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EIP > EIP Questions COPY > Flashcards

EIP Questions COPY Flashcards

1
Q

Technical Analysis is based on the beliefs of all of the following except:

a) Price moves in trends
b) History tends to repeat itself
c) Supply and demand
d) The strength of the economy affects prices

A

D

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2
Q

Which of the following is NOT necessary when using technical analysis?
a) Moving Averages
b) Trading Volumes
c) Peak Earnings
d) Peak Prices

A

C

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3
Q

Which of the following must be present when using technical analysis?
a) Historical prices
b) Charts
c) Earnings
d) Cash Flows

A

A

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4
Q

ABC Company issues a 5-year convertible bond of $1,000 par value with a coupon of 5%. The conversion ratio si 25. After 5years, the stock price fals to $30. What si the maximum net profit an investor can make per convertible bond he owns?
a) $0
b) $250
c) $500
d) $1000

A

B

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5
Q

Which type of fixed income securities can be prepaid before the maturity date? a) Government bonds
b) Callable bonds
c) Zero-coupon bonds d) Corporate bonds

A

B

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6
Q

Which type of fixed income securities has the lowest default risk?
a) Government bonds
b) Callable bonds
c) Zero-coupon bonds
d) Corporate bonds

A

A

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7
Q

Which type of fixed income securities is usually issued at a discount to par value?
a) Callable bonds
b) Junk bonds
c) Zero-coupon bonds
d) Government bonds

A

C

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8
Q

Which type of fixed income securities has the highest default risk?
a) Callable bonds
b) Junk bonds
c) Zero-coupon bonds
d) Corporate bonds

A

B

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9
Q

Which of the following is NOT a type of fixed income securities?

a) Government bonds
b) Interest rate swaps
c) Treasury bills
d) Corporate bonds

A

B

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10
Q

In the ____ stage, bonds are an attractive investment opportunity.
a) Recession
b) Recovery
c) Early Expansion
d) Late Expansion

A

D

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11
Q

In the ____ stage, real estate are an attractive investment opportunity.

a) Recession
b) Recovery
c) Early Expansion
d) Late Expansion

A

C

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12
Q

In the ____ stage, cyclical investments are an attractive investment opportunity.
a) Recession
b) Recovery
c) Early Expansion
d) Late Expansion

A

B

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13
Q

In the ____ stage, commodities and stocks are an attractive investment opportunity.
a) Recession
b) Recovery
c) Early Expansion
d) Late Expansion

A

A

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14
Q

Which of the following is NOT a stage in the business cycle?

a) Recession
b) Recovery
c) Expansion
d) Failure

A

D

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15
Q

The threat of substitute products increases as:

a) the price and performance of the substitute product can match the existing product
b) customers become comfortable with the existing product
c) the brand of the existing product is established
d) All of the above

A

A

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16
Q

The bargaining power of customers increases as:

a) the number of customers decreases
b) the volume of purchases increases
c) the number of alternative suppliers increases
d) the possibility of integrating backwards decreases

A

D

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17
Q

The bargaining power of a supplier increases when:

a) The resource they supply is scarce
b) The cost of switching to an alternative supplier is low
c) The supplier cannot integrate vertically
d) The supplier has very few customers

A

A

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18
Q

Which of the following will form a barrier to entry for new entrants ot an industry?
a) Low capital requirements
b) Easy access to suppliers and distribution channels
c) Strong branding
d) Low unit costs

A

C

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19
Q

Factors that act together to determine the nature of competition within an industry include:
i) Threat of new entrants to a market
ii) Bargaining power of suppliers iii) Bargaining power of customers
iv) Threat of substitute products
v) Strength of the overall economy

a) i, ii, iv, v
b) i ,ii, iii, iv
c) ,i iii, iv, v
d) All of the above

A

B

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20
Q

Which of the following industry life cycle phases is characterised by declining growth as demand shifts to other substitute products?
a) Pioneering Phase
b) Growth Phase
c) Maturity Phase
d) Deceleration Phase

A

D

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21
Q

Which of the following is NOT a phase of an industry life cycle?
a) Pioneering Phase
b) Growth Phase
c) Failure Phase
d) Deceleration Phase

A

C

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22
Q

The issuance of government bonds will:
a) decrease interest rates
b) increase aggregate demand for goods and services
c) both a and b
d) None of the above

A

D

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23
Q

Expansionary fiscal policy:
a) is usually undertaken when an economy is in equilibrium.
b) can be done by increasing government spending such that it is higher than tax revenue
c) can be done by decreasing government spending such that it is lower than tax revenue
d) cannot be done by any of the above methods

A

B

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24
Q

Which of the following is a type of fiscal policy that can be used to stimulate the economy?
a) Neutral
b) Expansionary
c) Contractionary
d) Al of the above

