MIDTERM EXAMINATION 2011 FIN630- Investment Analysis & Portfolio Management (Session - 3) 12 may 2011

Question No: 1 ( Marks: 1 ) - Please choose one A self-regulatory body that licenses brokers and generally oversees the trading practices of Over the counter(OTC) securities is known as __________ . Securities and Exchange Commission (SEC) National Association of Security Dealers (NASD)

The National Association of Securities Dealers (NASD) is a self-regulatory body that licenses brokers and generally oversees trading practices. PAGE # 14 OR http://books.google.com/books?id=cO1am2FPTgC&pg=PA156&lpg=PA156&dq=A+selfregulatory+body+that+licenses+brokers+and+generally+oversees+the+trading+practices +of+Over+the+counter(OTC) +securities+is+known+as+National+Association+of+Security+Dealers+ (NASD)&source=bl&ots=Ba5SymmYXx&sig=Uh6q5ikFKhWV0IBpFIW34YZK5tg&hl =en&ei=KmLGTZCkIIWbhQeckNntAw&sa=X&oi=book_result&ct=result&resnum=1 &ved=0CBQQ6AEwAA#v=onepage&q=A%20self-regulatory%20body%20that %20licenses%20brokers%20and%20generally%20oversees%20the%20trading %20practices%20of%20Over%20the%20counter(OTC)%20securities%20is%20known %20as%20National%20Association%20of%20Security%20Dealers %20(NASD)&f=false Initial Public Offering (IPO) Offered for Sale (OFS) Question No: 2 ( Marks: 1 ) - Please choose one The primary purpose of the liquidity ratios is to determine: The amount of earnings paid to shareholders The amount of working capital tied up in inventory The ability of a firm to pay off short-term obligations Page # 82 The ratio is mainly used to give an idea of the company's ability to pay back its shortterm liabilities (debt and payables) with its short-term assets (cash, inventory, receivables). Or http://highered.mcgrawhill.com/sites/0073405159/student_view0/chapter8/multiple_choice_quiz.html MCQ # 12 Question No: 3 ( Marks: 1 ) - Please choose one

_________ provides an automatic execution of limit orders up to 1,099 shares at the best bid or offer. SuperDOT NASDAQ Auction market NYSE direct NYSE Direct+ currently provides optional automatic execution of limit orders up to 1,099 shares at the best bid or offer. The average execution time is 1 second http://www.nyse.com/press/1075990965691.html Question No: 4 ( Marks: 1 ) - Please choose one Which of the following statement is FALSE about Elliot Wave Theory? It made extensive use of Fibonacci series It is based on repeating 8 waves cycles It identified three movements in security prices PAGE # 67 Dow Theory holds that there are three components in the movement of stock prices. It was proposed by R.N. Elliot Question No: 5 ( Marks: 1 ) - Please choose one Which of the following allows you to specify the most you are willing to pay when buying or the least you are willing to accept when selling? Limit order Limit Order allows you to specify the most you are willing to pay when buying or the least you are willing to accept when selling. http://www.stock4today.com/order-types.htm Market order Stop order Good till cancelled order Question No: 6 ( Marks: 1 ) - Please choose one

ABC Furnitures worth $51 million. What is another term for this? Book value Earning per share Market value Cost per share

Question No: 7 ( Marks: 1 ) - Please choose one 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 Question No: 8 ( Marks: 1 ) - Please choose one Stocks can be purchased for a combination of cash and borrowed funds in: Margin account Cash account IRA account Option account Question No: 9 ( Marks: 1 ) - Please choose one Mr. A purchased a stock at Rs. 50 today that is expected to grow in future up to Rs.100, he believes in. Growth investment Handouts # 25 and 26 Value investment Speculation None of the given options Question No: 10 ( Marks: 1 ) - Please choose one Which of the following is correct option Assets = Liabilities + Owner's Equity Owner's Equity = Assets + Liabilities Liabilities = Owner's Equity + Assets

Question No: 11 ( Marks: 1 ) - Please choose one Which of the following stage should be avoided by investors who are interested in capital gains? Pioneering stage Expansion stage Decline stage Stabilization stage 5th MCQ http://vusr.net/courses/mcqs.php?course=fin630-investment-analysis-and-portfoliomanagement&page=2#axzz1LqX5vQKU OR https://encrypted.google.com/search? hl=en&biw=800&bih=509&q=Stabilization+stage+should+be+avoided+by+investors+w ho+are+interested+in+capital+gains&btnG=Search&aq=f&aqi=&aql=&oq= 2ND # PPT SLIDE Question No: 12 ( Marks: 1 ) - Please choose one 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 Question No: 13 ( Marks: 1 ) - Please choose one. When current assets exceeds current liabilities it is called: Gross capital Working capital The working capital means the amount that current assets exceed the current liabilities. PAGE # 83 Net capital Reserved capital Question No: 14 ( Marks: 1 ) - Please choose one

Which function of capital market facilitates transfer of money from savers to borrowers? Economic function The most important function is the economic function. This mechanism facilitates the transfer of money from savers to borrowers. PAGE # 05 Fair pricing function Exchange function Continuous pricing function Question No: 15 ( Marks: 1 ) - Please choose one Current ratio is also known as: Working capital ratio Current ratio is also known as the working capital ratio PAGE # 82 Acid test ratio Debt coverage ratio Dividend yield ratio Question No: 16 ( Marks: 1 ) - Please choose one A ratio that indicates the extent to which a firm could pay its current liabilities without relying on the sale of inventory is known as: Current ratio Quick ratio Inventory turnover ratio Debt coverage ratio Question No: 17 ( Marks: 1 ) - Please choose one Which of the following ratio depicts a firms ability to cover its short-term obligations? Dividend yield ratio Return on assets ratio Debt coverage ratio Current ratio Question No: 18 ( Marks: 1 ) - Please choose one If an investor wants to avoid transaction costs, which of the following strategy should he select?

 Active strategy Defensive strategy Buy and hold strategy Buy-And-Hold Strategy: A buy-and-hold strategy means exactly that an investor buys stocks and basically holds them until some future time in order to meet some objective. The emphasis is on avoiding transaction costs, additional search costs, and so forth. PAGE 138 Sector rotation The remaining MCQ are new Question No: 31 ( Marks: 3 ) Why you as invester would prefer investing in money market mutual funds(3) SOLUTION Money market mutual funds invest in portfolio of money market securities. 1. Taxable or tax-exempt. 2. Commercial paper important investment. 3. Average maturity limit: 90 days. 4. Investors pay a management fee but not a sales or redemption charge (load). 5. Not insured by the federal government Question No: 32 ( Marks: 3)

RELATIONSHIP OF INTREST RATE WITH Question No: 32 ( Marks: 5 )

1 QUESTION IS ABOUT FUNDANMENTAL ALANYSIS MARKS 5

Question No: 32

( Marks: 5 )

A company is paying $0.60 in dividends and the required rate of return is 6%.Company is selling the stocks at $12. Assume 2% growth rate. Figure out the current value of the stock. By keeping in view your answer. Explain whether the stock is overvalued or undervalued. SOLUTION Po=D1(1+g)/(k-g)

D1=0.6 P=12 G=2% RRR(k)=6% Po=? =0.6(1+0.02)/(0.06-0.04)=15.3 P=12 While Po=15.3 It means stock is undervalued.