Investment Analysis
Chapter Exam Questions
Course Introduction
Investment Analysis provides students with a comprehensive understanding of the fundamental concepts, tools, and techniques used to evaluate investment opportunities and manage investment portfolios. The course covers key topics such as financial markets and instruments, risk and return tradeoffs, valuation of stocks and bonds, portfolio theory, asset pricing models, and the use of derivatives in investment strategies. Through theoretical models and practical case studies, students learn to perform detailed financial analysis, assess investment risk, and make informed decisions to optimize portfolio performance in dynamic market environments.
Recommended Textbook Principles of Investments 1st Edition by Michael Drew
Available Study Resources on Quizplus
18 Chapters
1052 Verified Questions
1052 Flashcards
Source URL: https://quizplus.com/study-set/2904
Page 2
Chapter 1: Investments: Background and Issues
Available Study Resources on Quizplus for this Chatper
55 Verified Questions
55 Flashcards
Source URL: https://quizplus.com/quiz/57838
Sample Questions
Q1) An example of a real asset is ________.
I. a college education
II. customer goodwill
III. a patent
A)I only
B)II only
C)I and III only
D)I, II and III
Answer: D
Q2) Which of the following are financial assets?
I. Debt securities
II. Equity securities
III. Derivative securities
A)I only
B)I and II only
C)II and III only
D)I, II and III
Answer: D
To view all questions and flashcards with answers, click on the resource link above.
Page 3
Chapter 2: Asset Classes and Financial Instruments
Available Study Resources on Quizplus for this Chatper
59 Verified Questions
59 Flashcards
Source URL: https://quizplus.com/quiz/57839
Sample Questions
Q1) Which of the following is not considered a money market investment?
A)Bankers' acceptances
B)Treasury notes
C)Repurchase agreements
D)Eurobonds
Answer: D
Q2) Which of the following are not characteristic of common share ownership?
A)Residual claimant
B)Unlimited liability
C)Voting rights
D)Limited life of the security
Answer: B
To view all questions and flashcards with answers, click on the resource link above.
4
Chapter 3: Securities Markets
Available Study Resources on Quizplus for this Chatper
60 Verified Questions
60 Flashcards
Source URL: https://quizplus.com/quiz/57840
Sample Questions
Q1) In Australia, the allowable margin usually ranges ________.
A)from 10% to 30%
B)from 20% to 40%
C)from 10% to 50%
D)from 20% to 60%
Answer: D
Q2) If an investor uses the full amount of margin available, the equity in a margin account used for a share purchase can be found as ________.
A)market value of the share - amount owed on the margin loan
B)market value of the share + amount owed on the margin loan
C)market value of the share รท margin loan
D)margin loan x market value of the share
Answer: A
To view all questions and flashcards with answers, click on the resource link above.
Page 5
Chapter 4: Managed Funds and Other Investment Companies
Available Study Resources on Quizplus for this Chatper
60 Verified Questions
60 Flashcards
Source URL: https://quizplus.com/quiz/57841
Sample Questions
Q1) The Vanguard 500 Index Fund tracks the performance of the S&P 500. To do so the fund buys shares in each S&P 500 company ________.
A)in proportion to the market value weight of the firm's equity in the S&P500
B)in proportion to the price weight of the share in the S&P500
C)by purchasing an equal number of shares of each share in the S&P 500
D)by purchasing an equal dollar amount of shares of each share in the S&P500
Q2) Net Asset Value is defined as ________.
A)book value of assets divided by shares outstanding
B)book value of assets minus liabilities divided by shares outstanding
C)market value of assets divided by shares outstanding
D)market value of assets minus liabilities divided by shares outstanding
Q3) Management fees for open-end and closed-end funds, typically range between ________ and ________.
A)1%; 2.5%
B)0.5%; 5%
C)2%; 5%
D)3%; 8%
To view all questions and flashcards with answers, click on the resource link above.
Page 6
Chapter 5: Risk and Return: Past and Prologue
Available Study Resources on Quizplus for this Chatper
58 Verified Questions
58 Flashcards
Source URL: https://quizplus.com/quiz/182020
Sample Questions
Q1) The arithmetic average of -11%, 15% and 20% is ________.
