MCQs- CHAPTER 11: FUNDAMENTALS OF RISK AND RETURN

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NISM Series-XV: Research Analyst Certification

CHAPTER 11: FUNDAMENTALS OF RISK AND RETURN

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1. What is the formula for calculating Compound Annual Growth Rate (CAGR)?

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2. Which risk refers to the possibility that a bond issuer will not be able to make expected interest rate payments and/or principal repayment?

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3. What is reinvestment risk?

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4. What is country risk?

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5. What does the traded value turnover ratio measure?

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6. What does a higher Jensen’s Alpha indicate?

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7. What is the objective of stock exchanges regarding liquidity?

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8. Which risk arises from the decline in the value of security’s cash flows due to the falling purchasing power of money?

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9. What does the Sharpe Ratio measure?

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10. What does ownership bias reflect?

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11. Which measure of return accounts for the time value of money and reinvested returns?

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12. What is Jensen’s Alpha?

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13. What does projection bias involve?

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14. Which risk is inherent in the operations of a company?

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15. What is loss-aversion bias?

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16. When should one be cautious while using ROI numbers?

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17. Is business risk also known as operating risk?

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18. Which measure calculates the risk premium per Beta?

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19. What does herd mentality in investing refer to?

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20. Is dividend a small component of the total returns from equity?

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21. What is systematic risk?

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22. What is political risk?

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23. What is the gambler’s fallacy?

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24. Which risk refers to the risk of the loss of value in an investment due to adverse price movements in the market?

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25. Which measure of return is the accepted standard in financial markets?

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26. What is Return on Investment (ROI) for a single period?

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27. Which shares are considered in the calculation of stock turnover ratio?

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28. What does the winner’s curse involve?

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29. Which bias can prevent investors from benefiting from market corrections?

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30. What is call risk?

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31. Which type of return considers the investment period and allows for comparison?

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32. What happens to reinvestment risk when interest rates rise?

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33. What is unsystematic risk?

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34. What does the Treynor Ratio measure?

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35. What is the main measure of liquidity in the traded value turnover ratio?

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36. Which measure factors in the difference in risk?

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37. Which risk refers to the absence of liquidity in an investment?

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38. What is the calling feature in bonds?

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39. What is anchoring bias?

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40. Which bias involves interpreting information to confirm existing beliefs?

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41. How is stock turnover ratio calculated?

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42. What is the purpose of investment for an investor?

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43. What is the time frame typically used for calculating the stock turnover ratio?

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44. What is the relationship between interest rates and bond prices?

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45. Which bias leads to the search for information that confirms one’s beliefs?