Question 1

Systematic risk is also referred to as:

Accepted Answer

A)  economic risk. 
B)  diversifiable risk. 
C)  market risk. 
D)  financial risk. 
A)  economic risk. 
B)  diversifiable risk. 
C)  market risk. 
D)  financial risk.

Question 2

The correlation between two shares:

Accepted Answer

A)  can take on positive values. 
B)  can take on negative values. 
C)  is related to the covariance of a share. 
D)  includes all of the given answers. 
A)  can take on positive values. 
B)  can take on negative values. 
C)  is related to the covariance of a share. 
D)  includes all of the given answers.

Question 3

What are some factors that influence investors to buy listed rather than unlisted shares?

Accepted Answer

Some factors that encourage investors to

Question 4

Passive investment means building a portfolio of shares based on the strategy of:

Accepted Answer

A)  buy and hold. 
B)  replicating a market index. 
C)  following solely the advice of share brokers. 
D)  investing in low-risk shares. 
A)  buy and hold. 
B)  replicating a market index. 
C)  following solely the advice of share brokers. 
D)  investing in low-risk shares.

Question 5

The correlation of pairs of securities within a portfolio is called:

Accepted Answer

A)  co-association. 
B)  correspondence. 
C)  covariance. 
D)  variance. 
A)  co-association. 
B)  correspondence. 
C)  covariance. 
D)  variance.

Question 6

For a portfolio of stocks,portfolio risk is heavily based on:

Accepted Answer

A)  a simple average of the variance of the stocks in the portfolio. 
B)  a weighted average of the variance of the stocks in the portfolio. 
C)  a weighted average of the covariance of the stocks in the portfolio. 
D)  the standard deviation of the stocks. 
A)  a simple average of the variance of the stocks in the portfolio. 
B)  a weighted average of the variance of the stocks in the portfolio. 
C)  a weighted average of the covariance of the stocks in the portfolio. 
D)  the standard deviation of the stocks.

Question 7

Explain the concept of a diversified portfolio.

Accepted Answer

Under investment theory,an investor who

Question 8

Efficient price discovery means that share information is disclosed at the lowest possible transactions cost.

Accepted Answer

A) True 
 B)False

Question 9

What should be the price of a share that constantly pays $2.50 annually in dividends,if the growth rate is zero and the required rate of return is 8% per annum?

Accepted Answer

A)  $22.86 
B)  $28.00 
C)  $31.25 
D)  $33.75 
A)  $22.86 
B)  $28.00 
C)  $31.25 
D)  $33.75

Question 10

When a share is trading cum-dividend,this means the seller of the share will receive the dividend payment.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is an aim of a stock split?

Accepted Answer

A)  To increase the number of shares on issue and so affect the capital structure 
B)  To reduce the dividend payments 
C)  To increase the share price 
D)  To try to improve the liquidity of shares 
A)  To increase the number of shares on issue and so affect the capital structure 
B)  To reduce the dividend payments 
C)  To increase the share price 
D)  To try to improve the liquidity of shares

Question 12

The capital structure of a company is one of the important indicators of performance.Which of the following statements regarding capital structure is incorrect?

Accepted Answer

A)  Debt to equity or shareholders' interest ratios are both measures of capital structure. 
B)  Capital structure ratios are an indicator of longer term viability and stability. 
C)  A company with a higher equity ratio is less dependent on external funding. 
D)  The capital ratios of companies, and industry groupings, are generally similar. 
A)  Debt to equity or shareholders' interest ratios are both measures of capital structure. 
B)  Capital structure ratios are an indicator of longer term viability and stability. 
C)  A company with a higher equity ratio is less dependent on external funding. 
D)  The capital ratios of companies, and industry groupings, are generally similar.

Question 13

Compared with a company's interest cover ratio,earnings before interest and tax measures its:

Accepted Answer

A)  amount of earnings for dividend payments. 
B)  expected earnings. 
C)  profitability. 
D)  return on equity. 
A)  amount of earnings for dividend payments. 
B)  expected earnings. 
C)  profitability. 
D)  return on equity.

