Consumer Behavior MCQs

Multiple Choice Questions 18 Pages

Savitribai Phule Pune University

Financial Management

Contributed by

Yogesh Singh

DNYANSAGAR INSTITUTE OF MANAGEMENT AND RESEARCH

Prof. Pappu Gaikwad www.dimr.edu.in

Personal Financial Planning
Multiple Choice Questions.

Q .no
Questions
Answer
1
1. Investment is the
A. net additions made to the nation’s 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
C
2
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 here says and market behaviours
C
3
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

B
4
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

A
5
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
C
6
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
B
7
7. 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
D
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8
8. Which of the following investment areas is heavily tied
to work using mathematical and statistical models?
A. Security analysis.
B. Portfolio management.
C. Institutional investing.
D. Retirement Planning
A
9
9. 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.

C
10
10. Which of the following would be considered a risk-free
investment?
A. Gold.
B. Equity in a house.
C. High-grade corporate bonds.
D. Treasury bills.

A
11
11. Are financial assets.
A. bonds
B. Machines
C. stocks
D. A&C

D
12
12. 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.
D
13
13. 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.

A
14
14. Savings accounts are but are not .
A. Negotiable; liquid.
B. Marketable; liquid.
C. Liquid; personal.
D. Liquid; marketable.

C
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15
15. Treasury bills are traded in the .
A. Money market.
B. Capital market.
C. Government market.
D. Regulated market.

A
16
16. 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

C
17

17. The coupon rate is another name for the .
A. Market interest rate.
B. Current yield.
C. Stated interest rate.
D. Yield to maturity

A
18
18. Dividends are paid .
A. Monthly.
B. Quarterly.
C. Semi-annually.
D. Yearly.

D
19
19. 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

B
20
20. 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
C
21
21. 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

A
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22
22. An unmanaged fixed income security portfolio
handled by an independent trustee is known as a
.
A. Junk bond fund.
B. Closed-end investment company.
C. Unit investment trust.
D. Hedge fund
D
23
23. 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
B
24
24. 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
D
25
25. 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.

D
26
26. A group of mutual funds with a common management are
known as .
A. Fund syndicates.
B. Fund conglomerates.
C. Fund families.
D. Fund complexes
C
27
27. 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

B
28
28. Mutual funds may be affiliated with an under writer. This
means .
A. The underwriter has an exclusive right to distribute shares.
B. The underwriter selects the securities in the portfolio.
A
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C. There is no risk to the issuer of the mutual fund.
D. There is no risk to the investor of the mutual fund.

29
29. In an underwriting arrangement, the risk is assumed by the .
A. Issuer of the security.
B. Investment bankers.
C. Commercial bankers.
D. Institutional Investors

A
30
30. The is a window through which the investor can
see the company.
A. Syndicate offer.
B. IPO.
C. Prospectus.
D. Shelf rule.

C
31
31. 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
D
32
32. Investment bankers operate in the .
A. Primary market.
B. Secondary market.
C. Third market.
D. Fourth market.

A
33
33. Which exchange member is assigned to a specific trading
post?
A. Commission broker.
B. Floor trader.
C. Specialist.
D. Dealer.
C
34
34. 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
B
35
35. 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.
B
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D. Contingency order.

36
36. 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
A
37
37. All new issues being offered for public sale are registered with .
A. SEBI.
B. New issue market.
C. Maloney act of 1936.
D. Securities investor protection act of1970.

B
38
38. Total return is equal to .
A. Capital gain + price change.
B. Yield + income.
C. Capital gain - loss.
D. Yield + price change.

A
39
39. The return component that gives periodic cash flows to the
investor is known as the .
A. Capital gain.
B. Interest rate.
C. Yield.
D. Unrealized gain.

C
40
40. 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.

D
41
41. 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.

A
42
42. 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.
B
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43
43. Political stability is the major factor concerning .
A. Exchange risk.
B. Systematic risk.
C. Non-systematic risk.
D. Country risk.

D
44
44. 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.
D
45
45. 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.

A
46
46. Financial disclosure regulations affecting the brokerage
industry are a type of .
A. Market risk.
B. Financial risk.
C. Business risk.
D. Liquidity risk.

C
47
47. If interest rates rose, you would expect to also
rise.
A. Business risk.
B. Financial risk.
C. Liquidity risk.
D. Inflation risk.

