Question 1 Which of the following causes a market to be weak-form efficient? Not yet answered Select one: Marked out of 1.25 P Flag question a. Investors analysing past prices and buying shares they think are more likely to increase than decrease, pushing prices up until the share price reflects any information contained in the pattern of past prices. b. Investors analysing past prices and selling shares they think are more likely to decrease than increase, pushing prices down until the share price reflects any information contained in the pattern of past prices. c. Investors analysing past prices and buying shares they think are more likely to decrease than increase, pushing prices up until the share price reflects any information contained in the pattern of past prices. d. Both (a) and (b). O Question 2 On a given day the excess return on the Australian stock market is -2.1%. On the same day the excess return on Share ABC is -2.8%. If there were NO unsystematic risk factors affecting the share on that day, what is your estimate of the share's beta? Not yet answered Marked out of 1.25 Select one: P Flag question O a. 0.93 b. 1.33 c. 1.24 d. 0.75 Question 3 Which of the following causes a market to be strong-form efficient? Not yet answered Select one: Marked out of 1.25 O p Flag question a. Investors using private information and buying shares they think will increase in price when the information becomes publicly known, pushing prices up until the share price reflects any information contained in the pattern of past prices. b. Investors using private information and selling shares they think will increase in price when the information becomes publicly known, pushing prices down until the share price reflects any information contained in the pattern of past prices. c. Investors using private information and selling shares they think will decrease in price when the information becomes publicly known, pushing prices down until the share price reflects any information contained in the pattern of past prices. d. Both (a) and (c). O Question 4 What does the Efficient Market Hypothesis tell us? Not yet answered Select one: Marked out of 1.25 a. That the market is inefficient. P Flag question b. That the market is efficient. O c. That it is not possible for a market to be efficient. O d. How to recognise an efficient market. Question 5 Which of the following statements is correct? Not yet answered Select one: Marked out of 1.25 P Flag question O a. An increase in the exercise price of an option will increase the value of both a call option and a put option. b. An increase in the exercise price of an option will increase the value of a put option and decrease the value of a call option. c. An increase in the exercise price of an option will decrease the value of both a call option and a put option. d. An increase in the exercise price of an option will increase the value of a call option and decrease the value of a put option. O Question 6 Which of the following statements is TRUE? Not yet answered Select one: a. Unsystematic risk is also known as common risk. Marked out of 1.25 O p Flag question O O b. Unsystematic risk is also known as independent risk. c. Unsystematic risk is also known as undiversifiable risk. d. Unsystematic risk is also known as market risk. O Question 7 Which of the following would be evidence that the market is not weak-form efficient? Not yet answered Select one: Marked out of 1.25 p Flag question a. Mechanical trading rules consistently outperform a "buy and hold" strategy. b. Analysis of publicly available information enables mispriced securities to be consistently identified. c. Investors with private information are able to buy or sell shares prior to the release of the information, and consistently achieve an abnormal return. d. Both (a) and (b). O Question 8 For which of the following types of investment is it possible to estimate your expected return? Not yet answered Marked out of 1.25 Select one: p Flag question a. Shares b. Cash c. Property O d. All of the above Question 9 Which of the following terms is NOT a way of quantifying risk? Not yet answered Select one: Marked out of 1.25 O a. Expected return p Flag question b. Standard deviation O c. Variance O d. None of the above. (In other words, ALL of the above ARE ways of quantifying risk.) Question 10 A call option (with shares as the underlying asset) was originally purchased for $1.36 and is now trading for $2.62. The exercise price is $31 and the underlying share is currently trading for $32.78. What is the time value of the option? Not yet answered Marked out of 1.25 Select one: p Flag question O a. $2.62 b. $1.78 O c. $-0.42 d. $0.84 Question 11 Which of the following features of an option never changes over the life of the option? Not yet answered Select one: a. Who the holder of the option is. Marked out of 1.25 p Flag question b. The risk-free rate of interest. c. The price of the underlying asset. O d. The exercise price. Question 12 Which of the following is true? Not yet answered Select one: Marked out of 1.25 O p Flag question O a. The total value of an option is equal to the time value times the intrinsic value. b. The total value of an option is equal to the time value minus the intrinsic value. c. The total value of an option is equal to the time value plus the intrinsic value. d. The total value of an option is equal to the intrinsic value minus the time value. O Question 13 Which of the following is NOT an example of a way in which you could gain information that is part of the information set related to semi-strong-form efficiency? Not yet answered Marked out of 1.25 O OP Select one: a. Attending a company's board meeting as a director of the company. b. Attending the Annual General Meeting of a company. c. Listening to news about a company that has been included in the Finance Report on ABC news. O d. Reading the annual report of a company. Question 14 How would you describe the relationship between risk and return for large portfolios of investments? Not yet answered Marked out of 1.25 P Flag question Select one: a. The relationship approximates a negative linear relationship. b. The relationship approximates a positive linear relationship. c. The relationship is precisely a positive linear relationship. d. There is no clear relationship. a O Question 15 Which of the following would be most useful as an estimate of the realised return for any given year of an investment? Not yet answered Marked out of 1.25 Select one: O a. Arithmetic Average Realised Return P Flag question b. Geometric Average Realised Return c. Both of the above would be equally useful. d. None of the above. Question 16 A share has a beta of 1.6. The risk-free rate of return is 2.9% and the expected return on the market is 8.1%. What is the expected return from the share according to the CAPM? Not yet answered Marked out of 1.25 Select one: a a. 5.20% p Flag question a b. 9.76% O c. 11.22% a d. 8.32% Question 17 You are comparing two alternative investments. One will require an investment of $100, and the other will require an investment of $500. Which should you choose? Not yet answered Marked out of 1.25 Select one: O p Flag question O a. The investment with the higher realised percentage return. b. The investment with the higher realised dollar return. c. The investment with the higher expected dollar return. O O d. The investment with the higher expected percentage return. Question 18 A share has a beta of 1.8. The risk-free rate of return is 3.2% and the market risk premium is 6.8%. What is the expected return from the share according to the CAPM? Not yet answered Marked out of 1.25 Select one: p Flag question a. 8.54% b. 15.44% c. 9.68% d. 16.37% Question 19 A probability distribution of possible returns from a share has a variance of 0.0016. What is the standard deviation of this probability distribution? Not yet answered Marked out of 1.25 Select one: O p Flag question a. 0.04 b. 0.16 C. 4% O d. Both (a) and (c) Question 20 Which of the following always results in the creation of new shares if it is exercised? Not yet answered Select one: Marked out of 1.25 a. A put option p Flag question b. A warrant O c. A call option O d. A debenture