interest sensitive industry sldie 15 121. Which of the following is defined as an investment company whose Capitalization constantly changes as new shares are sold and outstanding shares are redeemed? Unit investment trust Close end Investment Company Exchange traded Fund Company Open ended investment company Ref: http://www.answers.com/topic/investment-company 124. Stocks can be purchased for a combination of cash and borrowed funds in: Margin account Cash account IRA account Option account


125. The average price of a security or currency over a specified time period used to spot pricing trends by smoothing out the large fluctuations is known as: Moving Average page#66 Standard deviation Variance Beta 126. The use of the earnings multiplier model requires the use of forecast company earnings. How do investors obtain forecasts of company earnings? Public companies are required to issue forecasts of quarterly earnings, going out three years Securities analysts develop and publish earnings forecasts, based on their understanding of the company, its industry, and the overall economy Ref: http://www.investopedia.com/articles/stocks/06/earningsforecasts.asp Securities analysts develop and publish earnings forecasts, based on sophisticated statistical techniques Because these earnings will be announced in the future, no one can forecast them 127. Which of the following is an intangible asset with an identifiable useful life? Patent Timber Goodwill Trademark 128. Which of the following categories is NOT a financial statement element? Cash flow Contributed capital Assets Distributions


130. Which of the following is NOT a derivative security?

Option Debenture Swap Future 131. Which of the following is an example of a financial asset? Factories Options Commercial properties Gold 132. ________ are qualified and regulated professionals who trade shares and other securities through market makers on behalf of investors. Members Specialists Day traders Stock brokers 135. Mr. A purchased a stock at Rs. 50 today that is expected to grow in future up to Rs.100, he believes in _____________. Growth investement Value investement Speculation None of the given options 136. Which of the following is a popular price pattern? Resistance and support Double ups Head and shoulders Triangles 140. What will be the resulting figure, when gross profit is divided by net sales? Gross margin page#83 Operating margin Net margin


Profit margin

141. Which of the following ratio depicts a firm’s ability to cover its short-term obligations? Dividend yield ratio Return on assets ratio Debt coverage ratio Current ratio liquidy option available then msut choose liquidity ratio page#82 142. In top-down approach of fundamental analysis, investors begin their analysis with: Company Industry Economy page#90 Market 143. Which of the following stage is more important for the investors? Pioneering stage Expansion stage Stabilization stage page 98 Decline stage 144. Which of the following stage should be avoided by investors who are interested in capital gains? Pioneering stage Expansion stage Decline stage page#99 Stabilization stage 148. An efficient market reflects which of the following information? Past, current and inferred information Future and past information Past and current information page#142,143 Current and inferred information 147. In an efficient financial market, there would be no ____________.


Under/over priced securities

Financial intermediaries Commissions Taxes 150. Leverage ratios are designed to: Measure a company's capital structure Measure the quality of a company's operations Measure a company's ability to cover its short-term obligations Measure the percentage of earnings paid to shareholders 151. Financial securities with a maturity of less than a year from their original issue date are sold in which of following market? Money market Bond market Equity market Derivative market http://en.wikipedia.org/wiki/Money_market 153. When current assets exceed current liabilities it is called: Gross capital Working capital page#83 Net capital Reserved capital 154. Balance sheet shows the: Financial position of business page#112 Balances of all accounts Net profit earned during a period Expense of a business 155. Which of the following is NOT an asset? Accounts payable Equipment Supplies Cash 156. Which of the following categories is NOT a financial statement element?


