This quiz works best with JavaScript enabled. Home > Finance > Investments > Investment Management > Investment Management – Quiz 9 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Investment Management Quiz 9 (30 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. Company XYZ is an advisory firm that assesses two investment options. Aggressive and Conservative. The Aggressive option has an Expected Return of 13% and a standard deviation of 20%. The Conservative option has an Expected Return of 8% and a standard deviation of 12%. The covariance between Aggressive and Conservative choices is 0.0072. What is the Correlation between Aggressive and Conservative choices? A) Positive, but cannot be calculated. B) +0.03. C) Negative, but cannot be counted. D) +0.30. Show Answer Correct Answer: D) +0.30. 2. Convertible bond consists of A) Present value of equity shares which will be received at time of conversion. B) Part equity, part preference shares. C) Part preference shares and part debentures. D) Zero interest bond. Show Answer Correct Answer: A) Present value of equity shares which will be received at time of conversion. 3. How might changing economic conditions impact the risk-return tradeoff? A) Changing economic conditions do not influence investor preferences for risk and return. B) Economic upturns are generally associated with lower potential returns and higher risk. C) During economic downturns, the risk-return tradeoff tends to favor higher potential returns. D) Economic conditions have no effect on the risk-return tradeoff. Show Answer Correct Answer: B) Economic upturns are generally associated with lower potential returns and higher risk. 4. Decomposition of performance model was given by A) Jenson. B) Burton g unlike. C) Eugene fama. D) Sharpe. Show Answer Correct Answer: C) Eugene fama. 5. It is a debt instrument issued by bank that indicates a specified sum of money has been deposited at the issuing depository institution. A) Certificate of deposit. B) Commercial paper. C) Treasury bills (also called T-bills). D) Preferred stocks. Show Answer Correct Answer: A) Certificate of deposit. 6. Stocks, bonds, mutual funds:Products to help us A) Save. B) Invest. Show Answer Correct Answer: B) Invest. 7. Private equity and venture capital investors are often attracted to: A) Low-risk, low-reward opportunities. B) Stable and mature companies. C) High-risk, high-reward opportunities. D) Short-term investment horizons. Show Answer Correct Answer: C) High-risk, high-reward opportunities. 8. Investments can be classified: A) According to capital management function and capital source. B) According to economic content. C) According to investment goals. D) All sentences are correct. Show Answer Correct Answer: D) All sentences are correct. 9. What is the term for the percentage of a company's profits paid out to shareholders as a dividend? A) Payout ratio. B) Dividend yield. C) Profit margin. D) Dividend ratio. Show Answer Correct Answer: A) Payout ratio. 10. This is a package of securities, usually government debt that an investor buys from a financial institution, under the agreement that the institution will buy it back at a specific price on a specific date. A) Bonds Near Maturity Date. B) Money Market Fund. C) U.S Treasury Issuance. D) Repurchase Agreement. Show Answer Correct Answer: D) Repurchase Agreement. 11. Investments come with volatility (risk) which means that returns can vary each year. A) True. B) False. Show Answer Correct Answer: A) True. 12. Economic forecasting tools? A) A Only. B) Barometric Approach & Opportunistic Model Building. C) Surveys, Economic Model Building & Diffusion Indexes. D) A & B. Show Answer Correct Answer: D) A & B. 13. A straightforward strategy for mitigating risk involves refraining from investing in the securities of a single entity and, instead, opting for investments exclusively in one or more money market funds. A) FALSE. B) TRUE. Show Answer Correct Answer: B) TRUE. 14. Common target in these activities is to "employ" the money (funds) during the time period seeking to enhance the investor's wealth. A) Investing. B) Financing. C) Portfolio. D) Both A and B. Show Answer Correct Answer: A) Investing. 15. Which financial ratio is often used to evaluate a company's profitability and is calculated as net income divided by total shareholders' equity? A) Earnings per Share (EPS). B) Return on Equity (ROE). C) Price-to-Earnings (P/E) ratio. D) Return on Investment (ROI). Show Answer Correct Answer: B) Return on Equity (ROE). 