1. Find the incorrect statement:

1. Diversification only helps with the diversifiable risk and does not help with the market risk
2. Interest rates and bond prices move in opposite directions.
3. Price volatility is not a good measure of risk for a stock.
4. Investing in warrants is a riskier strategy than investing in the underlying shares.
5. (a), (b) and (d) are true.

2. What is NOT correct about Hong Kong? Hong Kong:
   1. Is a small open economy
   2. Has capital convertibility
   3. Two Party Political System
   4. Has rule of law in place

3. Write few words on what these are and what is it for?
   1. IPO:
   2. SFC:
   3. LP/GP:
   4. HKMA :

4. Write four attributes of money.
   1. ..
   2. ..
   3. ..
   4. ..
5. If the tenor (period) is longer than one year, it better for us if we can:
   1. Receive simple interest rate on deposit and pay compound interest rate on loan we borrow
   2. Receive compound interest rate on deposit and have to pay simple interest rates on loan we borrow

6. A bond carrying fixed interest rate will show higher price volatility than a bond carrying floating interest rates.
   1. Ture
   2. False

7. Assuming two companies from the same industry also have identical revenues and profits. Generally speaking which company is likely to give investors higher capital gains over the years?
   1. Company A, that has a higher dividends pay-out ratio, say almost 80%; or
   2. Company B, that very low dividend pay-out ratio, say almost zero?
   3. Both the companies will give similar capital gains to investors as they both have identical revenues and profits.