Investment Analysis MCQs 2026

In the top-down approach to fundamental analysis, the analyst begins with

1. A a single company's ratios ✓
2. B technical charts ✓
3. C the firm's dividend policy ✓
4. D the overall economy, then the industry, then the company ✓

A security whose returns move independently of the market has a beta of approximately

1. A 2.0 ✓
2. B 0 ✓
3. C 1.0 ✓
4. D minus 1.0 ✓

A stock with a beta greater than 1.0 is expected to be

1. A risk-free ✓
2. B less volatile than the market ✓
3. C more volatile than the market ✓
4. D uncorrelated with the market ✓

Beta measures a security's

1. A total standalone risk ✓
2. B dividend growth ✓
3. C liquidity ✓
4. D sensitivity to overall market movements ✓

The standard deviation of a security's returns is a measure of its

1. A total risk ✓
2. B systematic risk only ✓
3. C dividend yield ✓
4. D beta ✓

Unsystematic (specific) risk can be reduced mainly through

1. A buying a single stock ✓
2. B increasing leverage ✓
3. C diversification across many securities ✓
4. D ignoring correlations ✓

Investment analysis is primarily concerned with

1. A recording daily accounting transactions ✓
2. B auditing corporate tax returns ✓
3. C evaluating securities to make informed buy, sell or hold decisions ✓
4. D designing a company payroll system ✓

Systematic risk is also referred to as

1. A diversifiable risk ✓
2. B company-specific risk ✓
3. C default risk ✓
4. D market (non-diversifiable) risk ✓

A bond rated below BBB minus (or Baa3) is classified as

1. A risk-free ✓
2. B non-investment grade or high-yield (junk) ✓
3. C government guaranteed ✓
4. D top investment grade ✓

Credit rating agencies such as Moody's and Standard & Poor's primarily assess a bond's

1. A default (credit) risk ✓
2. B coupon frequency ✓
3. C currency of issue ✓
4. D trading volume ✓

The intrinsic value of a security is best described as

1. A the present value of its expected future cash flows ✓
2. B its current market trading price ✓
3. C its original purchase cost ✓
4. D its face or par value ✓

Other things equal, a bond with a longer maturity will have

1. A lower interest-rate risk ✓
2. B greater price sensitivity to interest-rate changes ✓
3. C no interest-rate risk ✓
4. D a fixed price ✓

Bond duration is a measure of

1. A a bond's price sensitivity to changes in interest rates ✓
2. B the bond's credit rating ✓
3. C the coupon payment frequency ✓
4. D the issuer's tax rate ✓

A bond trading above its face value is said to be selling at a

1. A discount ✓
2. B par ✓
3. C yield ✓
4. D premium ✓

Fundamental analysis primarily focuses on

1. A historical price charts and trading volume ✓
2. B a company's financial statements, industry and the economy ✓
3. C investor mood on social media only ✓
4. D random walk simulations ✓

Technical analysis mainly studies

1. A macroeconomic GDP forecasts ✓
2. B audited balance sheets ✓
3. C dividend policies ✓
4. D past price and trading-volume patterns ✓

According to the Efficient Market Hypothesis, security prices

1. A can always be predicted using charts ✓
2. B fully and quickly reflect all available information ✓
3. C never change with new information ✓
4. D are set arbitrarily by exchanges ✓

A bond trading below its face value is said to be selling at a

1. A premium ✓
2. B par ✓
3. C discount ✓
4. D coupon ✓

The weak form of market efficiency implies that

1. A insider information gives no advantage ✓
2. B fundamental analysis is always profitable ✓
3. C prices ignore public news ✓
4. D past price data cannot be used to earn consistent abnormal returns ✓

The semi-strong form of market efficiency holds that prices reflect

1. A all publicly available information ✓
2. B only past prices ✓
3. C only private insider information ✓
4. D no information at all ✓

The strong form of market efficiency asserts that prices reflect

1. A only technical indicators ✓
2. B only historical prices ✓
3. C all information, both public and private ✓
4. D only accounting data ✓

The dividend discount model values a share as the

1. A present value of all expected future dividends ✓
2. B sum of past dividends paid ✓
3. C book value of total assets ✓
4. D face value plus coupon ✓

In the Gordon constant-growth model, share value equals next year's dividend divided by

