Module 12 (Set 1)
1. Over the long term, a company’s stock price will be most affected by:
A. speculation
B. management
C. earnings
D. growth potential
2. The larger the market capitalization of a stock, the higher its:
A. revenue
B. profit
C. stock price
D. number of shares
3. The higher the Price to Earning ratio (P/E ratio) of a stock, the higher its:
A. profitability
B. valuation
C. equity
D. stock price
4. 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
5. Which of the following risks is the lowest risk of Exchange Traded Funds?
A. Tracking error
B. Market brisk
C. Counterparty risk
D. Concentration risk
6. Aggregate Demand can be calculated by adding of the following except
A. Spending
B. Investment
C. Exports
D. Imports
7. Aggregate Demand can decrease if there is an increase in:
A. interest rates
B. wages
C. government spending
C. All of the above
8. Aggregate Demand can increase if there is a decrease in:A. consumer confidence
B. income tax
C. housing prices
D. All of the above
9. Which of the following will NOT result in long term economic groeth?
A. Technological improvements
B. Increase in Investment
C. Decrease in working population
D. Increase in labour productivity
10. Which economic indicator uses an approach that compares a consistent base of products year on year?
A. Unemployment
B. Purchasing Managers Index (PMI)
C. Gross Domestic Product (GDP)
D. Consumer Price Index (CPI)
11. The unemployment rate is:A: The percentage of the total labour force that is employed
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.
12. Represents the market value of 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)
13. Which economic indicator when showing a reading of 50 or higher generally indicates thatb the general economy is expending?
A. Unemployment Rate
B. Purchasing Managers Index (PMI)
C. Gross Domestic Product (GDP)
D. Consumer Price Index (CPI)
14. 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
15. Monetary Policy is the regulation of the money supply
B. interest rate
C. Both of the above
D. None of the above
16. Controlling the money supply and interest rates can: (i) control inflation, (ii) stabilize currency (iii) grow the economy and (iv) reduce the amount of money that is spent by consumers:
A. i
B. ii
C. I, ii and iii
D. All of the above
17. 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
18. 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
19. 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. All of the above
20. 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
21. The issuance of government bond will:
A. decrease interest rates
B. increase aggregate demand for goods and services
C. Both of the above
D. None of the above
22 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
23. Which of the following industry life cycle phases is characterized by low demand for the industry’s product and upstart costs?
A. Pioneering Phase
B. Growth Phase
C. Stabilization Phase
D. Deceleration Phase
24. 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. Mature Growth Phase
D. Deceleration Phase
25. Which of the following industry life cycle phases is characterized by declining growth as demand shifts to other substitute products?
