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Unit 7 – Quiz

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  1. Current
  2. Review
  3. Answered
  4. Correct
  5. Incorrect
  1. Question 1 of 105
    1. Question

    Type of swaps in which fixed payments of interest are exchanged by two counterparties for floating payments of interest are called

    Correct
    Incorrect
  2. Question 2 of 105
    2. Question

    An option whose intrinsic value is calculated by comparing the strike price with the average spot price over the period of the option is

    Correct
    Incorrect
  3. Question 3 of 105
    3. Question

    In a swap motivated by credit differentials, a firm should borrow in the market where

    Correct
    Incorrect
  4. Question 4 of 105
    4. Question

    Agreement between two parties to exchange cash flows in future and cash flows are based on underlying instruments is called as

    Correct
    Incorrect
  5. Question 5 of 105
    5. Question

    An option on a swap is a

    Correct
    Incorrect
  6. Question 6 of 105
    6. Question

    The Security Market Line (SML) is

    Correct
    Incorrect
  7. Question 7 of 105
    7. Question

    Which statement is true regarding the market portfolio?

    Correct
    Incorrect
  8. Question 8 of 105
    8. Question

    Market risk is also called

    Correct
    Incorrect
  9. Question 9 of 105
    9. Question

    Empirical results regarding betas estimated from historical data indicate that

    Correct
    Incorrect
  10. Question 10 of 105
    10. Question

    What is a lease where the lessee maintains and insures the leased asset rather than the lessor in a full-service lease?

    Correct
    Incorrect
  11. Question 11 of 105
    11. Question

    A bet on particular mispricing across two or more securities, with extraneous sources of risk such as general market exposure hedged away is a

    Correct
    Incorrect
  12. Question 12 of 105
    12. Question

    Shares in hedge funds are priced at

    Correct
    Incorrect
  13. Question 13 of 105
    13. Question

    The risk profile of hedge funds ______, making performance evaluation __________.

    Correct
    Incorrect
  14. Question 14 of 105
    14. Question

    To force conversion, the call price of a convertible bond is generally

    Correct
    Incorrect
  15. Question 15 of 105
    15. Question

    The risk profile of hedge funds ______, making performance evaluation ______.

    Correct
    Incorrect
  16. Question 16 of 105
    16. Question

    The terms of futures contracts such as the quality and quantity of the commodity and the delivery date are

    Correct
    Incorrect
  17. Question 17 of 105
    17. Question

    In India, Future contracts in _________ may be settled by delivery.

    Correct
    Incorrect
  18. Question 18 of 105
    18. Question

    Why is the system of trading on margin practiced in futures markets?

    Correct
    Incorrect
  19. Question 19 of 105
    19. Question

    Which of the following does the most to reduce default risk for futures contracts?

    Correct
    Incorrect
  20. Question 20 of 105
    20. Question

    Which of the following is a legitimate reason for international investment?

    Correct
    Incorrect
  21. Question 21 of 105
    21. Question

    Mezzanine finance has higher risk than

    Correct
    Incorrect
  22. Question 22 of 105
    22. Question

    A factor affecting the growth of VC finance

    Correct
    Incorrect
  23. Question 23 of 105
    23. Question

    Which of the following is a characteristic feature of venture capital firms?

    Correct
    Incorrect
  24. Question 24 of 105
    24. Question

    Which of the following is known as Mezzanine capital?

    Correct
    Incorrect
  25. Question 25 of 105
    25. Question

    With regard to hedge funds, ‘2 and 20’ is best explained as

    Correct
    Incorrect
  26. Question 26 of 105
    26. Question

    The strike price of an option is

    Correct
    Incorrect
  27. Question 27 of 105
    27. Question

    Standardization of derivative contracts

    Correct
    Incorrect
  28. Question 28 of 105
    28. Question

    A put option described as in-the-money would find

    Correct
    Incorrect
  29. Question 29 of 105
    29. Question

    Hedgers who are short in an asset can establish the maximum price they will have to pay for that asset by

    Correct
    Incorrect
  30. Question 30 of 105
    30. Question

    A strangle is a mixed options strategy consisting of

    Correct
    Incorrect
  31. Question 31 of 105
    31. Question

    Which of the following investment assets are the usual make-up of structured products?

    Correct
    Incorrect
  32. Question 32 of 105
    32. Question

    One similarity among the various structured products is that there is

    Correct
    Incorrect
  33. Question 33 of 105
    33. Question

    Structured note which is an intermediate term debt security is

    Correct
    Incorrect
  34. Question 34 of 105
    34. Question

    Which of the following gives the most capital protection?

    Correct
    Incorrect
  35. Question 35 of 105
    35. Question

    Investors may wish to invest in structured products as they

    Correct
    Incorrect
  36. Question 36 of 105
    36. Question

    Which one of the following statements regarding structured products is true?

