Time allowed: 30 min
Debre Birhan University
Exam date: 10/4/2006 E.C
College of Business and Economics
Accounting and Finance program
Investment Management (Acct 4101) Test (15%) for 3rd year Acct & Fn regular students.
Name: _____________________________________ Id No: ___________ Section: ________
I. Write true if the statement is correct otherwise false (1 point each).
1. A pension fund is a collection of investment money pooled from lots of people to be
invested for a specific objective or goal.
2. Investment deals with how the securities markets work and how to evaluate and
manage investments in stocks and bonds.
II. Choose the best answer from the given alternatives (1 point each).
1. Compared to investors with long term investment time horizons, investors with short
term investment time horizons most likely require:
A. More liquidity & less emphasis on capital appreciation.
B. Less liquidity & less emphasis on capital appreciation.
C. Less liquidity & greater emphasis on capital appreciation.
D. All of the above. E. None of the above.
2. When investors use a derivative instrument to reduce his exposure to the price volatility
of certain underlying assets, he is said to be :
A. Speculator. C. Arbitrageur.
B. Hedger. D. Investor.
3. Closed- ended funds have lower cash requirements than open-ended funds because:
A. Open- ended funds pay more taxes than closed-ended funds.
B. Open- ended funds tend to invest in less liquid assts.
C. Open- ended funds allow investors to redeem their shares at any time.
D. Closed-ended funds have limited life time.
4. Which of the following statements about mutual funds is true?
A. Mutual funds allow investors to spread out risk among several stocks & bonds.
B. All mutual funds are the same.
C. Many mutual funds do not charge a sales commission but invest in low quality stocks.
D. All of the above. E. None of the above.
5. Which is/ are the problems of foreword markets?
A. Lack of centralization of trading.
B. Illiquidity.
C. Counterparty risk.
D. Foreign exchange risk.
E. All except “C”. F. All of the above.
6. Which of the following statement about money market mutual funds is true?
A. They invest in commercial paper, certificates of deposits and repurchase agreements.
B. They usually offer check-writing privileges.
C. They are highly leveraged and risky.
D. Both A & C are true. E. Both A & B are true.
“INFORMATION IS AN INVESTOR’S BEST TOOL” 1
7. Which of the following would increase the NAV of a mutual fund share, assuming all other
things remain constant?
A. An increase the number of funds shares outstanding.
B. An increase in the value of one of the fund’s stocks.
C. A change in the funds management.
D. An increase in the fund’s account payable.
8. An option which gives the holder the right to sell a stock at a specified price at some time in the
future is called a (n):
A. Call option. B. Forward contracts.
C. Put option. D. Futures contracts. E. Swaps.
9. Investors in closed-ended funds who wish to liquidate their positions must:
A. Sell their shares through brokers.
B. Sell their shares to the issuer at a premium to NAV.
C. Sell their shares to the issuer for NAV.
D. Sell their shares to the issuer at a discount.
E. None of the above.
10. Which of the following statements about the features of debt and equity are true?
A. They can be long-term financial instruments.
B. They both involve a claim on the issuer’s income.
C. They both enable a corporation to raise funds.
D. All of the above.
E. A & C are only correct.
III. Fill the Blank Space (1point each)
1. ___________________is the professional management of various real and financial assets to
meet specified investment goals for the benefit of investors.
2. ___________________ is the market in which commodities or currencies are sold for cash &
delivered immediately.
3. __________________contract is an agreement that grants the owner the right, but not the
obligation to make a future transaction in underlying asset at a fixed price& within specified
time in the future.
ANSWERSHEET
I. TRUE/FALSE II. MULTIPLE CHOICES
1.____________ 1.________ 6.__________
2.____________ 2.________ 7.__________
III. FILLING BLANK SPACE 3.________ 8.__________
1._________________________ 4.________ 9.__________
2._________________________ 5.________ 10.__________
3._________________________
“INFORMATION IS AN INVESTOR’S BEST TOOL” 2