Cash flow Contributed capital Assets Distributions 157. for which of the following value of beta, a stock is assumed to be as risky as market? 1.5 1.0 page#130 2.0 0.5 158. Which of the following is NOT a requirement for an efficient market? Stock prices incorporate all information All known information be reflected in prices The adjustments occur very quickly Each adjustment be perfect 152. An over-the-counter market can be defined as: A network of dealers connected electronically page#11 An illegal secondary market for stocks used primarily by those attempting to evade taxes A primary market for stocks A form of centralized exchange 149. If stock advances are greater than declines by a wide margin, the market is perceived as______________. Healthy Stable Stronger because of the widespread movement Weaker because of the widespread movement page#57 139. If a company possess higher required rate of return, the justified P/E will be. Lower page#80 Higher Both will be same None of given options


138. Which one of following statement is true if intrinsic value of a security is lower then its current market price? The security is being overvalued The security is being undervalued The security is correctly valued No connection exists between security intrinsic value and market price Ref: If intrinsic value < current market price, avoid or sell because the asset is overvalued 133. If a person gives too much weight to recent information compared to prior beliefs, he would make ________ errors. Framing Selection bias Conservatism Forecasting 129. Shares of McDonald Corporation are an example of a (n): Standardized financial instrument not sure Non-standard sized financial instrument since their prices can differ over time Standardized financial liability instrument Open-end investment 123. Which of the following would be considering as the most bullish indicator? A price decrease with heavy volume A price increase with small volume A price increase on heavy trading No change in price but an increase in volume 88. Which of the following is a pattern that occurs during high volatility, when a security shows great movement with little direction?



Broadening Formation Relative Strength Index On Balance Volume Bollinger Bands Ref: A pattern that occurs during high volatility, when a security shows great movement with little direction. The formation is identified by a series of higher pivot highs and lower pivot lows. A trendline drawn over the pivot highs and under the pivot lows frames out the widening pattern. It looks like a megaphone and, in fact, it is also known by that name 78. If a company decides to issue new securities, these should be issued in: Select correct option: Primary market sldie 2 Secondary market Third market Fourth market 77. Which of the following is an income that is the source of revenue for members or brokers? Select correct option: Copyright fee Application fee Fixed cost fee Trading fee sldie 5 page#35 76. More investors are using technical analysis now than in earlier periods because: Select correct option: Investors are able to know the quantitative calculations of technical analysis More business schools are now teaching technical analysis The Internet makes more data available to track stock prices There is now more empirical evidence supporting technical analysis 16. The circuit breaker that is applied where stock prices in the market are rising is known as which of the following?


Select correct option: Floor Starter Simulator Ceiling


52. Which of the following prices can be different from the rate at which your shares are to be sold? Select correct option: Skimming price Consumer price Retail price Trigger price 63. Which of the following is applied on the shares only? Select correct option: Brick breaker Circuit breaker Bubble breaker Suburb breaker 68. The circuit breaker that is applied where stock prices in the market are dropping is known as which of the following? Select correct option: Starter Floor Ceiling Simulator 72. Which of the following depicts a bullish trend in stock market? Select correct option: Stock price drop below support level Stock price rises above support level Stock price drop below resistant level None of given options 92. Bonds and preferred stock do not ensures ________.


Select correct option: A fixed income Security

Ownership None of given options 105. Which of the following statement regarding short sales is NOT true? 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 111. Which of the following is relevant to market breadth? Specialist inventory Advance/declining ratio page#71 Fundamental analysis Ticker tape 115. Which of the following is TRUE regarding price per earning ratio? P/E=Earnings available to common stockholders/outstanding shares P/E=Market price per share/dividend per share P/E=Market price per share/earning per share http://www.accountingformanagement.com/price_earning_ratio.htm P/E=Dividend per share/earning per sharessss 118. Which of the following items will reduce stockholders' equity? Purchase of equipment Purchase of supplies Receiving a loan Payment of salaries 56. A place where trading of listed securities in the NASDAQ market is performed is known as: Select correct option: Primary market Secondary market Third market not sure Fourth market


113. Which of the following is correct formula for calculating short interest ratio? Average shares sold short / Average daily trading volume Total shares sold short / Average daily trading volume page#72 None of the given options Total shares sold short / Total daily trading volume 120. Mutual funds pool the funds of savers and can be used to buy _____________. Shares in mutual savings banks only A variety of financial instruments Shares in the Federal Reserve System None of the given options

Which stage of the industry life cycle is more attractive to the investors?


