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Unit 9 – Quiz

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  1. Current
  2. Review
  3. Answered
  4. Correct
  5. Incorrect
  1. Question 1 of 104
    1. Question

    Which of the following is not one of the assumptions of portfolio theory?

    Correct
    Incorrect
  2. Question 2 of 104
    2. Question

    Which of the following statements regarding indifference curves is not true?

    Correct
    Incorrect
  3. Question 3 of 104
    3. Question

    Portfolios lying on the upper right portion of the efficient frontier are likely to be chosen by

    Correct
    Incorrect
  4. Question 4 of 104
    4. Question

    Indifference curves

    Correct
    Incorrect
  5. Question 5 of 104
    5. Question

    Different investors will estimate the inputs to the Markowitz model differently because

    Correct
    Incorrect
  6. Question 6 of 104
    6. Question

    The assumption in calculating annuity is that every payment is

    Correct
    Incorrect
  7. Question 7 of 104
    7. Question

    The amount of money today which is equal to series of payments in future

    Correct
    Incorrect
  8. Question 8 of 104
    8. Question

    The positive cash flows are classified as

    Correct
    Incorrect
  9. Question 9 of 104
    9. Question

    In the formula S = P+iP, the S is classified as

    Correct
    Incorrect
  10. Question 10 of 104
    10. Question

    The process of loan repayment by installment payments is classified as

    Correct
    Incorrect
  11. Question 11 of 104
    11. Question

    The risk in average individual stock can be reduced by placing an individual stock in

    Correct
    Incorrect
  12. Question 12 of 104
    12. Question

    According to the Capital Asset Pricing Model (CAPM), a well diversified portfolio’s rate of return is a function of

    Correct
    Incorrect
  13. Question 13 of 104
    13. Question

    Which one of the following best describes a reverse yield gap?

    Correct
    Incorrect
  14. Question 14 of 104
    14. Question

    Market interest rates and the prices of bonds in the secondary market

    Correct
    Incorrect
  15. Question 15 of 104
    15. Question

    Which of the following best describes liquidation value?

    Correct
    Incorrect
  16. Question 16 of 104
    16. Question

    Which of the following methods of project evaluation do NOT discount future cash flows?

    Correct
    Incorrect
  17. Question 17 of 104
    17. Question

    The Jensen portfolio evaluation measure

    Correct
    Incorrect
  18. Question 18 of 104
    18. Question

    A portfolio manager’s ranking within a comparison universe may not provide a good measure of performance because

    Correct
    Incorrect
  19. Question 19 of 104
    19. Question

    The Modigliani M2 measure and the Treynor T2 measure

    Correct
    Incorrect
  20. Question 20 of 104
    20. Question

    Parameter Estimation problem is about

    Correct
    Incorrect
  21. Question 21 of 104
    21. Question

    Artificial neural network used for

    Correct
    Incorrect
  22. Question 22 of 104
    22. Question

    Internal state of neuron is called __________, is the function of the inputs the neurons receives.

    Correct
    Incorrect
  23. Question 23 of 104
    23. Question

    Which of the following is not the promise of artificial neural network?

    Correct
    Incorrect
  24. Question 24 of 104
    24. Question

    Which of the following is an application of NN (Neural Network)?

    Correct
    Incorrect
  25. Question 25 of 104
    25. Question

    In the Treynor-Black model

    Correct
    Incorrect
  26. Question 26 of 104
    26. Question

    Which of the following is another name for the required return on a stock?

    Correct
    Incorrect
  27. Question 27 of 104
    27. Question

    Analysts commonly consider all of the following to be indicators that the market is overvalued except

    Correct
    Incorrect
  28. Question 28 of 104
    28. Question

    The M-squared measure

    Correct
    Incorrect
  29. Question 29 of 104
    29. Question

    Which of the following qualities does not distinguish a futures from a forward contract?

    Correct
    Incorrect
  30. Question 30 of 104
    30. Question

    Which of the following statements about futures contracts is wrong?

    Correct
    Incorrect
  31. Question 31 of 104
    31. Question

    To minimize default risk, futures exchanges require all contracts to be

    Correct
    Incorrect
  32. Question 32 of 104
    32. Question

    A futures contract is

    Correct
    Incorrect
  33. Question 33 of 104
    33. Question

    The cash price of wheat today is 410 cents per bushel, and the three-month futures price of the same is 421 cents per bushel. The basis is

    Correct
    Incorrect
  34. Question 34 of 104
    34. Question

    Which of the following are the components of foreign capital?
    1. Grants and loans
    2. External commercial borrowings
    3. Foreign direct investment
    4. Deposits from non-residents
    Select the correct answer using the codes given below.

