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ABA CTFA Practice Test - Questions Answers, Page 54

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The APT was developed in 1976 by __________.

A.
Lintner
A.
Lintner
Answers
B.
Modigliani and Miller
B.
Modigliani and Miller
Answers
C.
Ross
C.
Ross
Answers
D.
Sharpe
D.
Sharpe
Answers
Suggested answer: C

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

A.
Price weighting
A.
Price weighting
Answers
B.
Equal weighting
B.
Equal weighting
Answers
C.
Base weighting
C.
Base weighting
Answers
D.
Capitalization weighting
D.
Capitalization weighting
Answers
Suggested answer: D

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

A.
Price weighting
A.
Price weighting
Answers
B.
Capitalization weighting
B.
Capitalization weighting
Answers
C.
Equal weighting
C.
Equal weighting
Answers
D.
Base weighting
D.
Base weighting
Answers
Suggested answer: B

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

A.
Diversification
A.
Diversification
Answers
B.
Risk aversion
B.
Risk aversion
Answers
C.
Securitization
C.
Securitization
Answers
D.
Sector rotation
D.
Sector rotation
Answers
Suggested answer: A

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

A.
Municipal bonds
A.
Municipal bonds
Answers
B.
Convertible bonds
B.
Convertible bonds
Answers
C.
Zero coupon bonds
C.
Zero coupon bonds
Answers
D.
Corporate bonds
D.
Corporate bonds
Answers
Suggested answer: D

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?

A.
Long hedge
A.
Long hedge
Answers
B.
Short hedge
B.
Short hedge
Answers
C.
Cross hedge
C.
Cross hedge
Answers
D.
Stack hedge
D.
Stack hedge
Answers
Suggested answer: C

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

A.
Duration
A.
Duration
Answers
B.
Yield to maturity
B.
Yield to maturity
Answers
C.
Convexity
C.
Convexity
Answers
D.
Immunization
D.
Immunization
Answers
Suggested answer: A

Which of the following is the right to buy?

A.
Put option
A.
Put option
Answers
B.
Strategic option
B.
Strategic option
Answers
C.
System option
C.
System option
Answers
D.
Call option
D.
Call option
Answers
Suggested answer: D

Which of the following is NOT an example of derivative security?

A.
Futures
A.
Futures
Answers
B.
Options
B.
Options
Answers
C.
Swaps
C.
Swaps
Answers
D.
Bonds
D.
Bonds
Answers
Suggested answer: D

Which of the following bonds are high yield bonds issued by companies that are considered highly speculative because of risk of default?

A.
Junk bonds
A.
Junk bonds
Answers
B.
Municipal bonds
B.
Municipal bonds
Answers
C.
Callable bonds
C.
Callable bonds
Answers
D.
Convertible bonds
D.
Convertible bonds
Answers
Suggested answer: A
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