1. A the dividend growth rate alone ✓
2. B the market price ✓
3. C the required return minus the growth rate ✓
4. D the number of shares outstanding ✓

Dollar-cost averaging is a strategy of investing

1. A all funds at a single market peak ✓
2. B only when prices are highest ✓
3. C a lump sum once and never again ✓
4. D a fixed amount at regular intervals regardless of price ✓

In technical analysis, a support level is a price at which

1. A buying interest tends to halt a further price decline ✓
2. B selling always accelerates ✓
3. C trading is suspended by law ✓
4. D dividends are paid ✓

Free cash flow to equity (FCFE) represents cash available to

1. A bondholders only ✓
2. B the government as tax ✓
3. C suppliers ✓
4. D equity shareholders after operating costs, reinvestment and debt payments ✓

Under CAPM, a stock's required return equals the risk-free rate plus

1. A the dividend yield ✓
2. B the inflation rate ✓
3. C the earnings yield ✓
4. D beta multiplied by the market risk premium ✓

The price-earnings (P/E) ratio equals

1. A dividends divided by price ✓
2. B market price per share divided by earnings per share ✓
3. C earnings divided by total assets ✓
4. D equity divided by liabilities ✓

A relatively high P/E ratio usually indicates that investors expect

1. A imminent bankruptcy ✓
2. B falling revenues ✓
3. C zero dividends forever ✓
4. D higher future earnings growth ✓

If market interest rates rise, the prices of existing fixed-coupon bonds will generally

1. A rise ✓
2. B stay the same ✓
3. C fall ✓
4. D become zero ✓

The dividend yield of a share is

1. A EPS divided by price ✓
2. B annual dividend per share divided by market price per share ✓
3. C retained earnings divided by equity ✓
4. D coupon divided by par ✓

The PEG ratio refines the P/E ratio by dividing it by

1. A the dividend yield ✓
2. B the earnings growth rate ✓
3. C the beta ✓
4. D the current ratio ✓

Return on equity (ROE) is calculated as net income divided by

1. A total sales ✓
2. B total assets ✓
3. C shareholders' equity ✓
4. D market capitalization ✓

Earnings per share (EPS) equals net income available to common shareholders divided by

1. A total liabilities ✓
2. B sales revenue ✓
3. C the number of outstanding common shares ✓
4. D total dividends ✓

Book value per share equals

1. A common shareholders' equity divided by number of shares ✓
2. B market capitalization divided by EPS ✓
3. C net income divided by sales ✓
4. D total debt divided by equity ✓

A bond's coupon rate expresses annual interest as a percentage of the bond's

1. A market price ✓
2. B face (par) value ✓
3. C yield to maturity ✓
4. D duration ✓

The current yield of a bond equals the annual coupon divided by

1. A the bond's current market price ✓
2. B the face value ✓
3. C the years to maturity ✓
4. D the coupon rate ✓

The concept of a margin of safety in investing was popularized by

1. A Harry Markowitz ✓
2. B William Sharpe ✓
3. C Benjamin Graham ✓
4. D Eugene Fama ✓

A value stock is typically one that has

1. A an extremely high P/E ratio ✓
2. B a low price relative to its fundamentals ✓
3. C no earnings ✓
4. D the highest beta in the market ✓

The Security Market Line (SML) plots expected return against

1. A standard deviation ✓
2. B beta ✓
3. C the dividend yield ✓
4. D market price ✓

A growth stock is typically characterized by

1. A high dividend payout and low growth ✓
2. B very low P/E and high yield ✓
3. C declining earnings ✓
4. D high earnings growth and low dividend payout ✓

Yield to maturity (YTM) is

1. A the coupon rate only ✓
2. B the current yield only ✓
3. C the dividend yield ✓
4. D the total return anticipated if the bond is held until it matures ✓

If a security's estimated intrinsic value exceeds its market price, it is generally a signal to

1. A buy ✓
2. B short sell immediately ✓
3. C ignore it ✓
4. D sell at a loss ✓

A security plotting above the Security Market Line is considered

1. A undervalued ✓
2. B overvalued ✓
3. C fairly valued ✓
4. D risk-free ✓

The Capital Asset Pricing Model assumes that investors are

1. A risk-seeking ✓
2. B indifferent to risk ✓
3. C risk-averse ✓
4. D unable to diversify ✓