Pioneering stage

Expansion stage

Stabilization stage

Declining stage

Ref: Expansion stage:


–Survivors from the pioneering stage are identifiable. –Firm operations more stable, dependable. –Considerable investment funds attracted. –Financial policies firmly established. –Dividends often become payable. •Attractive to a wide group of investors.

A company that might not have historical perspective in background but it will find a place in the future depending on the product or industry is a _________. Select correct option: Value company

Large cap company Small cap company Growth company

Ref: Growth company might not have historical perspective in background but it will find a place in the future depending on the product or industry belong.

All of the following steps are involved in estimating the earnings stream, EXCEPT: Select correct option: Estimating corporate sales Estimating corporate earnings before taxes Estimating corporate liabilities and assets Estimating corporate earnings after taxes


The three broad categories of financial assets are: Select correct option:

Debt, equity and money market securities Corporate securities, derivatives and equity Debt, equity and derivatives long-term debt and equity and money market securities

Which of the following take place at the declining stage of the industry life cycle? Select correct option: Firm operations get more stable and dependable Rapid growth in demand and subsequent profits occur Costs get stable rather than decreasing or increasing Sales growth decline as new products are developed

Which of the following ratios are of more concern for the shareholders? Select correct option: Liquidity and profitability Liquidity and leverage Profitability and activity Profitability and leverage

In which of the following the investors look at the historical perspective? Select correct option: Value investment Interactive investment Growth investment Accredited investment Ref: The value investors will wait for reaping the benefits of investments means he will be patient.Value investor believes that he must wait for the stock to pay you a handsome return in due course of time

Which of the following terms refer to the recurring and fluctuating levels of economic activity that an economy experiences over a long period of time? Select correct option: Claims cycle Reaction cycle Business cycle Capital cycle


Ref: The recurring and fluctuating levels of economic activity that an economy experiences over a long period of time. The five stages of the business cycle are growth (expansion), peak, recession (contraction), trough and recovery. At one time, business

cycles were thought to be extremely regular, with predictable durations, but today they are widely believed to be irregular, varying in frequency, magnitude and duration.

All of the following are the analytical factors revolving around stock, EXCEPT: Select correct option: Growth rates Inflation rates Firm cash flows Ratio analysis

In which of the following approaches the capitalization of income is done? Select correct option: Present value approach Multiple of earning approach Communicative approach Integrated eclectic approach

Ref: A method of evaluating an investment by estimating future cash flows and taking intoconsideration the time value of money. also called Discounted Cash Flow (DCF) Analysis.

An account that permits an investor to borrow part of the cost of investment firm a brokerage firm. Select correct option: Dealer account Option account Margin account Cash account

Which of the following ratios would not be used to draw a conclusion about a company's managerial effectiveness? Select correct option: Net margin Price-Earnings Ratio Return on equity Return on Investment (not sure)


Apart from the balance sheet or retained earnings what else must the financial analyst take into consideration in fundamental analysis? Select correct option: The assortment track record The previous track record The crowbar track record The advisor track record

Ref: As we have learned, some industries perform well and others poorly over long periods of time. Although performance is not always consistent and predictable on the basis of the past, an industry's track record should not be ignored.

Which of the following statement is NOT true about Elliot Wave Theory? Select correct option: It is based on repeating 8 waves’ cycles It identified three movements in security prices It was proposed by R.N. Elliot It made extensive use of Fibonacci series

Which of the following estimates are needed while applying fundamental analysis to the market? Select correct option: Stream of shareholder benefits Earnings and dividends Required return or earnings multiple All of given options


Which of the following is a current market in which all buying and selling is done on cash or margin basis? Select correct option: Target market

Historic market Regular market Borough market

These measures identify the population to be measured and its method These measures offer equivalents for common sizes and metric units These measures regulate the access to and cost of imports and exports These measures quickly judge the overall portfolio performance

Which of the following approaches is a valuation relative to financial performance measure? Select correct option: Present value approach Multiple of earning approach Communicative approach Integrated eclectic approach

Of the following who believes the body in motion tends to stay in motion? Select correct option: Institutional investors Interactive investors Growth investors Accredited investor

Ref: •A Growth investor seeks rapidly growing companies.

