Question 1

What is inferred in case the share price is moving above the simple moving average line?

Accepted Answer

When the share price is moving above the simple moving average line, it is an indication that the price is increasing. This means that there is an upward trend in the market and investors are willing to pay more for the shares. It does not necessarily mean that the company is good or that the market is positive, as other factors can also influence the share price.

Question 2

Which of the following estimates are needed while applying fundamental analysis to the market?

Accepted Answer

All of the given options (stream of shareholder benefits, earnings and dividends, required return or earnings multiple) are fundamental factors that are crucial for applying fundamental analysis to the market. The stream of shareholder benefits includes any potential cash flows, dividends, or stock repurchases that investors may receive. Earnings and dividends are important indicators of a company's financial health and ability to generate returns for its shareholders. The required return or earnings multiple helps investors understand the level of risk associated with investing in a particular stock and enables them to compare the value of different stocks within the same industry or sector.

Question 3

Which of the following shows relationship between two moving averages of prices?

Accepted Answer

Moving average convergence/divergence (MACD) shows the relationship between two moving averages of prices. It is calculated by subtracting a longer-term exponential moving average from a shorter-term exponential moving average. The resulting MACD line is often plotted alongside a signal line, which is a moving average of the MACD line. The crossing of these two lines indicates potential buy and sell signals.

Question 4

Which of the following approaches is a valuation relative to financial performance measure?

Accepted Answer

The answer of Which of the following approaches is a...

Question 5

Which of the following has the assumptions of absence of personal taxes, single-period investment and riskless borrowing or lending?

Accepted Answer

The Capital Asset Pricing Model assumes absence of personal taxes, single-period investment and riskless borrowing or lending.

Question 6

Which of the following statements hold true for bid price?

Accepted Answer

Bid price is the price at which a broker is willing to buy a certain security, while ask price is the price at which a seller is willing to sell their securities to buyers.

Question 7

Which of the following types of bonds are usually unsecured debts maturing in 20-40 years and paying semi-annual interest?

Accepted Answer

Corporate bonds are usually unsecured debts maturing in 20-40 years and paying semi-annual interest. Municipal bonds are issued by state and local governments, convertible bonds can convert into equity or stock, and zero coupon bonds do not pay interest but are sold at a discount and mature at face value.

Question 8

The APT was developed in 1976 by __________.

Accepted Answer

The APT was developed by Stephen Ross in 1976. Lintner, Modigliani and Miller, and Sharpe all made significant contributions in finance, but not specifically related to the development of the APT.

Question 9

Which of the following measures the sensitivity of the asset's price to interest rate movements, expressed as a number of years?

Accepted Answer

Duration measures the sensitivity of the asset's price to interest rate movements, expressed as a number of years. Yield to maturity is the total return anticipated on a bond if the bond is held until maturity. Convexity measures the curvature of the relationship between bond prices and bond yields. Immunization is a strategy used to manage interest rate risk by matching the duration of assets and liabilities.

Question 10

Which of the following analysts think that supply and demand play an important role?

Accepted Answer

The answer of Which of the following analysts think that...

Question 11

Which of the following is the current market in which all buying and selling is done on cash or margin basis?

Accepted Answer

The regular market is the current market in which all buying and selling is done on cash or margin basis. Target market refers to a specific group of consumers for which a product is designed or marketed. Historic market refers to a market that has existed for a long time and is often associated with traditional or historical products. Borough market refers to a specific market in London that sells a variety of food and drink products.

Question 12

Which of the following represents an unusually risky stock?

Accepted Answer

Penny stocks are typically issued by small, relatively unknown companies and trade at a low price. They are also highly volatile and can be subject to fraudulent practices, making them an unusually risky investment. Blue chip stocks are typically issued by large, established companies with a strong financial track record, while growth stocks are issued by companies with significant growth potential but may also carry significant risks.

Question 13

All of the following are properties of stop order Except:

Accepted Answer

Rapid execution is not a property of stop orders. Stop orders are designed to be triggered when a specific price is reached, and they may not be executed immediately.

Question 14

Which of the following involves an additional source of basis risk due to the difference between the asset being hedged and the asset underlying the futures?

Accepted Answer

Cross hedge involves an additional source of basis risk due to the difference between the asset being hedged and the asset underlying the futures. A long hedge involves buying futures contracts to hedge against the price increase of an asset, whereas a short hedge involves selling futures contracts to hedge against the price decrease of an asset. A stack hedge involves hedging multiple future contracts of the same underlying asset.

Question 15

The practice of spreading money among different investments to reduce risk is known as _______.

Accepted Answer

Diversification involves spreading money among different investments to reduce risk by investing in various assets such as stocks, bonds, and commodities across different industries and sectors. It helps to minimize the impact of negative events on an individual investment, thus providing a cushion to the overall portfolio. Risk aversion is a personal preference for avoiding risks and tends to be subjective, while securitization refers to the process of creating financial securities by pooling similar assets and selling them to investors. Sector rotation involves shifting investments from one sector to another based on economic or market trends.

Question 16

Which of the following function removes the fear of buying and selling at ripe of price?

Accepted Answer

Fair pricing function removes the fear of buying and selling at ripe of price as it ensures that the prices are fair and reasonable for both buyers and sellers.

Question 17

Which of the following considers the size of the company and needs no adjustment for stock splits?

Accepted Answer

Capitalization weighting considers the size of the company and does not need adjustment for stock splits, whereas price weighting does not consider the size of the company and requires adjustment for stock splits. Equal weighting and base weighting are not relevant to this question.

Question 18

Which of the following promotes education and ethical behavior among those involved in investment business?

Accepted Answer

The answer of Which of the following promotes education and...

Question 19

Which of the following index is also known as value weighting?

Accepted Answer

Capitalization weighting is also known as value weighting because it bases the weight of each stock in the index on its market capitalization, which is calculated by multiplying the stock's price by its number of outstanding shares. This means that stocks with a higher market capitalization will have a larger impact on the index value.

Question 20

In which of the following cases resistance occurs?

Accepted Answer

Resistance occurs when the price of an asset is unable to surpass a prior high. This is typically seen as a level at which there is selling pressure and the price cannot continue upward. Inability to break below a prior low would be a form of support, and inability to repair beyond a prior low does not relate to resistance.

Exam 2: Certified Trust and Financial Advisor