16. Investing in business to make a profit is an activity that: A) Society. B) Economy. C) Environment. D) All sentences are correct. Show Answer Correct Answer: B) Economy. 17. What term describes the total market value of a company's outstanding shares of stock? A) Face value. B) Book value. C) Market capitalization. D) By value. Show Answer Correct Answer: C) Market capitalization. 18. During an economic expansion, which sectors might be favored in a sector rotation strategy? A) Defensive sectors like utilities and healthcare. B) Cyclical sectors like technology and consumer discretionary. C) Precious metals and mining sectors. D) Government bonds and fixed-income securities. Show Answer Correct Answer: B) Cyclical sectors like technology and consumer discretionary. 19. What is a common approach for investors who want to reinvest dividends automatically? A) Enrolling in a dividend-reinvestment plan (DRIP). B) Timing the market to maximize reinvestment returns. C) Holding cash until market conditions are favorable. D) Ignoring dividend reinvestment and focusing on capital gains. Show Answer Correct Answer: A) Enrolling in a dividend-reinvestment plan (DRIP). 20. An investor bought an asset for IDR 3, 200, 000 at the beginning of the year. At the end of the year, his assets were worth IDR 3, 600, 000. How much return did he get? A) 12.5%. B) 112.5%. C) 110%. D) 10%. Show Answer Correct Answer: A) 12.5%. 21. Diversification is important in investing because ..... A) It helps you to balance your risk across different types of investments. B) It increases your overall risk, which guarantees that you will make more money. C) It ensures that you only make low-risk investments. D) It helps you gain the highest rate of return despite any risks. Show Answer Correct Answer: A) It helps you to balance your risk across different types of investments. 22. Preference shareholders receive A) Fixed rate of dividend. B) Flexible rate of interest. C) Flexible rate of dividend. D) Fixed rate of interest. Show Answer Correct Answer: A) Fixed rate of dividend. 23. What is the sunk cost fallacy in the context of investment decisions? A) Evaluating investments based on potential future gains. B) Ignoring past investment performance. C) Continuing an investment based on past costs rather than future benefits. D) Considering only current market conditions. Show Answer Correct Answer: C) Continuing an investment based on past costs rather than future benefits. 24. What is the average annual return for savings? A) 6-10%. B) 2-4%. C) 0-2%. D) 4-6%. Show Answer Correct Answer: C) 0-2%. 25. Diversification is most effective when security returns are A) High. B) Negatively correlated. C) Positively correlated. D) Uncorrelated. Show Answer Correct Answer: B) Negatively correlated. 26. Which among the statements is the primary goal of income-oriented investment strategies? A) Maximizing portfolio volatility. B) Short-term trading for quick profits. C) Generating a steady stream of income. D) Capital appreciation. Show Answer Correct Answer: C) Generating a steady stream of income. 27. A professionally managed investment scheme A) Mutual funds. B) Bonds. C) Debentures. D) Equity shares. Show Answer Correct Answer: A) Mutual funds. 28. What is a bond rating agency responsible for? A) Regulating bond markets. B) Managing stock market indices. C) Assigning credit ratings to bonds to assess their creditworthiness. D) Administering government bonds. Show Answer Correct Answer: C) Assigning credit ratings to bonds to assess their creditworthiness. 29. Which among is a key characteristic of active investing? A) Aiming to replicate the performance of a specific market index. B) Seeking to outperform the market through strategic buying and selling. C) Holding investments for the long term without active management. D) Relying on market trends and momentum for decision-making. Show Answer Correct Answer: B) Seeking to outperform the market through strategic buying and selling. 30. Within the boundaries of appropriate levels of risk, maturity, and marketability, the treasurer can then pick the investment with the highest risk. A) FALSE. B) TRUE. Show Answer Correct Answer: A) FALSE. ← PreviousNext →Related QuizzesInvestments QuizzesFinance QuizzesInvestment Management Quiz 1Investment Management Quiz 2Investment Management Quiz 3Investment Management Quiz 4Investment Management Quiz 5Investment Management Quiz 6Investment Management Quiz 7Investment Management Quiz 8 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books