A

B

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25
Q

Fiscal policy makes use of changes to ____ in order to influence aggregate demand and the level of economic activity.
a) taxation rates
b) interest rates
c) lending rates
d) money supply

A

A

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26
Q

Fiscal policy to stimulate economic growth can include all the following actions, except:
a) Lowering tax rates
b) Increasing the number of jobs
c) Increasing government spending
d) Lowering interest rates

A

D

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27
Q

Controlling the money supply and interest rates can:
i) Control inflation
ii) Stabilize currency
iii) Grow the economy
iv) Reduce the amount of money that is spent by consumers

a) i
b) i, ii
c) i, ii, iii
d) All of the above

A

D

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28
Q

Monetary policy is the regulation of the :

a) money supply
b) interest rates
c) Both a and b
d) None of the above

A

C

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29
Q

If the money supply grows too fast:
a) the rate of inflation may increase
b) economic growth may decrease
c) price stability may increase
d) All of the above

A

A

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30
Q

Which economic indicator when showing a reading of 50 or higher generally indicates that the general economy is expanding?

a) Unemployment Rate
b) Purchasing Managers Index (PMI c) Gross Domestic Product (GDP)
d) Consumer Price Index (CPI)

A

B

31
Q

______ represents the market value fo all goods and services produced by the economy during the period measured?
a) Unemployment Rate
b) Purchasing Managers Index (PMI
c) Gross Domestic Product (GDP)
d) Consumer Price Index (CPI)

A

C

32
Q

The unemployment rate is:
a) The percentage of the total labour force that is unemployed
b) The percentage of the total population that is unemployed
c) The percentage of the total labor force that is unemployed but actively seeking employment and willing to work
d) The percentage of the total population that is unemployed but actively seeking employment and willing to work

A

C

33
Q

Which economic indicator uses an approach that compares a consistent base of products year on year?
a) Unemployment Rate
b) Purchasing Managers Index (PMI)
c) Gross Domestic Product (GDP)
d) Consumer Price Index (CPI)

A

D

34
Q

Which of the following will NOT result in long term economic growth:
a) Technological improvements b) Increase in investment
c) Decrease in working population
d) Increase in labour productivity

A

C

35
Q

Aggregate Demand can increase fi there is a decrease in:
a) consumer confidence
b) income tax
c) housing prices
d) All of the above

A

B

36
Q

Aggregate Demand can decrease if there is an increase in:
a) interest rates
b) wages
c) government spending
d) All of the above

A

A

37
Q

Aggregate Demand can be calculated by adding of the following except:
a) Spending
b) Investment
c) Exports
d) Imports

A

D

38
Q

Which of the following risks is the lowest risk of Exchange Traded Funds (ETFs)?
a) Tracking error
b) Market risk
c) counterparty risk
d) Concentration risk

A

D

39
Q

Which of the following statement regarding Exchange Traded Funds (ETFs) are NOT true?
a) They are open-ended investment funds
b) They may use derivatives to track an index or asset
c) They may issue dividends
d) They do not have management fees

A

D

40
Q

The higher the Price to Earnings ratio (P/E ratio) of a stock, the higher its:
a) profitability
b) valuation
c) equity
d) stock price

A

B

41
Q

The larger the market capitalization of a stock, the higher its:

a) revenue
b) profit
c) stock price
d) number of shares

A

C

42
Q

Over the long term, a company’s stock price will be most affected by:
a) speculation
b) management
c) earnings
d) growth potential

A

C

43
Q

ABC Company issues a 5-year convertible bond of $1,000 par value with a coupon of 5%. The conversion ratio is 25. After 5 years, the stock price climbs to $50. What is the maximum net profit an investor can make per convertible bond he owns?
a) $250
b) $500
c) $1000
d) $1500

A

B

44
Q

ABC Company issues a 5-year convertible bond of $1,000 par value with a coupon of 5%. The conversion ratio is 25. The effective conversion price is:
a) $12.50 per share
b) $25 per share
c) $40 per share
d) $50 per share

A

C

45
Q

Which of the following statement is FALSE? Convertible bonds:
a) have greater appreciation potential than corporate bonds
b) are less vulnerable to losses if the issuer defaults compared to corporate bonds
c) holders have a lower priority to claim to the company’s assets than investors in corporate bonds
d) typically offer lower yields than corporate bonds

A

B

46
Q

Which of the following statement is FALSE? Convertible bonds:
a) typically offer a lower coupon than a standard bond.
b) allow issuers to have less debt
c) will dilute the value of equity
d) must be converted upon maturity

A

D

47
Q

Which one of the follow types of bonds have the lowest volatility?
a) high coupon rate
b) short term to maturity
c) low yield to maturity
d) high coupon rate and short term to maturity

A

D

48
Q

Which one of the following types of bonds have the highest volatility?
a) high coupon rate
b) short term to maturity
c) low yield to maturity
d) high coupon rate and short term to maturity