A. Pioneering Phase
B. Growth Phase
C. Maturity Phase
D. Deceleration Phase
26. 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 product
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
27. Which of the following will form a barrier to entry for new entrants to an industry?
A. Low capital requirements
B. Easy access to suppliers and distribution channels
C. Strong branding
D. Low unit costs
28. The bargaining power of a supplier increases when:
A. the resources 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
29. The bargaining power of customers increases as:
A. the number of customers decreases
B. the volume of purchases increases
C. the number of alternative supplies increases
D. the possibility of integrating backwards decreases.
30. The threat of substitute products increases as:
A. the price and performance of the substitute product can match the existing product
B. customer become comfortable with the existing product
C. the brand of the existing product is established
D. All of the above
31. Which of the following is NOT a stage in the business cycle?
A. Recession
B. Recovery
C. Expansion
D Failure
32. In the ______ stage, commodities and stocks are attractive investment opportunities.
A. Recession
B. Recovery
C. Early Expansion
D. Late Expansion
33. In the ______ stage, cyclical investments are attractive investment opportunities.
A. Recession
B. Recovery
C. Early Expansion
D. Late Expansion
34. In the ______ stage, real estate is attractive investment opportunity.
A. Recession
B. Recovery
C. Early Expansion
D. Late Expansion
35. In the ______ stage, bonds are an attractive investment opportunity.
A. Recession
B. Recovery
C. Early Expansion
D. Late Expansion
36. 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
37. Which type of fixed income securities has highest default risk?
A. callable bonds
B. Junk bonds
C. Zero-coupon bonds
D. Corporate bonds
38. Which type of fixed income securities is usually issued a discount to par value?
A. callable bonds
B. Junk bonds
C. Zero-coupon bonds
D. Corporate bonds
40. Which type of fixed income can be prepaid before the maturity date?
A. Government bonds
B. Callable bond
C. Zero-coupon bonds
D. Corporate bonds
41. Implied volatility is used in calculating an option’s premium and is essentially the:
A. estimated volatility of a security’s price.
B. maximum volatility of a security’s price
C. minimum volatility of a security’s price
D. average volatility of a security’s price
42. What type of warrants can be used to protect against a decline in a stock portfolio value?
A. Put warrant
B. Call warrant
C. Both of the above
D. None of the above
43. A _______ exercise price ________ the probability of a call warrant being exercised and _______ the probability of a put warrant being exercised.
A. high, reduce, increases
B. high, increases, reduce
C. low, reduces, increases
D. high or low, does not effect, does not affect
44. Which of the following statements is FALSE regarding derivatives?
A. The payoff from derivative over a given period of time does not depend on the performance of the underlying asset.
B. Derivatives are traded on centralized and regulated exchanges.
C. Derivatives are traded between counterparties.
D. All of the above.
45. Which of the following derivatives are NOT traded on an exchange?
A. Forwards
B. Futures
C. Options
D. All of the above
46. Which of the following types of contracts cannot be settled by physical delivery?
A. Forwards
B. Futures
C. Both of the above
D. None of the above
47. Which of the following types of derivative contract is the most heavily traded?
A. Foreign exchange contracts
B. interest rate contracts
C. Credit default swaps
D. Commodity contract
48. Derivatives can be used for?
A. Hedging
B. Speculating
C. Arbitraging
D. All of the above
49. Which of the following statements is FALSE?
A. Structured notes and structured funds contain embedded options
B. Barrier options may include knock-in and knock-out features
C. Both of the above
D. None of the above
50. Which of the following factors can affect the present and future price of commodities and financial assets?
A. Political
B. Economic
C. socio-cultural
D. All of the above
51. Which of the following type of derivatives has no inherent value and is determined by movements in the prize and underlying value of an asset?
A. Forwards
B. Futures
C. Options
D. All of the above
52. When trading futures contracts, an investor need not pay for the entire contract at the time the trade is initiated. Instead, the investor makes an upfront payment known as the:
A. Initial Margin
B. Maintenance Margin
C. Additional Margin
D. Minimum Margin
53. Which of the following is known as the minimum margin amount that must be maintained on deposit by the customer with the broker at all times?
A. Initial Margin
B. Maintenance Margin
C. Additional Margin
D. Minimum Margin
54. If the balance in the margin account falls below the maintenance level, the account must be returned to the _______ margin level immediately.
A. Initial
B. Maintenance
C. Additional
D. Minimum
55. Which of the following types of contracts are exposed to counterparty risk?
A. Forwards
B. Futures
C. Options
D. All of the above
56. Which of the following is a non-binding agreement that sets the basic terms and conditions under which an investment will be made?
A. Term sheet
B. Non-binding contract
C. Policy document
D. All of the above
57. Which of the following statements regarding derivative contracts is FALSE?
A. OTC derivatives contracts can be cancelled by either party
B. Futures are standardized contracts
C. Forwards are a private contracts
D. Forwards are non-transferable between parties.
58. In general, implied volatility increases when the market is _____ and decreases when the market is _______.
A. bearish, bullish
B. bullish, bearish
D. sideways, bearish
E. bullish, sideways
59. A call option is ______ when the strike price is about the spot price of the underlying security?
A. in the money
B. out of the money
C. at the money
D. near the money
60. A put option is _____ when the strike price is below the spot price of the underlying security
A. in the money
B. out of the money
C. at the money
D. near the money
Module 12 (Set 2)
1. All the following are EQUITY SECURITIES except:
A. Ordinary shares
B. Non-ordinary shares
C. Non-voting shares
D. Preference shares
2. Which of the following EQUITY SECURITIUES has the lowest risk?
A. Ordinary shares
B. Non-ordinary shares
C. Non-voting shares
D. Preference shares
3. Which of the following financial instruments is a DERIVIATIVE?
A. Futures
B. option
C. Warrants
D. All of the above
4. Which of the following financial instruments gives an investor the right to buy or sell a specific amount of an underlying asset within a specific period at a specific time?
