21. John who is fund manger generated 1.5% return over the expected return given a certain beta. This excess return is known as:

1. Beta
2. Alpa
3. Excess return
4. Profit

22.What do followers of the Random Walk Theory believe about stock markets?

a) Technical analysis is not useful.

b) Stock markets are inefficient.

c) A stock's expected price is the best predictor of its true value.

d) Past price changes have a strong link to future price changes.

23. Which of the following statements about P/E ratios is correct?

a) P/E ratios tend to increase in a rising market.

b) P/E ratios tend to fall in a rising market

c) A company with a low P/E is always a better buy than a company with a high

P/E.

d) P/E ratios tend to be fairly similar between industry groups.

24. Which of the following types of ratios are used to judge a company's ability to

meet its short-term debt commitments?

a) Value ratios.

b) Liquidity ratios.

c) Risk analysis ratios.

d) Operating performance ratios.

25. An investor purchases shares of a mutual fund with a 4% front-end load. The

fund has total assets of $10,000,000 and unpaid expenses totalling $1,000,000.

There are currently 1,000,000 shares outstanding. What is the offering price per

share of this fund?

a) $ 9.000

b) $9.360

c) $ 9.375

d) $10.753

26. An equity mutual fund reports a compound annual return of 7.5 % and an MER

of 2.5 %. This means that the MER, expressed as a percentage of the fund's gross

return is what amount?

a) 7.5 %

b) 25 %

c) 21 %

d) 33 %.

27. If the stock market is expected to decline over the next 12 months, which of the

following stocks would you consider the most appropriate investment?

a) Big Bank A with a 5 year Beta of 0.73.

b) Big Communications Company B with a 5 year Beta of 1.37.

c) S&P/TSX Index Fund with a 5 year Beta of 1.

d) Big Gold Company C with a 5 year Beta of 1.1 1.

28. Which equity management style is characterized by low P/E multiples

and low dividend yields?

a) Sector Rotation.

b) Growth.

c) Value.

d) Credit Quality.

29. Which of the following portfolios asset mix would you consider most appropriate for a senior?

a) 10 % cash, 40 % long-term bonds, 50 % conservative stocks.

b) 10 % cash, 20% medium-term bonds, 25% long-term bonds, 25 % preferred

shares, 20 % conservative stocks.

c) 5% cash, 25 % medium-term bonds, 30 % long-term bonds, 40 %

conservative stocks.

d) 5 % cash,30 % medium-term bonds, 30 % long-term bonds, 35 %

conservative stocks.

30. An investor purchases an 8 % Canadian corporate bond at a price of 102. Other

things equal, what primary risk would the investor be most concerned with?

a) Business risk.

b) Interest rate risk.

c) Foreign exchange risk.

d) Political risk.

31. Which of the following statements about correlation is false?

a) Adding weakly correlated stocks to a portfolio reduces risk.

b) Perfectly negatively correlated stocks result in a portfolio with low risk.

c) Risk is not reduced by adding perfectly positively correlated stocks.

d) Continuing to add stocks to a portfolio will continue to reduce risk

significantly.

32. A portfolio has a market value of $455,000 at the start of the year. The

portfolio has an end of year value of $610,000. What is the pre-tax return?

on the portfolio?

a) 25.41 %

b) 38.43 %

c) 34.06 %

d) 74.59 %

33. The holdings of a large-cap equity fund are very close to the market weightings of

the sector's benchmark. What strategy is the fund manager likely following?

a) Closet indexing.

b) Passive indexing.

c) Active allocation.

d) Sector rotation

34. Which of the following is not a feature of Target-dated Funds?

a) They trade on the stock market.

b) The asset allocation changes from higher risk to lower risk as the maturity date approaches

c) Maturity date is selected when buying fund based on some goal.

d) Maturity date and glide path.

35. The Beta for the S&P 500 US Market is

1. 2
2. 1
3. 3
4. 1.5