    Correct
    Incorrect
  37. Question 37 of 105
    37. Question

    The risk of a stock in a portfolio can be expressed using the _____________________ instead of the covariance.

    Correct
    Incorrect
  38. Question 38 of 105
    38. Question

    Risk in average individual stock can be reduced by placing an individual stock in?

    Correct
    Incorrect
  39. Question 39 of 105
    39. Question

    The individual investor’s optimal portfolio is designated by which of the following?

    Correct
    Incorrect
  40. Question 40 of 105
    40. Question

    The net wealth of the aggregate economy is equal to the sum of which of the following?

    Correct
    Incorrect
  41. Question 41 of 105
    41. Question

    Most favourable portfolio is proficient portfolio with which of the following?

    Correct
    Incorrect
  42. Question 42 of 105
    42. Question

    Which of the following sets the global benchmark price for crucial commodities?

    Correct
    Incorrect
  43. Question 43 of 105
    43. Question

    Which of the following is not a commodity exchange?

    Correct
    Incorrect
  44. Question 44 of 105
    44. Question

    Which of the following is not normally included as one of the advantages of real estate as an investment?

    Correct
    Incorrect
  45. Question 45 of 105
    45. Question

    Which of the following is an advantage of investing in managed funds?

    Correct
    Incorrect
  46. Question 46 of 105
    46. Question

    Which of the following is a disadvantage of investing in managed funds?

    Correct
    Incorrect
  47. Question 47 of 105
    47. Question

    A trader is likely to prefer an options contract to a futures contract on an asset if

    Correct
    Incorrect
  48. Question 48 of 105
    48. Question

    Which of the following is a major difference between swaps and futures contracts?

    Correct
    Incorrect
  49. Question 49 of 105
    49. Question

    Regarding interest rate swaps, all of the following are true except

    Correct
    Incorrect
  50. Question 50 of 105
    50. Question

    To adjust for stock splits

    Correct
    Incorrect
  51. Question 51 of 105
    51. Question

    Which statement is not true regarding the Capital Market Line (CML)?

    Correct
    Incorrect
  52. Question 52 of 105
    52. Question

    A security has an expected rate of return of 0.10 and a beta of 1.1. The market expected rate of return is 0.08 and the risk-free rate is 0.05. The alpha of the stock is

    Correct
    Incorrect
  53. Question 53 of 105
    53. Question

    A __________ is a continuously offered debt instrument that is designed to fill the gap between commercial paper and long-term bonds with maturities currently ranging from 9 months to 30 years and has gained favor from the existence of shelf registration.

    Correct
    Incorrect
  54. Question 54 of 105
    54. Question

    What allows the borrower to have credit up to some maximum amount over a specific period, but the notes are usually 90 days and allow the company to renew or borrow additionally?

    Correct
    Incorrect
  55. Question 55 of 105
    55. Question

    By selling a convertible security instead of __________, companies create less dilution in earnings per share, both now and in the future. The reason is that the conversion price on a convertible security is higher than the issuing price on a new issue of __________.

    Correct
    Incorrect
  56. Question 56 of 105
    56. Question

    Which of the following uses quantitative techniques and often automated trading systems to seek out many temporary misalignments among securities?

    Correct
    Incorrect
  57. Question 57 of 105
    57. Question

    Hedge funds are typically set up as ______ and provide ______ information about portfolio composition and strategy to their investors.

    Correct
    Incorrect
  58. Question 58 of 105
    58. Question

    The minimum investment in some new hedge funds is as low as ______, compared to a traditional minimum of ______.

    Correct
    Incorrect
  59. Question 59 of 105
    59. Question

    The previous value of a portfolio that must be retained before a hedge fund can charge incentive fees is known as a

    Correct
    Incorrect
  60. Question 60 of 105
    60. Question

    The buyer of a futures contract is said to have a __________ position and the seller of a futures contract is said to have a __________ position in futures.

    Correct
    Incorrect
  61. Question 61 of 105
    61. Question

    Which of the following is a major difference between swaps and futures contracts?

    Correct
    Incorrect
  62. Question 62 of 105
    62. Question

    The forward market is especially well-suited to offer hedging protection against

    Correct
    Incorrect
  63. Question 63 of 105
    63. Question

    A multinational can centralize cash management and attempt to reduce exchange rate risk exposure through the use of

    Correct
    Incorrect
  64. Question 64 of 105
    64. Question

    Which of the following does not make the firm more vulnerable to financial distress?

    Correct
    Incorrect
  65. Question 65 of 105
    65. Question

    Which of the following is true regarding Leveraged Beta?