A. Futures
B. Options
C. Warrants
D. All of the above
5. Which of the following financial instruments gives an investor the right to buy a specific number of shares from the issuing company at a specific price over a given period of time??
A. Futures
B. Options
C. Warrants
D. All of the above
6. Which of the following financial instruments is an agreement to provide for the future delivery of a particular asset between a buyer and a seller as a predetermined price?
A. Futures
B. Options
C. Warrants
D. All of the above
7. Brokers in the financial markets can be classified as:
A. Issuers
B. Intermediaries
C. Regulators
D. Investors
8. Market makers in the financial markets can be classified as:
A. Issuers
B. Intermediaries
C. Regulators
D. Investors
10. The ability to buy or sell a security at a price not substantial different from the prices for previous transactions is known as:
A. Tradability
B. Solvency
C. Liquidity
D. Market depth
11. The number of buyers and sellers willing to trade at prices near the current price of a security is known as:
A. Tradability
B. Solvency
C. Liquidity
D. Market Depth
12. The higher the liquidity of a security, the ______ its bid-offer spread.
A. narrower
B. wider
C. No influence
D. None of the above
13. Which of the following is NOT a method of raising capital?
A. A regulated exchange
B. Private equity
C. Mezzanine financing
D. Margin financing
14. Which of the following does not occur in the primary market?
A. Initial public offers for equities
B. Tender of government binds
C. Rights issue for securities
D. Offers of new fixed income instruments
15. Which of the following correctly describes a secondary market?
A. A market where an investor purchases a security from another investor
B. A market where the security is purchased directly from the issuer
C. A market where secondary listings are traded
D. A market where unlisted securities are purchased
16. Which of the following instruments carries the higest risk?
A. Treasury bills
B. Bonds
C. Equities
D. Cash
17. Which of the following instruments carries the lowest risk?
A. Treasury bills
B. Bonds
C. Equities
D. Cash
18. Jane purchases 1000 shares of ABC Company Berhad for RM10 per share and receives a dividend of RM1 per share. She sells the shares one year later at RM11. The rate of return is:
A. 5%
B. 10%
C. 15%
D. 20%
19. Jane purchases 1000 shares of ABC Company Berhad for RM10 per share and received of RM1 per share. She sells the shares one year later at RM18. The rate of return is:
A.0%
B. -5%
C. -10%
D. -15%
20. The rate of return an investor expects to achieve from an investment is referred to as the:
A. Point return
B. Point estimate
C. Point future
D. Point occurance
21. The expected rate of return can be calculated from the:
A. weighted average of profitable returns
B. weight average of lowest returns
C. weighted average of highest returns
D. average number of possible returns
22. The probability of an economic recession is 20% and the expected rate of return during such a period is -30%. The probability of an economic boom is 20% and the expected rate of return during such a period is 25%. The probability of a stable economy is 60% and the expected rate of return during such a period is 15%. What is the expected rate of return?