A)15.67%
B)8.00%
C)11.22%
D)6.45%
Q2) Suppose you pay $9700 for a $10 000 par Treasury bond maturing in three months. What is the holding period return for this investment?
A)3.01%
B)3.09%
C)12.42%
D)16.71%
Q3) Consider the following two investment alternatives. First, a risky portfolio that pays 20% rate of return with a probability of 60% or 5% with a probability of 40%. Second, a Treasury bond that pays 6%. If you invest $50 000 in the risky portfolio, your expected profit would be ________.
A)$3 000
B)$7 000
C)$7 500
D)$10 000
To view all questions and flashcards with answers, click on the resource link above.
Chapter 6: Efficient Diversification
Available Study Resources on Quizplus for this Chatper
56 Verified Questions
56 Flashcards
Source URL: https://quizplus.com/quiz/57843
Sample Questions
Q1) An investor can design a risky portfolio based on two shares, A and B. Share A has an expected return of 18% and a standard deviation of return of 20%. Share B has an expected return of 14% and a standard deviation of return of 5%. The correlation coefficient between the returns of A and B is 0.50. The risk-free rate of return is 10%. The proportion of the optimal risky portfolio that should be invested in Share A is ________.
A)0%
B)40%
C)60%
D)100%
Q2) The standard deviation of return on investment A is .10 while the standard deviation of return on investment B is .05. If the covariance of returns on A and B is .0030, the correlation coefficient between the returns on A and B is ________.
A).12
B).36
C).60
D).77
To view all questions and flashcards with answers, click on the resource link above.
8
Chapter 7: Capital Pricing and Arbitrage Pricing Theory
Available Study Resources on Quizplus for this Chatper
59 Verified Questions
59 Flashcards
Source URL: https://quizplus.com/quiz/57844
Sample Questions
Q1) Beta is a measure of ________.
A)total risk
B)relative systematic risk
C)relative non-systematic risk
D)relative business risk
Q2) In a simple CAPM world which of the following statements is/are correct?
I. All investors will choose to hold the market portfolio, which includes all risky assets in the world
II. Investors' complete portfolio will vary depending on their risk aversion
III. The return per unit of risk will be identical for all individual assets
IV. The market portfolio will be on the efficient frontier and it will be the optimal risky portfolio
A)I, II and III only
B)II, III and IV only
C)I, III and IV only
D)I, II, III and IV
To view all questions and flashcards with answers, click on the resource link above.
9
Chapter 8: The Efficient Market Hypothesis and Behavioral Finance
Available Study Resources on Quizplus for this Chatper
60 Verified Questions
60 Flashcards
Source URL: https://quizplus.com/quiz/182031
Sample Questions
Q1) If you believed in the reversal effect, you should ________.
A)buy bonds this period if you held shares last period
B)buy shares this period that performed poorly last period
C)buy shares this period that performed well last period
D)do nothing if you held the share last period
Q2) Studies show that the bid-ask spread for the least liquid shares may be as high as
A)3%
B)5%
C)9%
D)12%
Q3) You are looking to invest in one of three shares. Share A has high expected earnings growth, Share B has only modest expected earnings growth and Share C is expected to generate poor earnings growth. Which share is likely to generate the greatest alpha for you?
A)Share A
B)Share B
C)Share C
D)You cannot tell from the information given
To view all questions and flashcards with answers, click on the resource link above. Page 10
Chapter 9: Bond Prices and Yields
Available Study Resources on Quizplus for this Chatper
58 Verified Questions
58 Flashcards
Source URL: https://quizplus.com/quiz/57846
Sample Questions
Q1) A coupon bond pays semi-annual interest is reported as having an ask price of 117% of its $1 000 par value in the Wall Street Journal. If the last interest payment was made 2 months ago and the coupon rate is 6%, the invoice price of the bond will be ________.
A)$1 140
B)$1 170
C)$1 180
D)$1 200 Invoice price =
Q2) Yields on tax-exempt bonds are typically ________ yields on corporate bonds of similar risk and time to maturity.