    Correct
    Incorrect
  66. Question 66 of 105
    66. Question

    A business angel is best described in which one of the following statements?

    Correct
    Incorrect
  67. Question 67 of 105
    67. Question

    If a venture capital investment contract provides for the protection of the venture capital group’s ownership stake if the firm sells new equity under duress, then the contract has a(n)

    Correct
    Incorrect
  68. Question 68 of 105
    68. Question

    A provision in the venture capital fund’s investment contract that limits the firm’s ability to sell assets without prior investor approval is an example of

    Correct
    Incorrect
  69. Question 69 of 105
    69. Question

    Credit default swaps are credit derivatives that

    Correct
    Incorrect
  70. Question 70 of 105
    70. Question

    Mr. Z owns 500 shares of XYZ Ltd., around the annual budget time, he gets uncomfortable with the price movements. Which of the following will give him the hedge he desires? (Assume One futures contract = 100 Shares)

    Correct
    Incorrect
  71. Question 71 of 105
    71. Question

    Which of the following actions will not close a long position in a call option?

    Correct
    Incorrect
  72. Question 72 of 105
    72. Question

    Mr. X buys 100 calls on a stock with a strike of Rs.1200. He pays a premium of Rs.50 per call. A month later the stock trades in the market at Rs.1300. Upon exercise he will receive?

    Correct
    Incorrect
  73. Question 73 of 105
    73. Question

    If Dan Ltd issues shares with a £1 nominal value, for £1.50 per share, then the gearing proportion and the current ratio will be affected as follows

    Correct
    Incorrect
  74. Question 74 of 105
    74. Question

    When two risky securities that are positively correlated but not perfectly correlated are held in a portfolio

    Correct
    Incorrect
  75. Question 75 of 105
    75. Question

    The “information effect” refers to the notion that

    Correct
    Incorrect
  76. Question 76 of 105
    76. Question

    The public sale of common stock in a subsidiary in which the parent usually retains majority control is called

    Correct
    Incorrect
  77. Question 77 of 105
    77. Question

    Recent accounting changes in the US

    Correct
    Incorrect
  78. Question 78 of 105
    78. Question

    The benefits of diversification increase as the

    Correct
    Incorrect
  79. Question 79 of 105
    79. Question

    The possibility that a country will take over a publicly held firm is referred to as the

    Correct
    Incorrect
  80. Question 80 of 105
    80. Question

    What happens to corporate bond with a fixed interest rate, if interest rates in nation increase?

    Correct
    Incorrect
  81. Question 81 of 105
    81. Question

    Risk mitigation involves all but which of the following?

    Correct
    Incorrect
  82. Question 82 of 105
    82. Question

    Some investors will accept high risk investments and some investors prefer low risk investments. What is the term best describes that situation?

    Correct
    Incorrect
  83. Question 83 of 105
    83. Question

    Which type of fund actively incorporates ethics and morality factors, as well as financial return, into its investment decisions?

    Correct
    Incorrect
  84. Question 84 of 105
    84. Question

    Which one of the following describes a balanced fund?

    Correct
    Incorrect
  85. Question 85 of 105
    85. Question

    Annabelle, a busy professional, is seeking a way to invest a fixed amount of her monthly salary into an actively-managed investment fund to invest for the long term. She has indicated she has a surplus $500 per month she would like to invest. Which investor service would be suitable for her?

    Correct
    Incorrect
  86. Question 86 of 105
    86. Question

    Suppose the price of a share of Google stock is $500. An April call option on Google stock has a premium of $5 and an exercise price of $500. Ignoring commissions, the holder of the call option will earn a profit if the price of the share

    Correct
    Incorrect
  87. Question 87 of 105
    87. Question

    If a person sells an in the money call option with strike price of Rs. 2600 at a premium of Rs. 154 and buys an out of the money call option with strike price Rs. 2800 at a premium of Rs. 49. If on expiry the stock closes at 3200, the net pay-off would be

    Correct
    Incorrect
  88. Question 88 of 105
    88. Question

    Your opinion is that Tata Ltd., has an expected rate of return 13.75%. It has a beta of 1.3. The risk-free rate is 4% and the market expected rate of return is 11.5%. According to the Capital Asset Pricing Model, this security is

    Correct
    Incorrect
  89. Question 89 of 105
    89. Question

    What is the commitment fee that will most probably be charged to the firm for the first year given the following information? The firm has just signed a three-year revolving credit agreement that has a $5 million maximum loan limit. The firm is borrowing $1 million today at 10 percent annual interest for the next year with a commitment fee of 0.4 percent. It does not anticipate borrowing any additional funds for the first year.

