MGT 411 current quiz

MGt411 Recent Quiz:

Question # 1
The return on holding a bond till its maturity is called:
Select correct option:

Coupon rate
Yield to maturity
Current yield
Internal rate of return

Question # 2
What is the true relationship that exists between default risk and yield?
Select correct option:

Higher the default risk, higher the yield
Lower the default risk, higher the yield
Higher the default risk yield will remain constant
Lower the default risk yield will remain constant

Question # 3
The theory of efficient market states that prices of financial instruments reflect:
Select correct option:

All available information
Some of the information
No information
Imperfect information


Question # 4
Which one of the following is the procedure of finding out the Present Value (PV)?
Select correct option:

Discounting
Compounding
Time value of money
Bond pricing


Question # 5
Diversification is the principle of:
Select correct option:

Holding more than one risk at a time
Reducing the risks we carry to just two
Creating risk to increase returns
Eliminating investments from our portfolio that have idiosyncratic risk

Question # 6
The price of a coupon bond can best be described as:
Select correct option:

The present value of the face value
The future value of the coupon payments and the face value
The present value of the coupon payments
Both The present value of the face value and of the coupon payments


Question # 7
An index number is a valuable tool because:
Select correct option:

The number by itself provides all of the useful information needed
The index provides a meaningful measurement scale to calculate percentage changes
The index is more stable than the data it reflects
It does not require any calculations to compute percentage changes


Question # 8
A risk-averse investor will:
Select correct option:

Always prefer an investment with a lower expected return
Always prefer an investment with a certain return to one with the same expected return but any amount of uncertainty
Always require a certain return
Always focus exclusively on the expected return

Question # 9
Which of the following is NOT included in the definition of M1?
Select correct option:

Traveler’s checks
Demand deposits
Currency
Gold coins issued by treasury

Question # 10
Which of the following statement is true about the relation ship between bond ,coupon payment and interest?
Select correct option:

Coupon payments fall, the interest rate falls, and Bond price will rise
Coupon payments rises, the interest rate falls, and Bond price will rise
Coupon payments fall, the interest rate falls, and Bond price will fall
Coupon payments rise, the interest rate falls, and Bond price will fall

Question # 11
There is no guarantee that a bond issuer will make the promised payments is known as which one of the following?
Select correct option:

Default risk
Inflation risk
Interest rate risk
Systematic risk


Question # 12
Banks can also borrow by using a repurchase agreement or repo, which is a short-term _____________.
Select correct option:

Discount loan
Collateralized loan
Personal loan
Corporate loan

Question # 14
Which of the following would be included in a definition of risk?
Select correct option:

Risk is a not measure of uncertainty
Risk is unavoidable
Risk doesn't have a time horizon
Risk seldom involves some future payoff

Question # 15
When the auto manufacturing industry does poorly due to a recession this is an example of:
Select correct option:

Idiosyncratic risk
Systematic risk
Risk premium
Unique risk