Institute of Chartered Financial Analysts of India (ICFAI) University 2006 Certification Finance Security Analysis - I - Question Paper

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9.
An index model regression applied to past monthly returns in ACC stock price produces the subsequent estimates, which are believed to be stable over time:

rACC = 0.15% + 1.2 rM

If the return on market index subsequently rises by 8% and return on ACC’s stock rises by 7%, what is the abnormal return earned on ACC’s stock?

(a)
0.55%

(b)
–1.65%

(c)
–2.75%

(d)
1.65%

(e)
2.75%.


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10.
Which of the subsequent statements is not true?

(a)
According to Liquidity Preference Theory, spenders keep a proportion of their assets as cash balances for maintaining liquidity

(b)
According to this Pure Expectations Theory, the current term structure of interest rates is determined by the consensus forecast of future interest rates

(c)
According to the Loanable Funds Theory, interest rates in various sectors in the economy can be predicted

(d)
According to the Liquidity Premium Theory, the investors are not indifferent to risk and they charge higher rates than the expected future rates, if the maturity of the instrument increases

(e)
According to the Preferred Habitat Theory, it is a pre-requisite that the liquidity premium should increase at a uniform rate with maturity.


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11.
Which of the subsequent statement(s) is/are not true?

I. Runaway gaps occur halfway through a pattern.

II. A series of breakaway gaps indicate that an exhaustion gap is round the corner.

III. Exhaustion gap is treated as a sign of consolidation.

IV. Island is separated by an exhaustion gap and a runaway gap.

(a)
Only (I) above

(b)
Only (II) above

(c)
Only (IV) above

(d)
Both (I) and (III) above

(e)
Both (II) and (IV) above.


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12.
Which of the subsequent statements is actual with respect to bond price theorems?

(a)
provided the maturity, for equal fixed increases and reduces in the YTM, price movements are symmetrical

(b)
A change in a YTM affects the bonds with a higher YTM less than it affects the bonds with a lower YTM

(c)
For a provided difference ranging from YTM and coupon rate of the bonds, the longer the term to maturity, the lower will be the change in the price with change in YTM

Earning:   Approval pending.