Investment Risk and Portfolio Management MCQs

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The type of risk that is not diversifiable and affects the value of a portfolio is






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When purchasing temporary investments, which one of the following best describes the risk associated with the ability to sell the investment in a shor...






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The risk that securities cannot be sold at a reasonable price on short notice is called






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Political risk may be reduced by






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The risk of loss because of fluctuations in the relative value of foreign currencies is called






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Prior to the introduction of the euro, O & B Company, a U.S. corporation, was in possession of accounts receivable denominated in Deutsche marks. To w...






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An investment security with high risk will have a(n)






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Catherine & Co. has extra cash at the end of the year and is analyzing the best way to invest the funds. The company should invest in a project only i...






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The marketable securities with the least amount of default risk are






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The best example of a marketable security with minimal risk would be






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Which of the following classes of securities are listed in order from lowest risk/opportunity for return to highest risk/opportunity for return?






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From the viewpoint of the investor, which of the following securities provides the least risk?






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An investor is currently holding income bonds, debentures, subordinated debentures, and first-mortgage bonds. Which of these securities traditionally ...






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A feasible portfolio that offers the highest expected return for a given risk or the least risk for a given expected return is a(n)






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The risk of a single stock is






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If two projects are completely and positively linearly dependent (or positively related), the measure of correlation between them is






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The returns on two stocks can be correlated in values except those that are






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Which of the following specifically measures the volatility of returns together with their correlation with the returns of other securities?






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A market analyst has estimated the equity beta of Modern Homes, Inc., to be 1.4. This beta implies that the companys






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A measure that describes the risk of an investment project relative to other investments in general is the






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The benefits of diversification decline to near zero when the number of securities held increases beyond






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Based on the following information about stock price increases and decreases, make an estimate of the stocks beta: July = Stock +1.5%, Market +1.1%; ...






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DQZ Telecom is considering a project for the coming year that will cost $50 million. DQZ plans to use the following combination of debt and equity to ...






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Using the capital asset pricing model (CAPM), the required rate of return for a firm with a beta of 1.25 when the market return is 14% and the risk-fr...






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Which of the following is the major difference between the capital asset pricing model (CAPM) and arbitrage pricing theory (APT)?






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Stock J has a beta of 1.2 and an expected return of 15.6%, and stock K has a beta of 0.8 and an expected return of 12.4%. What is the expected return ...






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The difference between the required rate of return on a given risky investment and that on a riskless investment with the same expected utility is the...






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The systematic risk of an individual security is measured by the






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Which one of the following would have the least impact on a firms beta value?






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If Dexter Industries has a beta value of 1.0, then its






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The risk to which all investment securities are subject is known as






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One type of risk to which investment securities are subject can be offset through portfolio diversification. This type of risk is referred to as






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A company holds industrial development bonds issued by a county in another state. The county commission has announced that its financial condition has...






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Which one of the following lists properly ranks financial instruments in order from the highest risk/opportunity for return to the lowest risk/opportu...






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In theory, which of the following coefficients of correlation would eliminate risk in an investment portfolio?






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Listed below are four numbers. Which of these numbers represents the coefficient of correlation of a stock portfolio with the least risk?






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The incremental benefits of portfolio diversification initially decrease as the number of different securities held increases. The benefits become ex...






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OldTime, Inc., is a mature firm operating in a very stable market. Earnings growth has averaged about 3.2% for the last dozen years, just staying in l...






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If the return on the market portfolio is 10% and the risk-free rate is 5%, what is the effect on a companys required rate of return on its stock of a...






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The common stock of Wisconsin’s Finest Cheese has a beta coefficient of . . The following information about overall market conditions is available. ...






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An analyst at ABC Securities is in the process of reviewing the following information on YoYo, Inc., a publicly traded toy manufacturer: ? Share pric...






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The term beta can best be described as the






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The CFO of Clean Waterworks, a publicly traded company, is expecting to pay a dividend next year of $1.25 and projecting that the price of the company...






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Risk factors that cannot be eliminated through diversification include which of the following? I. Interest-rate fluctuations II. General price-level...






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Yerxa Industries is considering expanding its international operations. Which one of the following conditions should Yerxas controller classify as po...






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In the context of the capital asset pricing model (CAPM), the beta coefficient of a stock that has the same systematic risk as the market as a whole i...






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Systematic risk explains why






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Stock A and Stock B are combined into an equally weighted portfolio. If Stock A has a standard deviation of return of 30%, Stock B has a standard devi...






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A stock began the year with a stock price of $60 per share. In the middle of the year, it had a 3-for-2 stock split. The stock ended the year with a p...






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An analyst uses the capital asset pricing model (CAPM) to measure the required return on two stocks, X and Y. The expected market rate of return is 12...






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An automobile company that uses the futures market to set the price of steel to protect a profit against price increases is an example of






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An optimal portfolio of investments is






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Redimaker, Inc., a small but growing product assembler, has been able to profitably ride the ups and downs of several economic cycles, largely due to ...






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On April 1, year 1, Saxe, Inc. purchased $200,000 face value, 9% US Treasury Notes for $198,500, including accrued interest of $4,500. The notes mat...






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Kale Co. purchased bonds at a discount on the open market as an investment and intends to hold these bonds to maturity. Kale does not elect the fair...






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For a marketable debt securities portfolio classified as heldto- maturity, which of the following amounts should be included in the periods net inc...