A. 6%
B. 7%
C. 8%
D. 9%
23. The standard deviation of returns can be calculated by the:
A. sum of all variances
B. average variance
C. expected variance
D. square root of the variance
24. The risk per unit of expected return is known as the:
A. Coefficient of variation
B. Standard deviation
C. Variance
D. Volatility
25. Coefficient of variation can be calculated as:
A. Variance divided by Expected Rate of Return
B. Standard Deviation divided by Expected Rate of Return
C. Variance multiplied by Expected Rate of Return
D. Standard Deviation multiplied by Expected Rate of Return
26. The risk of closure of an exchange is known as:
A. Market risk
B. Liquidity risk
C. Counterparty risk
D. Operational risk
27. The risk of potential failure of a party to honour a contract between two parties is known as:
A. Market risk
B. Liquidity risk
C. Counterpart risk
D. Operational risk
28. The risk of investment loss due to an economic recession is known as:
A. Market risk
B. Liquidity risk
C. Counterparty risk
D. operational risk
29. The risk of lack of potential buyers to purchase a security an investor wants to sell is known as:
A. Market risk
B. Liquidity risk
C. Counterparty risk
D. Operational risk
30. Which of the following methods is a type of fundamental analysis method?
A. Support and resistance analysis
B. Price and volume analysis
C. Risk management modelling
D. Financial statement analysis
31. Which of the following methods is a type of technical analysis method?
A. Support and resistance analysis
B. Industry analysis
C. Risk management modelling
D. Financial statement analysis
32. Which of the following methods is a type of quantitative analysis method?
A. Support and maintenance analysis
B. Industry analysis
C. Risk management analysis
D. Financial statement analysis
33. Which of the following statements show the assets and liabilities of a company?
A. Balance sheet
B. Income statement
C. Funds statement
D. None of the above
34. Which of the following statements show the movement in cash within a company?
A. Balance sheet
B. Income statement
C. Funds statement
D. None of the above
35. Which of the following statements show the expresses of a company?
A. Balance sheet
B. Income statement
C. Funds statement
D. None of the above
36. Which of the following parameters is not required in calculating the QUICK RATIO of a company?
a. Current assets
B. Current liabilities
C. Inventory
D. None of the above
37. Which of the following parameters is not required in calculating the CURRENT RATIO of a company?
A. Current assets
B. Current liabilities
C. Inventory
D. None of the above
38. Which of the following parameters is not required in calculating the DEBT TO EQUITY RATIO of a company?
A. Total assets
B. Total debt
C. Total shareholders’ equity
D. None of the above
39. Which of the following parameters is not required in calculating the DEBT TO TOTAL ASSETS RATIO of a company?
A. Total assets
B. Total debt
C. Total shareholders’ equity
D. None of the above
40. Which of the following parameters is not required in calculating the INTEREST COVERAGE of a company?
A. Earnings Before Interest and Taxes
B. Interest Expenses
C. Lease Payments
D. None of the above
41. Which of the following statements regarding STRUCTURED PRODUCT is true?
A. They must issue the same coupon throughout the entire term.
B. They can issue coupons based on certain market conditions being met.
C. They can only bought and issued in once currency
D. All of the above
Note: What is STRUCTURED PRODUCT?
Structured products are pre-packaged investments that normally include assets linked to interest plus one or more derivatives. They are generally tied to an index or basket of securities and are designed to facilitate highly customized risk-return objectives…Read more
42. David is an investor who is keen to own share of ABC Ltd. However he feels that its current share price is too high. A strategy to overcome this would be to:
A. buy an Equity Linked Note with an out-of-money call on ABC Ltd
B. buy an Equity Linked Note with an in-the-money put on ABC Ltd
C. buy an Equity Linked Note with an out-of-money put on ABC Ltd
D. All of the above
43. Which of the following types of risks is a structured fund exposed to?
A. Financial risk
B. Operational risk
C. Legal risk
D. All of the above
44. For a STRUCTURED PRODUCT shorting a put option on a specific securities index, the put option will be:
A. in-the-money
B. out-of-the-money
C. worthless
D. at its maximum value
Note: What is OTM / ITM?
“Out of the money” (OTM) is an expression used to describe an option contract that only contains extrinsic value. These options will have a delta of less than 0.50. An OTM call option will have a strike price that is higher than the market price of the underlying asset. Alternatively, an OTM put option has a strike price that is lower than the market price of the underlying asset. OTM options may be contrasted with in the money (ITM) options…Read more
45. Which of the following types of products may result in a total loss of investment capital?
A. Equity Linked Structured Fund
B. Equity Linked ETF
C. Equity Linked ETN
D. Equity Linked ILP
46. The call price of a call barrier option must be:
A. lower than the strike price
B. equal to the strike price
C. Both of the above
D. None of the above
47. An investor who is speculating a large market movement should use a:
A. Knock-out barrier option
B. Knock-in barrier option
C. Down-and-out barrier option
D. Up-and-out barrier option
Note: What is KNOCK-IN OPTIONS?
