Sample Questions
1- Stocks and bonds would be classified as:
a.
real assets.
b.
indirect assets.
c.
personal assets.
d.
financial assets.
2- Security analysis is most concerned with:
a.
analysis of the overall securities market and its direction.
b.
valuation and analysis of individual securities.
c.
purchasing securities at the best price.
d.
determination of the investor’s required return.
3- In general, the ex ante risk-return trade-off:
a.
slopes upward.
b.
slopes downward.
c.
is flat.
d.
is impossible to determine.
4- Expected return is:
a.
b.
c.
d.
always related to historical return.
not related to risk.
always equal to required return.
based on probability estimates of future anticipations.
5- Which of the following would be considered a risk-free investment?
a.
gold
b.
equity in a house
c.
high-grade corporate bonds
d.
U.S. Treasury bills
6- International investing:
a.
is only practical for institutional investors.
b.
increases the overall risk of a stock portfolio.
c.
always leads to higher returns than a domestic portfolio.
d.
can reduce risk due to increased diversification.
7- Emerging markets are often characterized as:
a.
low risk, low return markets.
b.
low risk, high return markets.
c.
high risk, low return markets.
d.
high risk, high return markets.
8- Technically, investments include:
a.
only financial assets.
b.
only marketable assets.
c.
financial and real assets that are marketable or non-marketable.
d.
only financial and real assets that are marketable.
9- Portfolio management is most concerned with:
a.
generating the highest expected return regardless of risk.
b.
the income tax planning for security returns.
c.
the retirement planning process.
d.
the selection, revision, and evaluation of a group of assets.
10- The primary nonmarketable assets held by investors include all of the following
except:
a.
savings deposits.
b.
GICs.
c.
Treasury bills.
d.
Canada Savings Bonds (CSBs).
11- Which of the Canadian Treasury securities is always sold at a discount?
a.
Treasury bills
b.
Treasury notes
c.
Treasury bonds
d.
All of the Treasury securities are sold at a discount.
12- Which of the following money market instruments is normally used in international
trade?
a.
Negotiable CDs
b.
Commercial paper
c.
Repurchase agreements
d.
Banker’s acceptances
13- The most popular type of investment company is a:
a.
unit investment trust.
b.
mutual fund.
c.
closed-end investment company.
d.
real estate investment trust.
14- Which of the following trade on stock exchanges and OTC markets?
a.
unit investment trusts
b.
closed-end investment companies
c.
open-end investment companies
d.
All trade on stock exchanges.
15- Which of the following statements concerning the trend in investment company
growth is true?
a.
The recent trend shows more growth in closed-end investment
companies.
b.
The recent trend shows more growth in unit investment trusts.
c.
The recent trend shows more growth in open-end investment
companies.
d.
All investment companies have been growing at an equal rate.
16- If a mutual fund holds a substantial amount of Treasury bills, this is probably a(an):
a.
tax-exempt fund.
b.
conservative bond fund.
c.
income fund.
d.
money market mutual fund
17- The measure that allows investors to assess total performance over a stated period of
time is the:
a.
total return.
b.
cumulative total return.
c.
cumulative average return.
d.
total indexed return.
18- Which of the following return measures smoothes out variations in performance?
a.
total return
b.
cumulative return
c.
average annual return
d.
none of these
19- The over-the-counter market:
a.
is a brokered market.
b.
is an auction market.
c.
is a negotiated market.
d.
has a specific geographic location.
20- Securities dealers are compensated by:
a.
the underwriting spread.
b.
commissions paid by the buyers of the security.
c.
commissions paid by the sellers of the security.
d.
guaranteed investment contracts.
21- A major advantage of private placements over public offerings is:
a.
greater marketability.
b.
lower interest cost.
c.
don’t need a full prospectus.
d.
all of these.
22- Most of the members on the NYSE are associated with:
a.
investment banks.
b.
commercial banks.
c.
the SEC.
d.
stock brokerage firms.