Question 14

The S&P/ASX All Ordinaries share price index represents:

Accepted Answer

A)  changes in aggregate share market values of the largest 500 companies. 
B)  movements in the Australian share market relative to international markets. 
C)  the historical capitalisation of the 100 largest corporations. 
D)  changes in share market value, including dividend reinvestment. 
A)  changes in aggregate share market values of the largest 500 companies. 
B)  movements in the Australian share market relative to international markets. 
C)  the historical capitalisation of the 100 largest corporations. 
D)  changes in share market value, including dividend reinvestment.

Question 15

A diversified portfolio generally includes:

Accepted Answer

A)  0-5 stocks. 
B)  5-10 stocks. 
C)  10-15 stocks. 
D)  10-25 stocks. 
A)  0-5 stocks. 
B)  5-10 stocks. 
C)  10-15 stocks. 
D)  10-25 stocks.

Question 16

When a share goes ex-rights,assuming everything else remains the same,its price should:

Accepted Answer

A)  increase, as the company no longer has the right to make the shareholder convert. 
B)  decrease, as the shareholder is losing an option. 
C)  remain the same, as the market knows about it in advance. 
D)  increase, as a successful rights issue will raise a large amount of cash. 
A)  increase, as the company no longer has the right to make the shareholder convert. 
B)  decrease, as the shareholder is losing an option. 
C)  remain the same, as the market knows about it in advance. 
D)  increase, as a successful rights issue will raise a large amount of cash.

Question 17

The following is a simplified financial position statement for a company:
$$\begin{array} { | l | l | l | l | } 
\hline \text { Assets } & \$ & \text { Liabilities } & \$ \
\hline \text { Cash } & 250000 & \text { Accounts payable } & 1480000 \
\hline \text { Trading securities } & 350000 & \text { Accrued expenses payable } & 420000 \
\hline \text { Accounts receivable } & 1360000 & \text { Taxes payable } & 140000 \
\hline \text { Inventory } & 2470000 & \text { Long-term debt } & 3850000 \
\hline \text { Property } & 3350000 & \text { Shareholders' funds } & 2340000 \
\hline \text { Equipment } & 450000 & & \
\hline
\end{array}$$
Calculate the liquidity ratio.

Accepted Answer

A)  0.85 
B)  0.96 
C)  1.51 
D)  1.32 
A)  0.85 
B)  0.96 
C)  1.51 
D)  1.32

Question 18

What should be the price of a share if it paid $1.75 in dividends in the last financial year,its dividend growth rate is 4%,and the required rate of return is 11%?

Accepted Answer

A)  $25.00 
B)  $26.00 
C)  $30.28 
D)  $43.75 
A)  $25.00 
B)  $26.00 
C)  $30.28 
D)  $43.75

Question 19

A company declares a dividend of 35 cents per share,which was payable on 14 September.Immediately prior to the declaration of the dividend,the share price was $4.79.At the close of trading on the stock exchange on 13 September,the share price was $5.44.What is the theoretical ex-dividend price of the share?

Accepted Answer

A)  $4.44 
B)  $4.79 
C)  $5.09 
D)  $5.79 
A)  $4.44 
B)  $4.79 
C)  $5.09 
D)  $5.79

Question 20

The risk that impacts specifically on the share price of a particular company is called:

Accepted Answer

A)  economic risk. 
B)  business risk. 
C)  systematic risk. 
D)  unsystematic risk. 
A)  economic risk. 
B)  business risk. 
C)  systematic risk. 
D)  unsystematic risk.

Systematic risk is also referred to as:

The correlation between two shares:

What are some factors that influence investors to buy listed rather than unlisted shares?

