Thursday, July 2, 2009

MGT201- Financial Management (Session - 2) page 2

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Question No: 10 ( Marks: 1 ) - Please choose one
Which of the following is simply the weighted average of the possible returns, with the weights being the probabilities of occurrence?

► A probability distribution
► The expected return
► The standard deviation
► Coefficient of variation

Question No: 11 ( Marks: 1 ) - Please choose one
The square of the standard deviation is known as the ________.

► Beta
► Expected return
► Coefficient of variation
► Variance

Question No: 12 ( Marks: 1 ) - Please choose one
Why companies invest in projects with negative NPV?





► Because there is hidden value in each project
► Because they have chance of rapid growth
► Because they have invested a lot
► All of the given options

Question No: 13 ( Marks: 1 ) - Please choose one
An investor was expecting a 18% return on his portfolio with beta of 1.25 before the market risk premium increased from 8% to 10%. Based on this change, what return will now be expected on the portfolio?
► 22.5%
► 20.0%
► 20.5%
► 26.0%

Question No: 14 ( Marks: 1 ) - Please choose one
Which of the following is the characteristic of a well diversified portfolio?
► Its market risk is negligible
► Its unsystematic risk is negligible
► Its systematic risk is negligible
► All of the given options

Question No: 15 ( Marks: 1 ) - Please choose one
How the beta of a stock can be calculated?

► By monitoring price of the stock
► By monitoring rate of return of the stock
► By comparing the changes in the stock market price to the changes in the stock market index
► All of the given options

Question No: 16 ( Marks: 1 ) - Please choose one
Which of the following formula relates beta of the stock to the standard deviation?
► Covariance of stock with market * variance of the market
► Covariance of stock with market / variance of the market
► Variance of the market / Covariance of stock with market
► Slope of the regression line

Question No: 17 ( Marks: 1 ) - Please choose one
A beta greater than 1 for a stock shows:

► Stock is relatively more risky than the market
► If the market moves up by 10% the stock will move up by 12%
► As the market moves the stock will move in the same direction
► All of the given options

Question No: 18 ( Marks: 1 ) - Please choose one
If stock is a part of totally diversified portfolio then its company risk must be equal to:

► 0
► 0.5
► 1
► -1

Question No: 19 ( Marks: 1 ) - Please choose one
If risk and return combination of any stock is above the SML, what does it mean?

► It is offering lower rate of return as compared to the efficient stock
► It is offering higher rate of return as compared to the efficient stock
► Its rate of return is zero as compared to the efficient stock
► It is offering rate of return equal to the efficient stock

Question No: 20 ( Marks: 1 ) - Please choose one
An arbitrage opportunity exists if an investor can construct a __________ investment portfolio that will yield a sure profit.
► Positive
► Negative
► Zero
► All of the given options

Regards
Vuhelps

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