    Correct
    Incorrect
  35. Question 35 of 104
    35. Question

    Foreign Portfolio Investment (FPI) is investment by non-residents in Indian securities including

    Correct
    Incorrect
  36. Question 36 of 104
    36. Question

    What refers to grouping of investment assets from international or foreign markets rather than from the domestic ones?

    Correct
    Incorrect
  37. Question 37 of 104
    37. Question

    The funds that combine features of both open-ended and close-ended schemes are called

    Correct
    Incorrect
  38. Question 38 of 104
    38. Question

    For issuing IDR, a company

    Correct
    Incorrect
  39. Question 39 of 104
    39. Question

    An instrument representing ownership interest in securities of a foreign issuer is referred to as

    Correct
    Incorrect
  40. Question 40 of 104
    40. Question

    ADRs that do not qualify or are not intended to be listed on stock exchanges are referred to as

    Correct
    Incorrect
  41. Question 41 of 104
    41. Question

    An American Depositary Receipt is defined as a security

    Correct
    Incorrect
  42. Question 42 of 104
    42. Question

    Since the mid-1990s, __________ has become the largest component of external financing to developing countries.

    Correct
    Incorrect
  43. Question 43 of 104
    43. Question

    _______________ of an investment bank.

    Correct
    Incorrect
  44. Question 44 of 104
    44. Question

    Financial intermediaries exist because small investors cannot efficiently

    Correct
    Incorrect
  45. Question 45 of 104
    45. Question

    Investment bankers perform the following role(s)

    Correct
    Incorrect
  46. Question 46 of 104
    46. Question

    A fixed-income security pays

    Correct
    Incorrect
  47. Question 47 of 104
    47. Question

    An ETF

    Correct
    Incorrect
  48. Question 48 of 104
    48. Question

    Which of the following is not true regarding the Markowitz theory?

    Correct
    Incorrect
  49. Question 49 of 104
    49. Question

    The single-index model implies that stocks covary together only because of their common

    Correct
    Incorrect
  50. Question 50 of 104
    50. Question

    Asset allocation is one of the most widely used applications of

    Correct
    Incorrect
  51. Question 51 of 104
    51. Question

    The formula written as r = (1+i/m)m – 1 is used to calculate

    Correct
    Incorrect
  52. Question 52 of 104
    52. Question

    The portion of formula used to calculate equal payment annuity [(1+i)n-1/i(1+i)n is classified as

    Correct
    Incorrect
  53. Question 53 of 104
    53. Question

    The process of translating cash flow into equivalent dollars at common base period is considered as

    Correct
    Incorrect
  54. Question 54 of 104
    54. Question

    Units that do not qualify for distributions, but where the income is reinvested in the trust, increasing the value of each unit are known as

    Correct
    Incorrect
  55. Question 55 of 104
    55. Question

    If the intrinsic value of a share of common stock is less than its market value, which of the following is the most reasonable conclusion?

    Correct
    Incorrect
  56. Question 56 of 104
    56. Question

    In the formula ke = (D1/P0) + g, what does (D1/P0) represent?

    Correct
    Incorrect
  57. Question 57 of 104
    57. Question

    Which of the following accurately describes the behavior of bond prices?

    Correct
    Incorrect
  58. Question 58 of 104
    58. Question

    Suppose two portfolios have the same average return, the same standard deviation of returns, but portfolio A has a higher beta than portfolio B. According to the Sharpe measure, the performance of portfolio A

    Correct
    Incorrect
  59. Question 59 of 104
    59. Question

    If you wanted to evaluate the Seminole Fund using the M2 measure, what percent of the adjusted portfolio would need to be invested in T-Bills?

    Correct
    Incorrect
  60. Question 60 of 104
    60. Question

    The __________ measures the reward to volatility trade-off by dividing the average portfolio excess return by the standard deviation of returns.

    Correct
    Incorrect
  61. Question 61 of 104
    61. Question

    Risk-adjusted mutual fund performance measures have decreased in popularity because

    Correct
    Incorrect
  62. Question 62 of 104
    62. Question

    Fuzzy Set theory defines fuzzy operators. Choose the fuzzy operators from the following.

    Correct
    Incorrect
  63. Question 63 of 104
    63. Question

    In making a judgment about a specific instance, people often fall to take into account how prevalent or frequent something is in general. This describes

    Correct
    Incorrect
  64. Question 64 of 104
    64. Question

    The disposition effect

    Correct
    Incorrect
  65. Question 65 of 104
    65. Question

    A company whose stock is selling at a P/E ratio greater than the P/E ratio of a market index is most likely to have

    Correct
    Incorrect
  66. Question 66 of 104
    66. Question

    Merck is currently paying a dividend of £2. Its high dividend growth rate of 12% next year will drop to 7% for the foreseeable future. The discount rate of Merck is 13%. What is the stock price of Merck?

