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Question 1 of 10
1. Question
What is the role of specialist in trading securities?
I. They are responsible for movement in the price of securities.
II. To maintain orderly trading practices in the market.
III. Provides price with stability.
IV. They try to prevent large price disparities that may occur when the trading day opens.Correct
Specialists’ main roles are to ensure fair and orderly market conduct for his or her specific security. Specialists also attempt to prevent large price disparities that may occur when the trading day opens.
Incorrect
Specialists’ main roles are to ensure fair and orderly market conduct for his or her specific security. Specialists also attempt to prevent large price disparities that may occur when the trading day opens.
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Question 2 of 10
2. Question
Which of the following statements is/ are true?
I. Market making broker dealer sell from their inventory at the ask price and buy at the bid price.
II. Markups are fees that broker-dealers collect when they act as a principal
III. Market making broker dealer sell from their inventory at the bid price and buy at the ask price.
IV. Not mandatory to maintain profit when broker-dealers facilitate securities trading.Correct
They sell from their inventory at the “ask” price and buy for their inventory at the “bid” price, in a principal capacity.Markups are fees that broker-dealers collect when they act as a principal and sell securities from their inventory to clients.
Incorrect
They sell from their inventory at the “ask” price and buy for their inventory at the “bid” price, in a principal capacity.Markups are fees that broker-dealers collect when they act as a principal and sell securities from their inventory to clients.
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Question 3 of 10
3. Question
Which statements is /are true in regards of market making broker dealers?
I. They can carry out trade with a small trading unit as well.
II. They have no effect on the price of the securities.
III. They need a larger trading unit for carrying out a trade.
IV. Market markers effect the price dynamics by the way of there trade.Correct
Market-making broker-dealers will accept and execute trades in the smallest minimum trading unit, one hundred shares or greater.Market makers affect price dynamics by offering higher bid prices to solicit sellers, thus raising stock prices, and by lowering its ask price to solicit buyers, thus lowering stockprices.
Incorrect
Market-making broker-dealers will accept and execute trades in the smallest minimum trading unit, one hundred shares or greater.Market makers affect price dynamics by offering higher bid prices to solicit sellers, thus raising stock prices, and by lowering its ask price to solicit buyers, thus lowering stockprices.
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Question 4 of 10
4. Question
Which statements is/are true in regards of a OTC stocks?`
I. OTC stocks are substantially less liquid than exchange-traded stocks.
II. There is a large market for OTC stocks.
III. OTC securities have to be traded in a centralised exchange network.
IV. OTC securities are unlisted, so there is no central exchange for the market.Correct
These securities are usually traded over a dealer network rather than a centralized exchange such as the New York Stock Exchange. Because there is not necessarily a large market for OTC stocks,OTC stocks can be very illiquid, and investors in such stocks should consider the liquidity risks of stocks purchased over the counter
Incorrect
These securities are usually traded over a dealer network rather than a centralized exchange such as the New York Stock Exchange. Because there is not necessarily a large market for OTC stocks,OTC stocks can be very illiquid, and investors in such stocks should consider the liquidity risks of stocks purchased over the counter
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Question 5 of 10
5. Question
Which statement holds true in the case of time weighted returns?
I. Time-weighted returns provide a more accurate representation of the return of an investment.
II. This concept is applied to the individual investor, rather than to the portfolio.
III. The time- weighted method of calculating return is also sometimes referred to as the geometric mean return.
IV. The time-weighted rate of return is not a measure of the compound rate of growth in a portfolio.Correct
Time-weighted returns provide a more accurate representation of the return of an investment or portfolio.The time- weighted method of calculating return is also sometimes referred to as the geometric mean return since it is a function of the geometric total and mean and not the arithmetic total and mean.
Incorrect
Time-weighted returns provide a more accurate representation of the return of an investment or portfolio.The time- weighted method of calculating return is also sometimes referred to as the geometric mean return since it is a function of the geometric total and mean and not the arithmetic total and mean.
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Question 6 of 10
6. Question
What is the equation for calculating annualised rate of return?
I. annualized return = rate of return x annualization factor.
II. annualized return = income from the security + principal growth.
III. annualized return = rate of return + principal growth.
IV. annualized return = income from the security x annualization factor.Correct
An annualized return equation would appear as follows: annualized return = rate of return x annualization factor.
Incorrect
An annualized return equation would appear as follows: annualized return = rate of return x annualization factor.
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Question 7 of 10
7. Question
Which statements stands true in case of total return?
I. The equation form would be total return = income from the security – principal growth.
II. The equation form would be total return = income from the security + principal growth.
III.Return on investment including price appreciation with reinvested dividends or income over a specific period of time.
IV. Fixed income sector is mostly closely associated with total return.Correct
The total return of a security is made up of the income the investor receives from a security in addition to the growth of the principal invested. This is usually applied to a one-year holding period. In equation form, this would be total return = income from the security + principal growth
Incorrect
The total return of a security is made up of the income the investor receives from a security in addition to the growth of the principal invested. This is usually applied to a one-year holding period. In equation form, this would be total return = income from the security + principal growth
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Question 8 of 10
8. Question
Which of the following statements is/are false in regards of holding period return?
I. The holding period should be minimum of 12 months.
II. Holding period return is the total return received from holding an asset or portfolio of assets over a period of time.
III.Helps an investor determine the validity of an investment.
IV. The holding period can be anything such as 1 day, 1 month, 6 months, 1 year, 5 years and so on.Correct
Holding period return is the return of a given security over the period which it is held, thus the moniker holding period return. The holding period is not set and may be any period of time measurable in days or years. Holding period return is useful in helping an investor determine the validity of an investment.
Incorrect
Holding period return is the return of a given security over the period which it is held, thus the moniker holding period return. The holding period is not set and may be any period of time measurable in days or years. Holding period return is useful in helping an investor determine the validity of an investment.
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Question 9 of 10
9. Question
Which statements stand true for IRR?
I. IRR is of no use in common stocks.
II. If IRR falls below the required rate of return, the project should be rejected.
III.Internal rate of return is used to evaluate the attractiveness of a project or investment.
IV. If the IRR of a new project exceeds a company’s required rate of return, that project is not desirable.Correct
In summary, IRR is the percentage used to equate the future cash flows of an investment to its present value. If the IRR of a security is higher than the required rate of return, it is viewed as an attractive investment. Internal rate of return is most useful in the fixed-income sector of the markets. It is unusable when applied to common stocks.
Incorrect
In summary, IRR is the percentage used to equate the future cash flows of an investment to its present value. If the IRR of a security is higher than the required rate of return, it is viewed as an attractive investment. Internal rate of return is most useful in the fixed-income sector of the markets. It is unusable when applied to common stocks.
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Question 10 of 10
10. Question
Assume the following portfolio of stocks:
Stock A: $500,000 invested and an expected return of 15%
Stock B: $200,000 invested and an expected return of 6%
Stock C: $300,000 invested and an expected return of 9%
With a total portfolio value of $1,000,000, the weights of Stock A, B and C are 50%, 20% and 30%, respectively. Calculate the expected return of the total portfolio?
I. 11%
II. 11.4%
III. 12%
IV. 12.4%Correct
It is calculated as follows: expected returns = (probability of 1st estimated return x 1st estimated return) + (probability of 2nd estimated return x 2nd estimated return).
Incorrect
It is calculated as follows: expected returns = (probability of 1st estimated return x 1st estimated return) + (probability of 2nd estimated return x 2nd estimated return).