Mock Test 1 ss2 TE10

Q. If a market is weak-form efficient but semi-strong-form inefficient, then which of the following types of portfolio management is most likely to produce abnormal returns?

• A. Passive portfolio management.
• B. Active portfolio management based on technical analysis.
• C. Active portfolio management based on fundamental analysis.

Q. Zhenhu Li has submitted an immediate-or-cancel buy order for 500 shares of a company at a limit price of CNY 74.25. There are two sell limit orders standing in that stock’s order book at that time. One is for 300 shares at a limit price of CNY 74.30 and the other is for 400 shares at a limit price of CNY 74.35. How many shares in Li’s order would get cancelled?

• A. None (the order would remain open but unfilled).
• B. 200 (300 shares would get filled).
• C. 500 (there would be no fill).

Q. If the risk-free rate increases, the value of an in-the-money European put option will most likely:

• A. decrease.
• B. remain the same.
• C. increase.

Q. A liquid secondary bond market allows an investor to sell a bond at:

• A. the desired price.
• B. a price at least equal to the purchase price.
• C. a price close to the bond’s fair market value.

Q. When conducting a company analysis, the analysis of demand for a company’s product is least likely to consider the:

• A. company’s cost structure.
• B. motivations of the customer base.
• C. product’s differentiating characteristics.

None

• A. 0.924%.
• B. 1.348%.
• C. 1.178%.

None

• A. 101.93.
• B. 102.85.
• C. 105.81.

Which of the following situations will most likely indicate a reduction of market efficiency?

• A. An increase in rules and regulations that promote financial disclosure
• B. An increase in arbitrage opportunities
• C. An increase in the number of market participants

A trader who owns shares of a stock currently trading at $100 per share places a “GTC, stop $90, limit $85 sell” order (GTC means good till cancelled). Assuming the specified stop condition is satisfied and the order becomes executed, which of the following statements is most accurate?

• A. The order becomes a market order when the price falls below $85 and remains valid for execution.
• B. The trader faces a maximum realized loss of $15.
• C. The order will be executed at either $90 or $85.

Q. William Marolf obtains a EUR5 million mortgage loan from Bank Nederlandse. A year later, the principal on the loan is EUR4 million and Marolf defaults on the loan. Bank Nederlandse forecloses, sells the property for EUR2.5 million, and is entitled to collect the EUR1.5 million shortfall from Marolf. Marolf most likely had a:

• A. bullet loan.
• B. recourse loan.
• C. non-recourse loan.