    Correct
    Incorrect
  67. Question 67 of 104
    67. Question

    The Sharpe, Treynor, and Jensen portfolio performance measures are derived from the CAPM

    Correct
    Incorrect
  68. Question 68 of 104
    68. Question

    A portfolio manager’s ranking within a comparison universe may not provide a good measure of performance because

    Correct
    Incorrect
  69. Question 69 of 104
    69. Question

    What happens to the price of a futures contract as expiration draws closer?

    Correct
    Incorrect
  70. Question 70 of 104
    70. Question

    You enter into a forward contract to take delivery of one million Deutsche marks three months from now. What happens to the price you will pay at expiration if marks depreciate during the contract?

    Correct
    Incorrect
  71. Question 71 of 104
    71. Question

    Which of the following is true regarding company’s hedging for risk reduction?
    a) Fluctuations in commodity prices, interest rates, or exchange rates can make planning difficult and can throw companies badly off course.
    b) Financial managers look for opportunities to manage these risks, and a number of specialized instruments have been invented to help them.
    c) The specialized instruments which were invented to help financial managers manage risks are collectively known as derivative instruments.

    Correct
    Incorrect
  72. Question 72 of 104
    72. Question

    Consider the following statements:
    1) Foreign investment may affect a country’s export performance adversely.
    2) Inflow of foreign exchange may cause appreciation of local currency, leading to a rise in the prices of export commodities.
    Which of the statements given above is/are correct?

    Correct
    Incorrect
  73. Question 73 of 104
    73. Question

    What is the connection, if any, between comparative advantage (CA) and foreign direct investment (FDI)?

    Correct
    Incorrect
  74. Question 74 of 104
    74. Question

    When money market instruments and debt securities with residual maturity of up to 60 days are not traded on a particular day, they shall be valued on

    Correct
    Incorrect
  75. Question 75 of 104
    75. Question

    The FPI license is granted by a local custodian in its capacity as a Designated Depository Participants (DDP) on behalf of

    Correct
    Incorrect
  76. Question 76 of 104
    76. Question

    Money received for purchase of shares on Indian Company by a foreign investor will be treated as foreign direct investment if

    Correct
    Incorrect
  77. Question 77 of 104
    77. Question

    What are the funds that flow from one economy to the other with the purpose of aid or assistance to the economy as a whole?

    Correct
    Incorrect
  78. Question 78 of 104
    78. Question

    Construction of new plants abroad requires demand forecast. Such a demand forecast does not depend on the following

    Correct
    Incorrect
  79. Question 79 of 104
    79. Question

    The __________ refers to the orderly relationship between spot and forward currency exchange rates and the rates of interest between countries.

    Correct
    Incorrect
  80. Question 80 of 104
    80. Question

    A disadvantage of using stock options to compensate managers is that

    Correct
    Incorrect
  81. Question 81 of 104
    81. Question

    In the Treynor-Black model

    Correct
    Incorrect
  82. Question 82 of 104
    82. Question

    The Black-Litterman model is geared toward ____________ while the Treynor-Black model is geared toward ____________.

    Correct
    Incorrect
  83. Question 83 of 104
    83. Question

    The tracking error of an optimized portfolio can be expressed in terms of the ____________ of the portfolio and thus reveal ____________.

    Correct
    Incorrect
  84. Question 84 of 104
    84. Question

    Given the following information, calculate the expected return of Portfolio ABC. Expected return of stock A = 10%, Expected return of stock B = 15%, Expected return of stock C = 6%. 40 percent of the portfolio is invested in A, 40 percent is invested in B and 20 percent is invested in C.

    Correct
    Incorrect
  85. Question 85 of 104
    85. Question

    The present value of cash inflows is $60,000 USD and present value of cash outflows is $55,000 USD then net present value is

    Correct
    Incorrect
  86. Question 86 of 104
    86. Question

    The present value of cash inflows is $50,000 USD and present value of cash outflows is $55,000 USD then net present value is

    Correct
    Incorrect
  87. Question 87 of 104
    87. Question

    You have been asked to determine the intrinsic value of a share of Quick Quilters, Inc. (QQ) common stock. The stock most recently paid a $2.00 annual dividend (D0). You expect dividends to grow at a supernormal rate of 15% for the next three years. You then expect that dividends will grow at a normal 5% rate thereafter (indefinitely). As a potential investor, you would expect to earn 10% on this investment. What is the intrinsic value of a share of QQ?

    Correct
    Incorrect
  88. Question 88 of 104
    88. Question

    If a coupon bond sells at a large discount from par, then which of the following relationships holds true? (P0 > represents the price of a bond and YTM is the bond’s yield to maturity.)