A

C

49
Q

Bonds with poor credit ratings typically display _____ price volatility than bonds with good credit ratings.
a) lower
b) higher
c) higher depending on interest rates
d) none of the above

A

A

50
Q

Bonds with ____ durations carry _____ risk, and have _____ price volatility than bonds with ____ durations.
a) lower, more, higher, higher
b) lower, less, higher, higher
c) higher, more, higher, lower
d) higher, less, lower, lower

A

C

51
Q

Generally, bonds with a ____ duration will have a ____ price fluctuation than bonds with a ____ duration.

a) high, higher, low
b) low, higher, high
c) high, lower, low
d) None of the above

A

A

52
Q

As market interest rates increase, bond prices:
a) increase
b) decrease
c) stay the same
d) may increase or decrease

A

B

53
Q

If a bond’s interest rate is higher than current prevailing interest rates, it will sell at a ______.
a) premium
b) discount
c) par
d) none of the above

A

A

54
Q

A zero coupon bond has a maturity of three years and a maturity value fo $1,000. Given that the discount rate is 7%, find the Present Value of the bond.
a) $811.50
b) $812.50
c) $813.50
d) $814.50

A

49

55
Q

As a bond moves closer to its maturity date, its price will:
a) move closer to par
b) move further from par
c) not have any changes
d) change depending on the issuer

A

48

56
Q

A bond matures in five years with a coupon rate of 7%, and a maturity value of $1,000. Given that the interest payment is yearly and the discount rate is 5%, find the Present Value of the bond.
a) $1083.78
b) $1,086.59
c) $1,095.35
d) $1.098.54

A

47

57
Q

______ is the risk a security holder will have to bear if the issuer is unable to pay the scheduled interest payments or principal repayment due to financial constraints.
a) reinvestment risk
b) currency risk
c) liquidity risk
d) default risk

A

46

58
Q

______ is the risk a security holder will have to bear if exchange rates with other currencies change during the security holding period.
a) reinvestment risk
b) currency risk
c) liquidity risk
d) default risk

A

45

59
Q

_____ is the risk a security holder will have to bear if he is unable to use the principal funds for other purposes before the expiration of the security
a) Interest rate risk
b) reinvestment risk
c) liquidity risk
d) inflation risk

A

44

60
Q

_____ is the risk a security holder will have to bear if he is unable to purchase another security of similar return upon the expiration of the current security.
a) Interest rate risk
b) reinvestment risk
c) liquidity risk
d) inflation risk

A

43

61
Q

______ is the risk a security holder will have to bear if the overall interest rates increase when the security is sold
a) Interest rate risk
b) reinvestment risk
c) liquidity risk
d) inflation risk

A

42

62
Q

Which of the following risks cannot be found in fixed income securities?

a) interest rate risk
b) currency risk
c) default risk
d) None of the above

A

41

63
Q

The higher the risk-free interest rate, the a call option.
a) cheaper
b) more expensive
c) cheaper or more expensive depending on the outstanding number of shares
d) none of the above

A

40

64
Q

The higher the stock price, the lower the value of the:
a) call option
b) put option
c) warrant
d) shareholder equity

A

39

65
Q

The longer the time to expiry, the higher premium on a:
a) call option
b) warrant
c) both a and b
d) none of the above

A

38

66
Q

The lower the strike price, the lower the value of the
a) call option
b) warrant
c) both a and b
d) put option

A

37

67
Q

A company is obligated to issue new stock when:
a) options are exercised
b) warrants are exercised
c) stock split is exercised
d) dividends are issued

A

36

68
Q

A warrant has an exercise price of $5 on a stock that currently trades at $4. Upon the expiration of the warrant, the underlying stock trades at $3. An investor will make:
a) $0
b) $1
c) $2
d) $3

A

34

69
Q

A warrant has an exercise price of $5 on a stock that currently trades at $4. Upon the expiration of the warrant, the underlying stock trades at $6. An investor will make:
a) $0
b) $1
c) $2
d) $3

A

35

70
Q

Which of the following causes dilution to shareholders of the underlying security?
a) Options
b) Warrants
c) Both a and b
d) None of the above

A

33

71
Q

Which of the following statements is FALSE regarding warrants and options?
a) Warrants give the holder an obligation to buy shares at het strike price during expiration
b) Warrants are issued by a specific company
c) Warrants usually have longer maturity period than options.
d) All of the above

A

32

72
Q
A
73
Q

Which of the following industry life cycle phases is characterized by low demand for the industry’s product and large upstart costs?
a) Pioneering Phase
b) Growth Phase
c) Stabilization Phase
d) Deceleration Phase

A

A

74
Q

Which of the following industry life cycle phases is characterized by above average growth, but no longer accelerating growth, increasing competition and declining profit margins?

a) Pioneering Phase
b) Growth Phase
c) Maturity Phase
d) Deceleration Phase

A

C

EIP (2 decks)

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