FIN 630 - Midterm Dec 2009

Question No: 1 ( Marks: 1 ) - Please choose one________ are qualified and regulated professionals who trade shares and other securities through market makers on behalf of investors.► Stock brokers► Members► Specialists► Day traders

Question No: 2 ( Marks: 1 ) - Please choose oneWhich of the following function removes the fear of buying or selling at rip off price?► Fair pricing function► Continuous pricing function► Economic function► Exchange function

Question No: 3 ( Marks: 1 ) - Please choose oneWhich function of capital market facilitates transfer of money from savers to borrowers?► Economic function► Fair pricing function► Exchange function► Continuous pricing function

Question No: 4 ( Marks: 1 ) - Please choose one___________ is a computerized device that relays financial information to investors around the world, including the stock symbol, the latest price and the volume of securities as they are traded. ► SuperDot► NYSE Direct► Ticker tape► Trading Curb

Question No: 5 ( Marks: 1 ) - Please choose oneCompanies that have historically paid a larger than average percentage of their profit as dividend to their shareholders is known as:► Blue chip companies► Cyclical companies► Growth companies► Income companies

Question No: 6 ( Marks: 1 ) - Please choose one_________ think that supply and demand factors play the most important part.► Ratio analysts► Technical analysts► Research analysts► Fundamental analysts

Question No: 7 ( Marks: 1 ) - Please choose oneAccording to Dow Theory, primary trend is a:► Short term trend► Long term trend► Medium term trend► None of the given options

Question No: 8 ( Marks: 1 ) - Please choose oneWhich 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 ► It was proposed by R.N. Elliot

Question No: 9 ( Marks: 1 ) - Please choose oneThe idea of long term business cycle with a period of 50-60 years was proposed in which of the following theory?► Kondratev Wave Theory► Dow Theory► Elliot Wave Theory► None of the given options

Question No: 10 ( Marks: 1 ) - Please choose oneCurrent ratio is also known as:► Working capital ratio► Acid test ratio► Debt coverage ratio► Dividend yield ratio

Question No: 11 ( Marks: 1 ) - Please choose oneA 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: 12 ( Marks: 1 ) - Please choose oneWhich of the following ratio depicts a firm’s ability to cover its short-term obligations? ► Dividend yield ratio► Return on assets ratio► Debt coverage ratio► Current ratio

Question No: 13 ( Marks: 1 ) - Please choose oneWhich of the following ratios would NOT be used to draw a conclusion about a company's managerial effectiveness?► Return on investment► Return on equity ► Net margin ► Price-Earnings ratio

Question No: 14 ( Marks: 1 ) - Please choose oneWhich of the following functions do mutual fund companies perform for their investors? ► Record keeping and administration ► Professional management ► Diversification and divisibility► All of the given options

Question No: 15 ( Marks: 1 ) - Please choose oneWhich of the following is defined as an unmanaged, fixed-income security portfolio put together by a sponsor and handled by an independent trustee?► Unit investment trust► Closed-end investment ► Open-end investment ► Money market fund

Question No: 16 ( Marks: 1 ) - Please choose oneWhich of the following stocks would be expected to adversely impact during periods of high interest rates?► Consumer durable shocks► Interest-sensitive stocks► Capital goods stocks► Defensive stocks

Question No: 17 ( Marks: 1 ) - Please choose oneIf an investor wants to avoid transaction costs, which of the following strategy should he select?► Active strategy► Defensive strategy► Buy and hold strategy► Sector rotation

Question No: 18 ( Marks: 1 ) - Please choose oneTechnical analysts ______________ fundamental analysis.► Always incorporate► Does not deny the value of► Reject the value of► Have no connection with

Question No: 19 ( Marks: 1 ) - Please choose oneWho was the grandfather of technical analysis?► Harry Markowitz ► William Sharpe ► Charles Dow ► Benjamin Graham

Question No: 20 ( Marks: 1 ) - Please choose oneThe direct trade between large institutional investors takes place in which of the following market? ► Primary market► Secondary market► Third market► Fourth market

Question No: 21 ( Marks: 1 ) - Please choose oneWhich of the following statement is TRUE about value investors?► They are patient► They seek rapidly growing companies► They are speculators► They seek slow growing companies

Question No: 22 ( Marks: 1 ) - Please choose oneIn point and figure chart, what does X indicates?► Market price is going up► Market price is going down► Market price remains constant► Market price is fluctuating

Question No: 23 ( Marks: 1 ) - Please choose oneWhich of the following statement about a security is true, if it's beta > 1.0?► Security is more risky than the market► Security is less risky than market► Security is exactly as risky as maket► It is not possible to predict riskiness of a security by beta

Question No: 24 ( Marks: 1 ) - Please choose oneWhich of the following is a characteristic of line chart?► It is efficient in showing more details► It is simplest and most familiar chart► It show the highest degree of accuracy► It can be used for comparing three values

Question No: 25 ( Marks: 1 ) - Please choose oneIn a candlestick chart, what does black body candle depict?► Prices are moving up► Prices are moving down► Prices are constant► Prices are fluctuating

Question No: 26 ( Marks: 1 ) - Please choose oneWho has introduced the On Balance Volume technique of technical analysis?► Charles Dow► Joseph Granville► John Bollinger ► Welles Wilder

Question No: 27 ( Marks: 1 ) - Please choose oneWhich of the following is calculated by dividing gross profit by net sales?► Gross margin► Operating margin► Net margin► Profit margin

Question No: 28 ( Marks: 1 ) - Please choose oneWhen a company’s market value is divided by sales, it is known as:► Net income margin► Price-to-market value ratio► Price-to-book value ratio► Price-to-sales ratio

Question No: 29 ( Marks: 1 ) - Please choose oneWhich of the following is TRUE regarding price earning ratio?► P/E=Earnings available to common stockholders/outstanding shares► P/E=Market price per share/dividend per share► P/E=Market price per share/earning per share► P/E=Dividend per share/earning per share

Question No: 30 ( Marks: 1 ) - Please choose oneWhich of the following situations implies an upward sloping curve?► Accelerating economic activity► Static economic activity► Slowing economic activity► A recession period

Question No: 31 ( 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.

Question No: 32 ( Marks: 10 ) Leverage ratios are used to measure a company’s ability to meet its financial obligations. Describe the various leverage ratios used for analyzing financial statements.