Identify the correct formula for calculating the tax burden.

• A) Net Income/Pre-tax Income
• B) EBIT/Income tax expense
• C) Sales/Income taxes payable
• D) Pre-tax Income/EBIT

Which of the following stage of the industry life cycle offers the highest potential returns and greatest risk?

• A) Expansion stage
• B) Pioneering stage
• C) Stabilization stage
• D) Declining stage

Which one of the following is correct formula for calculating operating margin?

• A) Net income/Net Sales
• B) Operating income/credit sales
• C) Operating income/Net Sales
• D) Net Profit/Net Sales

Which of the following take place at the expansion stage of the industry life cycle?

• A) Firm operations get more stable and dependable
• B) Costs get stable rather than decreasing or increasing
• C) No rapid growth in demand
• D) Sales growth decline as new products are developed

What will be the effect on intrinsic value if the risk free rate and required rate of return rises?

• A) It will have no effect
• B) It will rise
• C) It will fluctuate
• D) It will fall

Market value for shares of Company A is Rs. 500, company is paying an annul dividend of Rs. 10 to shareholders whereas earning par share is Rs. 100. What will be its P/E ratio?

• A) 4.9
• B) 10
• C) 5.1
• D) 5

What will be the effect on intrinsic value if the risk free rate and required rate of return falls?

• A) It will have no effect
• B) It will rise
• C) It will fall
• D) It will fluctuate

Which of the following ratios are of more concern for the shareholders?

• A) Liquidity and profitability
• B) Liquidity and leverage
• C) Profitability and leverage
• D) Profitability and activity

All of the following are the problems associated to the Dividend Discount Model, EXCEPT:

• A) This model requires constant earnings per share
• B) This model must estimate future dividends
• C) This model need infinite stream of dividends
• D) This model has uncertain dividend stream

All of the following steps are involved in estimating the earnings stream, EXCEPT:

• A) Estimating corporate sales
• B) Estimating corporate earnings before taxes
• C) Estimating corporate earnings after taxes
• D) Estimating corporate liabilities and assets

Which of the following is defined as a procedure for valuing the price of a stock by using predicted dividends and discounting them back to present value?

• A) Bollinger bands
• B) Dividend Discount Model
• C) On Balance Volume
• D) Relative Strength Index

The higher the coupon on the bond:

• A) The higher is its reinvestment rate risk
• B) The higher is its reinvestment rate of return
• C) The lesser is its reinvestment rate of return
• D) The lesser is its reinvestment rate risk

If the Dow Jones Industrial Average stock splits 3 for 1 then what impact will this have on the index divisor?

• A) Index divisor remains constant
• B) Index divisor will incline
• C) Index divisor will decline
• D) Index divisor multiply

Which of the following is NOT true about January Effect anomaly?

• A) Stock returns are inexplicably high in January
• B) January effect is also called November through January effect
• C) Small firms tends to perform better in January
• D) Large firms tends to perform better in January

Value at Risk (VaR) modeling is used for evaluation of:

• A) Unsystematic risk
• B) Systematic risk
• C) Unique risk
• D) Diversifiable risk

If the value of correlation between returns of two securities is 0.9, it means:

• A) If price of one stock goes up, the price of other goes down
• B) Price movement of one asset has no effect on the price movement of the other asset
• C) Prices of both stocks move in same direction
• D) Prices of both stocks move in opposite directions

In ___________, the factors are attributes of stocks or companies that are important in explaining cross-sectional differences in stock prices.

• A) All of the given models
• B) Fundamental factor models
• C) Statistical factor models
• D) Macroeconomic factor models

Standard deviation of a portfolio measures which of the following?

• A) Systematic risk and unsystematic risk
• B) Systematic risk and market risk
• C) Unsystematic risk
• D) Systematic risk

Which one of the following statements regarding risk-seeker investors is TRUE?

• A) The investors who are willing to take on additional risk
• B) The investors who avoid additional risk and accept low returns
• C) The investors who take on additional risk only when it’s accompanied by a higher return
• D) The investors who only look at the potential gains of each investment and ignores the potential risk

Some investors prefer high-risk investments and some investors accept low-risk investments. Which of the following terms best describes this statement?

• A) Risk tolerance
• B) Rate of return
• C) Standard deviation
• D) Risk aversion