    Correct
    Incorrect
  89. Question 89 of 104
    89. Question

    Suppose the risk-free return is 6%. The beta of a managed portfolio is 1.5, the alpha is 3%,and the average return is 18%. Based on Jensen’s measure of portfolio performance, you would calculate the return on the market portfolio as

    Correct
    Incorrect
  90. Question 90 of 104
    90. Question

    Suppose the risk-free return is 4%. The beta of a managed portfolio is 1.2, the alpha is 1%,and the average return is 14%. Based on Jensen’s measure of portfolio performance, you would calculate the return on the market portfolio as

    Correct
    Incorrect
  91. Question 91 of 104
    91. Question

    You are evaluating a potential project which has uncertain future cash flows. The project will require an immediate outlay of $500. In year 1, cash flow will be $200 with probability 0.5, and $700 with probability 0.5. In year 2, cash flows will be $200 with probability 0.2, $400 with probability 0.6 and $700 with probability 0.2. In year three cash flows will be one of $200, $300, $400, $600 or $700 respectively, each with probability 0.2. What is the expected value of cash flows in year 2?

    Correct
    Incorrect
  92. Question 92 of 104
    92. Question

    The standard deviation of Stock E is 30% and the standard deviation of Stock F is 50%. The covariance of Stock E with Stock F is 0.0300. Portfolio J consists of $600,000 invested in Stock E and $200,000 invested in Stock F. What is the variance of Portfolio J?

    Correct
    Incorrect
  93. Question 93 of 104
    93. Question

    The variance of a portfolio equally divided between four uncorrelated assets with standard deviation of 5%, 15%, 20%, and 30%, respectively, is

    Correct
    Incorrect
  94. Question 94 of 104
    94. Question

    At the end of the year, IBM will pay a £2.00 dividend per share, an increase from the current dividend of £1.50 per share. After that the dividend is expected to increase at a constant rate of 5%. If you require a 12% return on the stock, what is the value of IBM stock?

    Correct
    Incorrect
  95. Question 95 of 104
    95. Question

    Suppose GE, which is selling at £75, will pay at the end of each year in the next two years an expected dividend of £5 per share. At the end of the second year, the stock will be either £70 or £100 with equal probability.

    Correct
    Incorrect
  96. Question 96 of 104
    96. Question

    Corporation B is a normal-growth company that expects to earn 13% on reinvested earnings. If the company pays 30% of its earnings as dividends, what will be the stock’s dividend growth rate?

    Correct
    Incorrect
  97. Question 97 of 104
    97. Question

    How can options, futures, and forward contracts be used to devise simple hedging strategies?
    a) Options are often used by firms to limit their downside risk. For example, if you own an asset and have the option to sell it at the current price, then you have effectively insured yourself against loss.
    b) Futures contracts are agreements made today to buy or sell an asset in the future. The price is fixed today, but the final payment does not occur until the delivery date. Futures contracts are highly standardized and are traded on organized exchanges. Commodity futures allow firms to fix the future price that they pay for a wide range of agricultural commodities, metals, and oil. Financial futures help firms to protect themselves against unforeseen movements in interest rates, exchange rates, and stock prices.
    c) Forward contracts are equivalent to tailor-made futures contracts. For example, firms often enter into forward agreements with a bank to buy or sell foreign exchange or to fix the interest rate on a loan to be made in the future.

    Correct
    Incorrect
  98. Question 98 of 104
    98. Question

    A listed entity shall submit a statement showing holding of securities and shareholding pattern separately for each class of securities Within 10 days of any capital restructuring of the listed entity resulting in a change exceeding __________ of the total paid-up share capital.

    Correct
    Incorrect
  99. Question 99 of 104
    99. Question

    An unlisted company intending to be listed should have a minimum average pre-tax operating profit of rupees fifteen crore, calculated on a restated and consolidated basis, during the

    Correct
    Incorrect
  100. Question 100 of 104
    100. Question

    Under which one of the following framework, an FPI would commit to investing a specified amount in Indian bonds for a minimum retention period of three years or more, as specified by the RBI and would need to ensure that at least 67 percent of the committed amount remained invested at all times during the period?

    Correct
    Incorrect
  101. Question 101 of 104
    101. 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
  102. Question 102 of 104
    102. Question

    Cross listing refers to
    a). When a home country company lists its shares in a foreign stock exchange denominated in home country currency.
    b). When a home country company lists its shares in a foreign stock exchange denominated in foreign country currency.
    c). When a foreign company lists its shares in domestic stock exchange denominated in foreign company’s home currency
    d). When a foreign company lists its shares in domestic stock exchange denominated in domestic currency

    Correct
    Incorrect
  103. Question 103 of 104
    103. Question

    To improve future analyst forecasts using the statistical properties of past forecasts, a regression model can be fitted to past forecasts. The intercept of the regression is a __________ coefficient, and the regression beta represents a __________ coefficient.

    Correct
    Incorrect
  104. Question 104 of 104
    104. Question

    The Treynor-Black model is a model that shows how an investment manager can use security analysis and statistics to construct

    Correct
    Incorrect

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