    Correct
    Incorrect
  90. Question 90 of 105
    90. Question

    To take advantage of an arbitrage opportunity, an investor would
    I. Short sell the asset in the low-priced market and buy it in the high-priced market.
    II. Construct a zero investment portfolio that will yield a sure profit.
    III. Make simultaneous trades in two markets without any net investment.
    IV. Construct a zero beta investment portfolio that will yield a sure profit.

    Correct
    Incorrect
  91. Question 91 of 105
    91. Question

    Assume that a Big Mac hamburger is selling for $1.99 in the United Kingdom, the same hamburger is selling for $2.71 in the United States, and the actual exchange rate (to buy $1.00 with British pounds) is 0.63. According to __________, the British pound is __________ the US dollar.

    Correct
    Incorrect
  92. Question 92 of 105
    92. Question

    Consider the fair value equation for a commodities future, relating the futures price to the risk-free interest rate, a positive storage cost, and the spot price. This fair value equation implies that futures prices should be increasing in the time to maturity. Does this necessarily imply that any backwardated price pattern represents an exploitable profit opportunity?

    Correct
    Incorrect
  93. Question 93 of 105
    93. Question

    How is the process of adjusting the Balance Sheet different in an LBO model, compared to what you might see in a typical merger model?

    Correct
    Incorrect
  94. Question 94 of 105
    94. Question

    John Smith seeks $15 million from a VC fund. John and the VC agree that the company should be ready to go public in 8 years. At that time the company should have a market capitalization of $368.75 million. If the VC requires a 45% return on their investment, what is the fraction of the firm that the VC will receive for its $15 million investment?

    Correct
    Incorrect
  95. Question 95 of 105
    95. Question

    You are a venture capitalist that is going to invest $10 million dollars today in a firm that is projected to be worth $100 million four years from today when it is expected to have an initial public offering. If you require a 40% annual return on investments with this kind of risk, then what portion of the equity of the firm should you own after the investment?

    Correct
    Incorrect
  96. Question 96 of 105
    96. Question

    Nifty futures are trading at Rs. 3975. An investor buys a 4000 call for current month for Rs. 100. What should be the closing price of Nifty only above which the investor starts to make profits if he holds his long option position? (1 lot of Nifty = 50 Shares)

    Correct
    Incorrect
  97. Question 97 of 105
    97. Question

    Assume the one year forward rate for a share of stock is $45, the spot price is $41 and the risk free rate is 5% pa. The observed forward price is and the implied forward price is

    Correct
    Incorrect
  98. Question 98 of 105
    98. Question

    A structured product manager purchased a zero-coupon bond at Rs.20 for every Rs.100 invested in the structured product. The structured product aims to provide a return of the capital portion to investors at maturity. Assuming the zero-coupon bond matures at the same time as the structured product, what must the maturity value of the zero-coupon be in order to return the principal to the investor?

    Correct
    Incorrect
  99. Question 99 of 105
    99. Question

    Suppose that the market price of Company X is $45 per share and that of Company Y is $30. If X offers three-fourths a share of common stock for each share of Y, the ratio of exchange of market prices would be

    Correct
    Incorrect
  100. Question 100 of 105
    100. Question

    Suppose a project has many hazards that could easily injure one or more persons and there is no method of avoiding the potential for damages. The project manager should consider __________ as a means of deflecting the risk.

    Correct
    Incorrect
  101. Question 101 of 105
    101. Question

    Strategy A has an expected value of 10 and a standard deviation of 3. Strategy B has an expected value of 10 and a standard deviation of 5. Strategy C has an expected value of 15 and a standard deviation of 10. Which one of the following statements is true?

    Correct
    Incorrect
  102. Question 102 of 105
    102. Question

    The analysis of a complex decision situation by constructing a mathematical model of the situation and then performing a large number of iterations in order to determine the probability distribution of outcomes is called

    Correct
    Incorrect
  103. Question 103 of 105
    103. Question

    For the year 2012, the average net asset value of S&P Asset Management is $ 47.00 million with an annual ongoing management fee of 0.146 million and reimbursable expenses of $ 0.141 million. If the management expense ratio (MER) is 2% of the total asset value, calculate the direct expense for managing the fund (ignore changes in values during the year).

    Correct
    Incorrect
  104. Question 104 of 105
    104. Question

    Stephanie has invested in a fund that has high exposure to the entire market index, low management fees, real time intra-day pricing, very high liquidity, and units are tradable. Which of the following funds has Stephanie invested in?

    Correct
    Incorrect
  105. Question 105 of 105
    105. Question

    Annabelle, the busy professional from the previous question, has been investing $500 per month using an automatic investment plan into her managed fund for over 12 months now. She has indicated that she wants all distributions from the funds to be automatically used by the fund managers to increase her unit holding and earn compounded rates of return. What investor service will carry out this function?

    Correct
    Incorrect

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