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Bing Corporation purchased bonds at a discount on the open market as an investment and intends to hold these bonds to maturity. Assume that Bing ele...






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For a marketable debt securities portfolio classified as heldto- maturity, which of the following amounts should be included in the periods net inc...






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Stone does not use the fair value option to account for available- for-sale securities. Information regarding Stone Co.s portfolio of available-for...






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Information regarding Shelton Co.s portfolio of availablefor- sale securities is as follows: Aggregate cost as of 12/31/Y1 $150,000 Unrealized gai...






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Information regarding Shelton Co.s portfolio of availablefor- sale securities is as follows: Aggregate cost as of 12/31/Y1 $150,000 Unrealized gai...






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On January 10, year 1, Box, Inc. purchased marketable equity securities of Knox, Inc. and Scot, Inc., neither of which Box could significantly influ...






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On both December 31, year 1, and December 31, year 2, Kopp Co.s only marketable equity security had the same fair value, which was below cost. Kopp...






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For the last ten years, Woody Co. has owned cumulative preferred stock issued by Hadley, Inc. During year 2, Hadley declared and paid both the year ...






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Deed Co. owns 2% of Beck Cosmetic Retailers. A property dividend by Beck consisted of merchandise with a fair value lower than the listed retail pri...






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Deed Co. owns 2% of Beck Cosmetic Retailers. A property dividend by Beck consisted of merchandise with a fair value lower than the listed retail pri...






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Pal Corp.s year 1 dividend revenue included only part of the dividends received from its Ima Corp. investment. Pal Corp. has an investment in Ima C...






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Deed Co. owns 2% of Beck Cosmetic Retailers. A property dividend by Beck consisted of merchandise with a fair value lower than the listed retail pri...






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Sun Corp. had investments in marketable debt securities costing $650,000 that were classified as available-for-sale. On June 30, year 2, Sun decided...






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Sun Corp. had investments in marketable debt securities costing $650,000 that were classified as available-for-sale. On June 30, year 2, Sun decided...






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A marketable debt security is transferred from available-forsale to held-to-maturity securities. At the transfer date, the securitys carrying amoun...






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Jill Corp. had investments in marketable debt securities purchased on January 1, year 1, for $650,000 that were classified as trading securities and...






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Jill Corp. had investments in marketable debt securities purchased on January 1, year 1, for $650,000 that were classified as trading securities and...






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Grant, Inc. acquired 30% of South Co.s voting stock for $200,000 on January 2, year 1. Grants 30% interest in South gave Grant the ability to exer...






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Sage, Inc. bought 40% of Adams Corp.s outstanding common stock on January 2, year 1, for $400,000. The carrying amount of Adams net assets at the ...






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On January 2, year 1, Kean Co. purchased a 30% interest in Pod Co. for $250,000. On this date, Pods stockholders equity was $500,000. The carrying...






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Park Co. uses the equity method to account for its January 1, year 1 purchase of Tun Inc.s common stock. On January 1, year 1, the fair values of T...






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An investor in common stock received dividends in excess of the investors share of investees earnings subsequent to the date of the investment. Ho...






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Peel Co. received a cash dividend from a common stock investment. Should Peel report an increase in the investment account if it has classified the ...






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On January 1, year 1, Point, Inc. purchased 10% of Iona Co.s common stock. Point purchased additional shares bringing its ownership up to 40% of Io...






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In its financial statements, Pulham Corp. uses the equity method of accounting for its 30% ownership of Angles Corp. At December 31, year 1, Pulham ...






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An increase in the cash surrender value of a life insurance policy owned by a company would be recorded by






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Upon the death of an officer, Jung Co. received the proceeds of a life insurance policy held by Jung on the officer. The proceeds were not taxable. ...






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Band Co. uses the equity method to account for its investment in Guard, Inc. common stock. How should Band record a 2% stock dividend received from ...






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On March 1, year 1, Acadia purchased 1,000 shares of common stock of Marston Corp. for $50,000 and classified the investment as available-for-sale s...






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Under IFRS any investment may be accounted for by fair value through profit and loss providing






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Under IFRS, investments are classified in any of the following different ways, except






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Under IFRS if a company uses the fair value method for accounting for an investment any changes in fair value are recognized in






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Under IFRS an equity investment may be accounted for using the equity method if the investor has significant influence over the investee. Significan...






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Which of the following actions is MOST accurately associated with tactical asset allocation?






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Which of the following categories would NOT be considered a super asset class?






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Which of the following sets of investment categories or products is MOST accurately described as being driven by beta rather than alpha?






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Which of the following types of beta is most associated with active returns rather than with systematic risk premiums?






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How are beta driven products generally described?






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How is the alpha of a particular investment differentiated from the beta?






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What is considered to be the most important task in distinguishing alpha from beta in the performance of an investment manager?





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There are several common reasons why alpha is argued to be a “zero sum game”. Which of the following is NOT one of those reasons?






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Which of the following is MOST accurate with regard to the information coefficient (IC) in the Fundamental Law of Active Management?






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Portfolio XYZ is well diversified. It has a return of 10.5%, a portfolio beta of 1.2 and a standard deviation of 5%. Assume the risk free rate is 3% ...






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Portfolio XYZ is well diversified. It has a return of 10.5%, a portfolio beta of 1.2 and a standard deviation of 5%. Assume the risk free rate is 3% ...