A knock-in option is a type of barrier option where the rights associated with that option only come into existence when the price of the underlying security reaches a specified barrier during the option’s life. Once a barrier is knocked in, or comes into existence, the option remains in existence until it expires…Read more.
58. Which of the following types of CALLABLE BULL/BEAR CONTRACT (CBC) had its call price at a different price from the strike price?
A. N-CBBC
B. R-CBBC
C. Both of the above
D. None of the above
49. Extended Settlement Contracts can be contra if they are of the same:
A. underlying asset
B. contract month
C. Both of the above
D. none of the above
50. Foreign exchange accumulator are designed using:
A. foreign exchange knock-out options
B. equity linked notes
C. interest rates swaps
D. Foreign currency swaps
51. Which of the following statements regarding RANGE ACCRUAL NOTES is true?
A. Its downside is capped at the maximum coupon rate
B. Early redemption is subject to the dealer’s bid
C. Its performance is based on multiple underlying references
D. All of the above.
52. During the tenure of an accumulator, an investor can realise a gain if the underlying share price remains:
A. above the strike price
B. below the knock-out barrier
C. Both of the above
C. None of the above
53. Which of the following statements regarding FUTURES is false?
A. Futures are traded in contracts
B. Each futures contract has a standard size which is set by the futures exchange it trades on
C. Not all futures have an underlying asset
D. Some futures require delivery of the actual commodity.
54. Which of the following statements regarding CASH MARKET is false?
A. In a cash market, the exchange of goods and money between the seller and the buyer takes place at a specified date in the future.
B. When comparing a specific commodity, the price in the cash market is usually less than its price in the futures market
C. The cash market is also known as the spot market
D. Cash market transactions can take place either on a regulated exchange or over-the-counter (OTC)
Note: What is CASH MARKET?
A cash market is a marketplace in which the commodities or securities purchased are paid for and received at the point of sale. For example, a stock exchange is a cash market because investors receive shares immediately in exchange for cash…Read more
55. Which of the following statements regarding FUTURES is false?
A. Futures can be used to hedge against adverse future price movements in the underlying commodity
B. Cash prices and futures values move closely in tandem
C. A business person can always rely on futures to offset the full amount of losses in the actual commodity he/she holds
D. A speculator can make more money in the futures market with less capital compared to the actual cost owning the underlying commodity.
56. Which of the following statements regarding FUTURES is NOT True?
A. Futures are highly leveraged investment
B. Hedgers make up the bulk of the futures market
C. Margin accounts are usually used to trade futures
D. The real value of the contract is only exchanged when delivery takes place
Note: What are FUTURES?
Futures are derivative financial contracts that obligate parties to buy or sell an asset at a predetermined future date and price. The buyer must purchase or the seller must sell the underlying asset at the set price, regardless of the current market price at the expiration date…Read more
57. A STRUCTURED PRODUCT usually consists of:
A. indices
B. securities
C. derivatives
D. All of the above
Note: What Are STRUCTURED PRODUCT?
Structured products are pre-packaged investments that normally include assets linked to interest plus one or more derivatives. They are generally tied to an index or basket of securities and are designed to facilitate highly customized risk-return objectives…Read more
58. STRUCTURED PRODUCTS are:
A. synthetic investment instruments
B. specifically to meet specific needs that cannot be met from standard
financial instruments
C. often include the use of various derivatives
D. All of the above
59. Which of the following is NOT true about STRUCTURED PRODUCTS?
A. They lack of liquidity
B. The full extent of returns can usually be realized before maturity
C. They can provide access to hard-to-reach exposures
D. All of the above.
60. Which of the following is risk of investing in STRUCTURED PRODUCT?
A. credit risk
B. pricing transparency
C. product complexity
D. All of the above