Passive investment means building a portfolio of shares based on the strategy of:

The correlation of pairs of securities within a portfolio is called:

For a portfolio of stocks,portfolio risk is heavily based on:

Explain the concept of a diversified portfolio.

Efficient price discovery means that share information is disclosed at the lowest possible transactions cost.

What should be the price of a share that constantly pays $2.50 annually in dividends,if the growth rate is zero and the required rate of return is 8% per annum?

When a share is trading cum-dividend,this means the seller of the share will receive the dividend payment.

Which of the following is an aim of a stock split?

The capital structure of a company is one of the important indicators of performance.Which of the following statements regarding capital structure is incorrect?

Compared with a company's interest cover ratio,earnings before interest and tax measures its:

The S&P/ASX All Ordinaries share price index represents:

A diversified portfolio generally includes:

When a share goes ex-rights,assuming everything else remains the same,its price should:

What should be the price of a share if it paid $1.75 in dividends in the last financial year,its dividend growth rate is 4%,and the required rate of return is 11%?

The risk that impacts specifically on the share price of a particular company is called:

A Modern Financial System: An Overview

Commercial Banks

Non-Bank Financial Institutions

The Share Market and the Corporation

Corporations Issuing Equity in the Share Market

Forecasting Share Price Movements

Mathematics of Finance: An Introduction to Basic Concepts and Calculations

Short-Term Debt

Medium-To-Long-Term Debt

International Debt Markets

Government Debt, monetary Policy and the Payments System

An Introduction to Interest Rate Determination and Forecasting

Interest Rate Risk

Foreign Exchange: The Structure and Operation of the Fx Market

Foreign Exchange: Factors That Influence the Exchange Rate

Foreign Exchange: Risk Identification and Management

An Introduction to Risk Management and Derivatives

Future Contracts and Forward Rate Agreements

Options

Interest Rate Swaps, Cross-Currency Swaps and Credit Default

Filters

Exam 6: Investors in the Share Market

Systematic risk is also referred to as:

The correlation between two shares:

What are some factors that influence investors to buy listed rather than unlisted shares?

Passive investment means building a portfolio of shares based on the strategy of:

The correlation of pairs of securities within a portfolio is called:

For a portfolio of stocks,portfolio risk is heavily based on:

Explain the concept of a diversified portfolio.

Efficient price discovery means that share information is disclosed at the lowest possible transactions cost.

What should be the price of a share that constantly pays $2.50 annually in dividends,if the growth rate is zero and the required rate of return is 8% per annum?

When a share is trading cum-dividend,this means the seller of the share will receive the dividend payment.

Which of the following is an aim of a stock split?

The capital structure of a company is one of the important indicators of performance.Which of the following statements regarding capital structure is incorrect?

Compared with a company's interest cover ratio,earnings before interest and tax measures its:

The S&P/ASX All Ordinaries share price index represents:

A diversified portfolio generally includes:

When a share goes ex-rights,assuming everything else remains the same,its price should:

What should be the price of a share if it paid $1.75 in dividends in the last financial year,its dividend growth rate is 4%,and the required rate of return is 11%?

The risk that impacts specifically on the share price of a particular company is called:

A Modern Financial System: An Overview

Commercial Banks

Non-Bank Financial Institutions

The Share Market and the Corporation

Corporations Issuing Equity in the Share Market

Forecasting Share Price Movements

Mathematics of Finance: An Introduction to Basic Concepts and Calculations

Short-Term Debt

Medium-To-Long-Term Debt

International Debt Markets

Government Debt, monetary Policy and the Payments System

An Introduction to Interest Rate Determination and Forecasting

Interest Rate Risk

Foreign Exchange: The Structure and Operation of the Fx Market

Foreign Exchange: Factors That Influence the Exchange Rate

Foreign Exchange: Risk Identification and Management

An Introduction to Risk Management and Derivatives

Future Contracts and Forward Rate Agreements

Options

Interest Rate Swaps, Cross-Currency Swaps and Credit Default

Filters