•Growth investors believes that a body in motion tends to stay in motion. Strong companies tend to get stronger

All of the following are characteristics of Earnings per share EXCEPT? Select correct option: It is calculated by dividing Net income over number of shares outstanding Earnings per share is a ratio, which is used for share price evaluation Earnings per share relate income with ownership It is based on future forecasted data not sure

Which of the following are the required inputs of the present value approach?



Discount rate and the expected cash flows

Expenses paid in cash and dividends disbursed

Earnings in valuing stocks and stock-in-trade

Retained earnings and dividends paid out ratio

Which of the following is the formula of expected future growth rate?


g =IRR / (1-Liquidity ratio)

g =ROE * (1- Payout ratio)

g =NPV * (1- Debt ratio)

g =ROI / (1- Leverage ratio)

Ref: The new long-run growth rate can now be calculated as:

g = ROE � (1 – Dividend payout ratio)

= 18% � (1 – 0.6667) = 6%.

All of the following are the investment alternatives, EXCEPT:

Derivative assets

Collateral securities

Fixed income securities

Equity securities

Fundamental analysis includes the evaluation of which of the following?



Quantitative and empirical data

Qualitative and colonial data

Qualitative and imperial data

Quantitative and imperial data

Question # 8 of 15 ( Start time: 05:10:19 AM ) Total Marks: 1

Which of the following is defined as a stock whose price tends to move in the opposite direction from that of interest rates?

Defensive stock

Growth stock

Value stock

Interest sensitive stock

Each division of the Standard Industrial Classification has several major industry groups, designated by which of the following codes?


A uni-digit code

A bilingual code

A two-digit code

A tentative code

Return on equity depends on the product of all of the following, EXCEPT:

Total asset turnover


Market value per share

Profit margin on sales

Financial leverage

Ref: ROE = ROA × Leverage

And ROA = Net income margin × Turnover

Ref : This is the definition of Head and Shoulder pattern. The first and third peaks are shoulders, and the second peak forms the head.

Question # 14 of 15 ( Start time: 05:14:31 AM ) Total Marks: 1

ABC Furniture has worth $51 million. What is the other term used for this?


Book value

Earning per share

Market value

Cost per share


Which of the following is the reason stock prices behave the way they do at resistance lines? Select correct option: Many investors want to buy at this price Market makers resist moving prices lower than this price Many investors want to sell at this price Market makers support prices at this level

Ref: When a stock's price rises to a level where demand decreases and owners begin to sell to lock in their profits, this creates the "ceiling" or resistance level.

A technical momentum indicator that compares the magnitude of recent gains to recent losses in an attempt to determine overbought and oversold conditions of an asset.

A company that might not have historical perspective in background but it will find a place in the future depending on the product or industry is a ....

Value company Large cap company Small cap company Growth company

Of the following who believe securities are priced according to fundamental economic data?


Technical analysts

Fundamental analysts

Accredited analysts

Interactive analysts

Ref:Fundamental analysis includes: 1.Economic analysis 2.Industry analysis 3.Company analysis

On the basis of this three analysis the intrinsic value of the shares are determined.

All of the following are examples of financial assets EXCEPT.



Stocks

Transport vehicles

Bonds

Bank deposits

Technical Analysis method that tries to pinpoint when a security's shares are being accumulated (being bought) or are being sold is known as.