A)lower than
B)slightly higher than C)identical to
D)twice as high as
Q3) Floating rate bonds have a ________ that is adjusted with current market interest rates.
A)maturity date
B)coupon payment date
C)coupon rate
D)dividend yield
To view all questions and flashcards with answers, click on the resource link above.
Page 11
Chapter 10: Managing Bond Portfolios
Available Study Resources on Quizplus for this Chatper
60 Verified Questions
60 Flashcards
Source URL: https://quizplus.com/quiz/57847
Sample Questions
Q1) Target date immunisation would primarily be of interest to ________.
A)banks
B)mutual funds
C)pension funds
D)individual investors
Q2) When interest rates increase, the duration of a 20-year bond selling at a premium ________.
A)increases
B)decreases
C)remains the same
D)increases at first, then declines
Q3) A forecast of bond returns based largely on a prediction of the yield curve at the end of the investment horizon is called a ________.
A)contingent immunisation
B)dedication strategy
C)duration analysis
D)horizon analysis
To view all questions and flashcards with answers, click on the resource link above. Page 12
Chapter 11: Equity Valuation
Available Study Resources on Quizplus for this Chatper
60 Verified Questions
60 Flashcards
Source URL: https://quizplus.com/quiz/57848
Sample Questions
Q1) Earnings yields tend to ________ when Treasury yields fall.
A)fall
B)rise
C)remain unchanged
D)fluctuate wildly
Q2) Cache Creek Manufacturing Company is expected to pay a dividend of $4.20 in the upcoming year. Dividends are expected to grow at the rate of 8% per year. The risk-free rate of return is 4% and the expected return on the market portfolio is 14%. Investors use the CAPM to compute the market capitalisation rate on the shares, and the constant growth DDM to determine the intrinsic value of the shares. The shares are trading in the market today at $84.00. Using the constant growth DDM and the CAPM, the beta of the shares is ________.
A)1.4
B)0.9
C)0.8
D)0.5
To view all questions and flashcards with answers, click on the resource link above.
13
Chapter 12: Macroeconomic and Industry Analysis
Available Study Resources on Quizplus for this Chatper
58 Verified Questions
58 Flashcards
Source URL: https://quizplus.com/quiz/182037
Sample Questions
Q1) Firm B produces gadgets. The price of gadgets is $2 each. Firm B has total fixed costs of $300 000 and variable costs of $1.40 per gadget. The corporate tax rate is 40%. What is the break-even number of gadgets B must sell to make a zero after-tax profit?
A)300 000
B)400 000
C)500 000
D)600 000
Q2) Which one of the following describes the amount by which government spending exceeds government revenues?
A)Balance of trade
B)Budget deficit
C)Gross domestic product
D)Output gap
Q3) Portfolio manager Peter Lynch would classify Coca-Cola as ________.
A)an asset play
B)a slow grower
C)a stalwart
D)a turnaround
To view all questions and flashcards with answers, click on the resource link above. Page 14
Chapter 13: Financial Statement Analysis
Available Study Resources on Quizplus for this Chatper
55 Verified Questions
55 Flashcards
Source URL: https://quizplus.com/quiz/57850
Sample Questions
Q1) Which of the following statements is true concerning Economic Value Added?
A)A growing number of firms tie managers' compensation to EVA.
B)A profitable firm will always have a positive EVA.
C)EVA recognises that the cost of capital is not a real cost.
D)If a firm has positive present value of growth opportunities it will have positive EVA.
Q2) Which of the following assets is most liquid?
A)Cash equivalents
B)Receivables
C)Inventories
D)Plant and equipment
Q3) Operating ROA can be found as the product of ________.
A)Return on sales x ATO
B)Tax burden x Interest burden
C)Interest burden x Leverage ratio
D)ROE x Dividend payout ratio
To view all questions and flashcards with answers, click on the resource link above. Page 15
Chapter 14: Options and Risk Management
Available Study Resources on Quizplus for this Chatper
60 Verified Questions
60 Flashcards
Source URL: https://quizplus.com/quiz/57851
Sample Questions
Q1) Investor A bought a call option that expires in 6 months. Investor B wrote a put option with a 9-month maturity. All else equal, as the time to expiration approaches the value of Investor A's position will ________ and the value of Investor B's position will ________.
