Chapter 6

Chapter 6

Question 1 of 17

1

A company's Market Value Added equates to the market assessment of the present value of
the company's future:

Select one of the following:

  • dividend distributions

  • economic value added

  • capital costs

  • gross profits

Explanation

Question 2 of 17

1

If the real annual returns of a UK equity investment are normally distributed around the mean
return of 8% with a standard deviation of 4.5% approximately two-thirds of the returns
recorded will be within what range?

Select one of the following:

  • -5.5% and 21.5%

  • -1% and 17%

  • 3.5% and 12.5%

  • 5.75% and 10.25%

Explanation

Question 3 of 17

1

When considering the money supply, money is accurately described as anything that is
generally:

Select one of the following:

  • convertible to sterling currency

  • acceptable as a means of settling a debt

  • sustainable in value over a defined period

  • tradable and held outside of a bank or building society deposit

Explanation

Question 4 of 17

1

Which of the following is a fiscal policy used to stimulate the economy?

Select one of the following:

  • Raising interest rates

  • Cutting interest rates

  • Raising personal taxes

  • Cutting personal taxes

Explanation

Question 5 of 17

1

Two sets of data are positively correlated. If one set of data rises in value, what will happen to
the other set?

Select one of the following:

  • Rises

  • Falls

  • No change

  • Rises to begin with then falls

Explanation

Question 6 of 17

1

What differentiates Gross Domestic Product (GDP) and Gross National Product (GNP)?

Select one of the following:

  • A Indirect taxes, depreciation and net exports

  • Indirect taxes and depreciation

  • Depreciation and property income

  • Net property income

Explanation

Question 7 of 17

1

A function of the Monetary Policy Committee is to:

Select one of the following:

  • attempt to control inflation by setting the base rate

  • intervene in the financial markets to control money supply

  • maintain confidence in the UK financial system

  • promote public understanding of inflation

Explanation

Question 8 of 17

1

The demand curve for a particular product will be horizontal where the supplying firm operates
in:

Select one of the following:

  • a perfect competitive market

  • a monopolistic market

  • a sector generating excessive profits

  • a sector generating minimal profits

Explanation

Question 9 of 17

1

The annual return of a portfolio in each of the last six years has been 8.2%, 3.6%, 5.1%, 2.1%,
9.4% and 4.7%. What is the arithmetic mean return?

Select one of the following:

  • 4.2%

  • 4.9%

  • 5.5%

  • 5.8%

Explanation

Question 10 of 17

1

A company's p/e ratio recently changed from 12 to 15. This normally indicates that:

Select one of the following:

  • the share value has fallen

  • growth expectations have improved

  • dividend levels have become less stable

  • the relevant market sector is in decline

Explanation

Question 11 of 17

1

Which of the following is MOST LIKELY to be a factor causing market movement?

Select one of the following:

  • Sentiment

  • Supply and demand

  • Economic and political strategy

  • Investor psychology

Explanation

Question 12 of 17

1

The Liquidity (Acid Test) ratio measures a company's ability to:

Select one of the following:

  • increase its current assets

  • meet its current liabilities

  • increase its inventory turnover

  • pay its non-current liabilities

Explanation

Question 13 of 17

1

In a two-stock portfolio which of the following correlations would normally offer the greatest
level of diversification?

Select one of the following:

  • 0.8

  • 0.6

  • -0.4

  • -0.7

Explanation

Question 14 of 17

1

In technical analysis, the term, 'primary movement' refers to which of the following?

Select one of the following:

  • Short-term share price trend

  • Long-term share price trend

  • Short-term dividend policy

  • Long-term dividend policy

Explanation

Question 15 of 17

1

The difference between a nominal rate of return and a real rate of return relates solely to the
effects of

Select one of the following:

  • taxation

  • charges

  • inflation

  • compounding

Explanation

Question 16 of 17

1

Which of the following is NOT counted as part of the Current Account Balance?

Select one of the following:

  • Imported and exported goods

  • Dividends on UK holdings of overseas assets

  • Long-term capital flows

  • Interest on UK holdings of overseas assets

Explanation

Question 17 of 17

1

If $2,200 is invested for four years with interest at the rate of 6% p.a., compounded half-yearly,
what will be the value at the end of this period?

Select one of the following:

  • $2,696.55

  • $2,777.45

  • $2,786.89

  • $2,860.77

Explanation

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