Relative strength index

On Balance Volume

Moving average

None of the given options

Ref: OBV attempts to detect when a financial instrument (stock, bond, etc.) is being accumulated by a large number of buyers or sold by many sellers. Traders will use an upward sloping OBV to confirm an uptrend, while a downward sloping OBV is used to confirm a downtrend

Question # 4 of 15 ( Start time: 10:18:01 PM ) Total Marks: 1 Which of the following is a pattern that occurs during high volatility, when a security shows great movement with little direction? Select correct option: Broadening Formation Relative Strength Index On Balance Volume Bollinger Bands Ref: A pattern that occurs during high volatility, when a security shows great movement with little direction. The formation is identified by a series of higher pivot highs and lower pivot lows. A trendline drawn over the pivot highs and under the pivot lows frames out the widening pattern. It looks like a megaphone and, in fact, it is also known by that name


: The dividends are usually paid out from which of the following? Select correct option: Previous incomes Current incomes Future incomes Unappropriated profits Identify the correct formula for the Dividend Discount Model. Select correct option: Value of stock = Earnings per share / Interest rate - Expected growth rate Value of stock = Dividend per share / Growth rate - Dividend discount rate Value of stock = Dividend per share / Discount rate - Dividend growth rate Value of stock = Earning per share / Expected rate - Interest growth rate Ref: http://mylifedump.com/2008/01/04/evaluating-stocks-using-dividend-discount-model/ Which of the following shows the relationship between the market yields and time to maturity? Select correct option: Smart curves Bezier curves Yield curves Filling curves Ref: http://www.ecb.int/stats/money/yc/html/index.en.html The Standard Industrial Classification codes have how many divisions? Select correct option: 9 11 page 97 13 15 Which of the following ratios that shows how much a company pays out in dividends each year relative to its share price? Select correct option: Dividend per share Dividend yield ratio Dividend coverage ratio Dividend earned ratio


: http://www.investopedia.com/terms/d/dividendyield.asp Which of the following function removes the fear of buying or selling at rip off price? Select correct option: Fair pricing function slide 2 Economic function Exchange function Continuous pricing function Fundamental analysis includes the evaluation of which of the following? Select correct option: Quantitative and empirical data Qualitative and colonial data Qualitative and imperial data Quantitative and imperial data Ref: http://www.investopedia.com/terms/f/fundamentalanalysis.asp Ref: http://www.investopedia.com/terms/l/leverageratio.asp All of the following are characteristics of stop orders EXCEPT: Select correct option: Protecting profits Minimizing losses Rapid execution page 27 It is seldom used by investors What does the abbreviation SIC stands for? Select correct option: Standard Industrial Classification Symbolic Industry Consortium Southeastern Illinois Compendium Social Innovation Collections Question # 4 of 15 ( Start time: 11:07:10 PM ) Total Marks: 1 Which of the following stage offers the highest potential returns and greatest risk? Select correct option: Pioneering stage sldie 15 Expansion stage Stabilization stage Decline stage


Which of the formula is TRUE for calculating retained earnings? Select correct option: Retained Earnings = Net Earnings – Dividends slde 18 Retained Earnings = Net Earnings +long term debt Retained Earnings = Net Earnings + short term debt Retained Earnings = Net Earnings + dividend Question # 15 of 15 ( Start time: 11:18:30 PM ) Total Marks: 1 Which of the following is the formula of expected future growth rate? Select correct option: g =IRR / (1-Liquidity ratio) g =ROE * (1- Payout ratio) sldie 17 g =NPV * (1- Debt ratio) g =ROI / (1- Leverage ratio) Question # 7 of 15 ( Start time: 11:27:42 PM ) Total Marks: 1 Which of the following is NOT a source of Return on Equity (ROE)? Select correct option: Return on assets Leverage Book value per share Sales per total assets page 106 All of the following are the problems associated to the Dividend Discount Model, EXCEPT: Select correct option: This model need infinite stream of dividends This model has uncertain dividend stream This model must estimate future dividends This model requires constant earnings per share slide 11 Question # 12 of 15 ( Start time: 11:32:19 PM ) Total Marks: 1