23- A block trade is defined as a transaction involving at least:
a.
1,000 shares.
b.
5,000 shares.
c.
10,000 shares.
d.
1 million shares.
24- Which of the following statements regarding the Nasdaq Stock Market is not true?
a.
All OTC stocks trade on the Nasdaq Stock Market.
b.
Dealers make a market by standing ready to buy and sell securities.
c.
Nasdaq is both a national and international stock market.
d.
Nasdaq’s electronic trading system provides instantaneous
transactions.
25- A computerized trading network of market makers in OTC stocks, that reports up-tothe-minute trades is the:
a.
National Markets System.
b.
Electronic Communications Networks.
c.
Internet Investment Service.
d.
Global Investment Network.
26- The Dow Jones Industrial Average is composed of:
a.
OTC stocks.
b.
cyclical stocks.
c.
blue chip stocks.
d.
defensive stocks.
27- A major difference between the Standard & Poor’s 500 Index and the Dow Jones
Industrial Average is that:
a.
the S&P 500 is more dominated by OTC stocks than the Dow
Jones Industrial Average.
b.
the S&P 500 is more difficult to calculate than the Dow Jones
Industrial Average.
c.
the S&P 500 is a market value index and the Dow Jones Industrial
Average is price weighted.
d.
the S&P 500 is more stable than the Dow Jones Industrial Average.
28- Most secondary bond trading takes place on the:
a.
NYSE.
b.
American Stock Exchange.
c.
OTC.
d.
Philadelphia Exchange.
29- Which of the following statements about the NYSE is the most true?
a.
Over 10,000 companies are listed on the NYSE.
b.
Specialists account for over 50 per cent of the seats on the NYSE.
c.
The NYSE is the oldest and most prominent secondary market in
the U.S.
d.
Institutional investors do not trade on the NYSE.
30- RBC Dominion and Nesbitt Burns are examples of:
a.
discount brokers.
b.
wholesale brokers.
c.
full-service brokers.
d.
blue-chip brokers.
31- Full-service stockbrokers earn their income from all the following except:
a.
from selling securities owned by their brokerage firm.
b.
from commissions charged on customers’ orders.
c.
from selling mutual funds owned by their firms.
d.
trading for their own account
32- Which of the following accounts requires just one annual fee?
a.
a cash account
b.
a wrap account
c.
a margin account
d.
All of these require an annual fee.
33- Which of the following requires a relatively large minimum investment, usually
$100,000 or higher?
a.
a cash account
b.
an asset management account
c.
a margin account
d.
a wrap account
34- The bid price is the:
a.
lowest price at which a dealer will sell.
b.
highest price at which a dealer will sell.
c.
highest price offered by a dealer.
d.
lowest price offered by the dealer.
35- If an investor is attempting to buy a stock that is very volatile, it would be best to use
a:
a.
market order.
b.
limit order.
c.
stop-loss order.
d.
contingency order.
36- Dividend reinvestment plans:
a.
enable investors to earn money market rates on their dividend
income.
b.
enable investors to directly purchase shares from corporations,
thereby eliminating brokerage commissions.
c.
are provided by full-service brokerage houses only.
d.
are provided by corporations to their employees only.
37- Ms. Brown sold short 100 shares of common stock at $78 per share. The price has
declined to $69. The outlook for the stock is mixed, so she would cover her short position
if the stock moves up as much as $1 but hold if it continues down. Ms. Brown should
place a:
a.
sell stop order at $70.
b.
buy stop order at $70.
c.
sell limit order at $70.
d.
buy limit order at $70.
38- Mr. King has researched a small company, whose stock is selling at $7 5/8. He wants
to buy 1,000 shares but thinks that he might get the stock at $7 3/8. To try to buy the
stock at the lower price, he should place a:
a.
sell stop order at $7 3/8.
b.
buy stop order at $7 3/8.
c.
sell limit order at $7 3/8.
d.
buy limit order at $7 3/8.