C
48
48. Total return as defined in the text is .
A. The difference between the sale price and the purchase
price of an investment.
B. Measured by dividing the sum of all cash flows received by
the amount invested.
C. The reciprocal of a return relative.
D. Measured by dividing all
cash flows received by its
selling price.

B
49
49. The is stated on the basis of 1.0.
A. Total return.
B. Return relative.
A
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C. Cumulative wealth index.
D. Geometric mean.
50
50. The return relative solves the problem of .
A. Inflation.
B. Negative returns.
C. Interest rates.
D. Tax differences.

A
51
51. In order to determine the compound growth rate of an
investment over some period, an investor would calculate the
.
A. Arithmetic mean.
B. Geometric mean.
C. Calculus mean.
D. Arithmetic median.

A
52
52. A major difference between real and nominal returns is that .
A. Real returns adjust for inflation and nominal returns do not.
B. Real returns use actual cash flows and nominal returns use
expected cash flows.
C. Real returns adjust for commissions and nominal returns do
not.
D. Real returns show the highest possible return and nominal
returns show the lowest possible return.
B
53
53. When most people refer to the mean, they are referring to the .
A. Median.
B. Arithmetic mean.
C. Geometric mean.
D. Cumulative mean.

B
54
54. Portfolio weights are found by .
A. Dividing standard deviation by expected value.
B. Calculating the percentage each asset is to the total portfolio
value.
C. Calculating the return of each asset to total portfolio return.
D. Dividing expected value by the standard deviation.
B
55
55. In order to determine the expected return of a
portfolio, all of the following must be Known
except .
A. Probabilities of expected returns of individual assets.
B. Weight of each individual asset to total portfolio value.
C. Expected return of each individual asset.
D. All of the above must be known in order to determine the
expected return of a portfolio.
D
56
56. Which of the following is true regarding the expected return
C
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of a portfolio?
A. It is a weighted average only for stock portfolios.
B. It can only be positive.
C. It can never be above the highest individual return.
D. All of the above are true.

57
57. The relevant risk for a well-diversified portfolio is .
A. Interest rate risk.
B. Inflation risk.
C. Business risk.
D. Market risk.

D
58
58. Which of the following portfolios has the least reduction of
risk?
A. A portfolio with securities all having positive correlation with
each other.
B. A portfolio with securities all has zero correlation with each
other.
C. A portfolio with securities all having negative correlation
with each other.
D. A portfolio with securities
all has skewed correlation with
each other.

A
59
59. Portfolio risk is best measured by the .
A. Expected value.
B. Portfolio beta.
C. Weighted average of individual risk.
D. Standard deviation.

C
60
60. Markowitz's main contribution to portfolio theory is .
A. That risk is the same for each type of financial asset.
B. That risk is a function of credit, liquidity and market factors.
C. Risk is not quantifiable.
D. Insight about the relative importance of variances and
co variances in determining portfolio risk.

B
61
61. The major problem with the Markowitz model is its .
A. Lack of accuracy.
B. Predictability flaws.
C. Complexity.
D. Inability to handle large number of inputs.
A
62
1. According to Markowitz, rational investors will seek
efficient portfolios because these portfolios are optimal
based on .
C
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A. Expected return.
B. Risk.
C. Expected return and risk.
D. Transactions costs.

63
62. Portfolios lying on the upper right portion of
the efficient frontier are likely to be chosen by
.
A. Aggressive investors.
B. Conservative investors.
C. Risk-averse investors.
D. Defensive investors.

B
64
1. Market risk is best measured by the .
A. Alpha.
B. Beta.
C. Standard deviation.
D. Coefficient of variation.
D
65
65. Book value is .
A. The same as market value.
B. A more accurate valuation technique than the dividend
models.
C. The accounting value of the firm as reflected in the financial
statements.
D. The same as liquidation value.

C
66
66. The price to book value ratio tends to be close for .
a. High-tech companies.
b. Banks.
c. Utilities.
d. Service companies.

D
67
67. The central issue of efficient markets concerns .
a. Regulations.
b. Information.
c. Participants.
d. Structure
A
68
68. A bond issue is broken up so that some investors will
receive only interest payments while others will receive
only principal payments, which is an example of .
a. bundling
b. un-bundling
c. financial engineering
d. B&D

D
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Consumer Behavior MCQs

Consumer Behavior MCQs

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