A technical analysis term pattern to describe a chart formation in which a stock's price rises to a peak and subsequently declines, then the price rises above the former peak and

again declines. And finally, rises again, but not to the second peak and declines once more is known as: Select correct option: Head and shoulder Resistance and support Double ups Triangles http://www.investopedia.com/terms/h/head-shoulders.asp Question # 14 of 15 ( Start time: 11:34:30 PM ) Total Marks: 1 Which of the following highlights expense control, asset utilization and debt utilization? Select correct option: DuPont analysis Financial modeling analysis Quantitative analysis Qualitative analysis Ref: http://www.essaypride.com/essays.php?free_essay=3122496&title=Financial-Analysis On which of the following financial statements would you expect to find revenues and expenses? Select correct option: Balance sheet Income statement slide 18 Statement of cash flows Statement of changes in equity Which of the following is a characteristic of cyclical stock? Select correct option: Their value is tied with the overall state of the national economy. Sldie 4 They are low-priced, speculative and risky securities. They have stable earnings and no extensive liabilities None of the given options Which of the following ratios measures a company's capital structure? Select correct option: Price to sales ratio


Price to book value ratio

Leverage ratio sldie 12 Debt coverage ratio In which of the following cases will the sell decision be taken? Select correct option: Where the intrinsic value is greater than the current market price as the asset is undervalued Where the intrinsic value is lesser than the current market price as the asset is overvalued slide 11 Where the intrinsic value is equivalent to the current market price as the asset is acquired Where the current market price has doubled from the intrinsic value as the asset is distributed Question # 8 of 15 ( Start time: 11:41:46 PM ) Total Marks: 1 Which of the following ratios that shows how much a company pays out in dividends each year relative to its share price? Select correct option: Dividend per share Dividend yield ratio slide 13 Dividend coverage ratio Dividend earned ratio Question # 9 of 15 ( Start time: 11:42:42 PM ) Total Marks: 1 Which of the following is correct formula for calculating P/E ratio? Select correct option: Face value per share / Earnings per Share Market value per share / Total Earnings Market value per share / Earnings per Share slide 13 None of given options Which of the following is EXCLUDED from Porter’s competitive factors? Select correct option: Bargaining power of buyers Rivalry between existing competitors Substitute products or services Changes in the economy page 100


Question # 8 of 15 ( Start time: 11:50:59 PM ) Total Marks: 1 Which of the following orders are placed prior to the execution of trade? Select correct option: Market and stop orders Market and limit orders Stop and limit orders Stop and mitigate orders Ref: http://www.stocksignal.net/trading.html In a chart the prices moving below which of the following indicates that the market will collapse? Select correct option: Peak Head Shoulders Neckline Ref: Ref:A key element of the pattern is the neckline. The neckline is formed by drawing a line connecting two low price points of the formation. The first low point occurs at the end of the left shoulder and the beginning of the uptrend to the head. The second marks the end of the head and the beginning of the upturn to the right shoulder. The neckline can be horizontal or it can slope up or down. The pattern is complete when the support provided by the neckline is "broken." This occurs when the price of the financial instrument, falling from the high point of the right shoulder, moves below the neckline. Technical analysts will often say that the pattern is not confirmed until the price closes below the neckline - it is not enough for it to trade below the neckline. Question # 11 of 15 ( Start time: 11:54:15 PM ) Total Marks: 1 What does the abbreviation OFS stands for? Select correct option: Offer for sale Overseas family sale Output field sale Object file sale Which of the following is the formula of earning per share? Select correct option: EPS=IRR / Market value per share EPS=ROE * Net asset value per share EPS=NPV * Retained earning value per share EPS=ROE * Book value per share lesson 17 ABC Furniture has worth $51 million. What is the other term used for this?