A)increase; increase B)increase; decrease C)decrease; increase D)decrease; decrease
Q2) Hedge ratios for long call position are ________ and hedge ratios for long put positions are ________.
A)negative; negative
B)negative; positive
C)positive; negative
D)positive; positive
Q3) A high dividend payout will ________ the value of a call option and ________ the value of a put option.
A)increase; decrease B)increase; increase C)decrease; increase D)decrease; decrease
To view all questions and flashcards with answers, click on the resource link above. Page 16
Chapter 15: Futures and Risk Management
Available Study Resources on Quizplus for this Chatper
60 Verified Questions
60 Flashcards
Source URL: https://quizplus.com/quiz/57852
Sample Questions
Q1) Futures contracts are said to exhibit the property of convergence because
A)the profits from long positions and short positions must ultimately be equal
B)the profits from long positions and short positions must ultimately net to zero
C)price discrepancies would open arbitrage opportunities for investors who spot them
D)the futures price and spot price of any asset must ultimately net to zero
Q2) From the perspective of determining profit and loss, the long futures position most closely resembles a levered investment in a ________.
A)long call
B)short call
C)short stock position
D)long stock position
Q3) At contract maturity the basis should equal ________.
A)1
B)0
C)risk-free interest rate
D)-1
To view all questions and flashcards with answers, click on the resource link above. Page 17
Chapter 16: Investors and the Investment Process
Available Study Resources on Quizplus for this Chatper
60 Verified Questions
60 Flashcards
Source URL: https://quizplus.com/quiz/57853
Sample Questions
Q1) At the early stage of an individual's working career their retirement portfolio should probably consist mostly of ________.
A)annuities
B)shares
C)bonds
D)commodities
Q2) To ________ means to mitigate a financial risk.
A)invest
B)speculate
C)hedge
D)renege
Q3) Which of the following is the least likely to be included in the portfolio management process?
A)Monitoring market conditions and relative values
B)Monitoring investor circumstances
C)Identifying investor constraints and preferences
D)Organising the investment management process itself
To view all questions and flashcards with answers, click on the resource link above.
18
Chapter 17: Hedge Funds
Available Study Resources on Quizplus for this Chatper
60 Verified Questions
60 Flashcards
Source URL: https://quizplus.com/quiz/57854
Sample Questions
Q1) Hedge funds managers are compensated by ________.
A)deducting management fees from fund assets and receiving incentive bonuses for beating index benchmarks
B)deducting a percentage of any gains in asset value
C)selling shares in the trust at a premium to the cost of acquiring the underlying assets
D)charging portfolio turnover fees
Q2) Which of the following are not managed investment companies?
A)Hedge funds
B)Unit investment trusts
C)Closed-end funds
D)Open-end funds
Q3) The fastest growing category of hedge funds is feeder funds. These funds invest in ________.
A)other hedge funds
B)convertible securities and preferred shares
C)equities and bonds
D)managed futures and options
To view all questions and flashcards with answers, click on the resource link above. Page 19
Chapter 18: Portfolio Performance Evaluation
Available Study Resources on Quizplus for this Chatper
54 Verified Questions
54 Flashcards
Source URL: https://quizplus.com/quiz/57855
Sample Questions
Q1) Empirical tests to date show ________.
A)that many investors have earned large rewards by market timing
B)little evidence of market timing ability
C)clear cut evidence of substantial market timing ability
D)evidence that absolutely no market timing ability exists
Q2) What is the contribution of security selection to relative performance?
A)-0.15%
B)0.15%
C)-0.3%
D)0.3%
Q3) Henriksson found that, on average, betas of funds ________ during market advances.
A)decreased slightly
B)decreased very significantly
C)increased slightly
D)increased very significantly
To view all questions and flashcards with answers, click on the resource link above. Page 20