Book value Earning per share Market value Cost per share

Which of the following stages of the industry life cycle offers the highest potential returns and greatest risk? Select correct option: Pioneering stage Stabilization stage Declining stage Expansion stage

Identify the correct formula for calculating the tax burden. Select correct option: EBIT/Income tax expense Sales/Income taxes payable Pre-tax Income/EBIT Net Income/Pre-tax Income

A company that might not have historical perspective in background but it will find a place in the future depending on the product or industry is a _________. Select correct option:

Value company

Large cap company Small cap company Growth company

Ref: Growth company might not have historical perspective in background but it will find a place in the future depending on the product or industry belong.


Which of the following highlights expense control, asset utilization and debt utilization? Select correct option:

DuPont analysis Financial modeling analysis Quantitative analysis Qualitative analysis

Ref: A type of analysis that examines a company's Return on Equity (ROE) by breaking it into three main components: profit margin, asset turnover and leverage factor.

Question # 13 of 15 ( Start time: 01:27:44 PM ) Total Marks: 1 Which of the following is the theories searching the patterns in randomness? Select correct option: Elliott wave theory Chaos theory Portfolio theory Valuation theory

Ref:Chaos theory is the study of nonlinear dynamics, where seemingly random events are actually predictable from simple deterministic equations.

MIDTERM EXAMINATION

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

Which one of the following financial instruments represents an ownership share in a

corporation?

Common stock

Bond

Preferred stock


Term Finance certificates

Question No: 4 ( Marks: 1 ) - Please choose one

_____________ promotes investment education and ethical behavior among those

involved in the investment business.

Licensed International Financial Analyst (LIFA)

Securities Investor Protection Corporation (SIPC)

Chartered Financial Analyst Institute (CFAI)

Securities and Exchange Commission (SEC)


Stocks of well-established companies that have stable earnings and no extensive

liabilities are known as _______.

Growth stocks

Income stocks

Defensive stocks

Blue chip stocks


Which of the following statement regarding short sales is NOT true?


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

In bar chart, which color indicates share prices are going up?

Black

White

Blue

Red

Ref: Blue color indicates market or share price is going up

Red color indicates market or share price is going down.

On Balance Volume technique of technical analysis was developed by:

Charles Dow

Joseph Granville

John Bollinger

Welles Wilder

Which of the following is relevant to market breadth?

Specialist inventory

Advance/declining ratio

Fundamental analysis


Ticker tape

Ref: A technique used in technical analysis that attempts to gauge the direction of the overall market by analyzing the number of companies advancing relative to the number declining. Positive market breadth occurs when more companies are moving higher than are moving lower, and it is used to suggest that the bulls are in control of the momentum. Conversely, a disproportional number of declining securities is used to confirm bearish momentum.

Which of the following is TRUE regarding price per earning ratio?

P/E=Earnings available to common stockholders/outstanding shares

P/E=Market price per share/dividend per share

P/E=Market price per share/earning per share

P/E=Dividend per share/earning per share


When inflation and interest rates are low, Price per Earning (P/E) ratio tend to be:

High

Low

Minimum

Average

Ref: Inflation affects equity prices in several ways. Most importantly, investors are willing to pay less for a certain level of earnings when inflation is high, and more for a certain level of earnings when inflation is low (and expected to remain so).


Which of the following industry is sensitive to business cycle and price changes?

Growth industry


Cyclical industry

Defensive industry

Interest sensitive industry

Which of the following items will reduce stockholders' equity?

Purchase of equipment

Purchase of supplies

Receiving a loan

Payment of salaries

Ref:.

Which of the following is defined as an investment company whose capitalization constantly changes as new shares are sold and outstanding shares are redeemed?

Unit investment trust

Closed-end investment company

Exchange traded fund company

Open-end investment company

Ref: An open-ended mutual fund continuously issues and redeems units, so the number of units outstanding varies from day to day. Most mutual funds are open-ended.


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