Investment Analysis MCQs 2026

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

1. Aa single company's ratios✓
2. Btechnical charts✓
3. Cthe firm's dividend policy✓
4. Dthe overall economy, then the industry, then the company✓

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

1. A2.0✓
2. B0✓
3. C1.0✓
4. Dminus 1.0✓

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

1. Arisk-free✓
2. Bless volatile than the market✓
3. Cmore volatile than the market✓
4. Duncorrelated with the market✓

Beta measures a security's

1. Atotal standalone risk✓
2. Bdividend growth✓
3. Cliquidity✓
4. Dsensitivity to overall market movements✓

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

1. Atotal risk✓
2. Bsystematic risk only✓
3. Cdividend yield✓
4. Dbeta✓

Unsystematic (specific) risk can be reduced mainly through

1. Abuying a single stock✓
2. Bincreasing leverage✓
3. Cdiversification across many securities✓
4. Dignoring correlations✓

Investment analysis is primarily concerned with

1. Arecording daily accounting transactions✓
2. Bauditing corporate tax returns✓
3. Cevaluating securities to make informed buy, sell or hold decisions✓
4. Ddesigning a company payroll system✓

Systematic risk is also referred to as

1. Adiversifiable risk✓
2. Bcompany-specific risk✓
3. Cdefault risk✓
4. Dmarket (non-diversifiable) risk✓

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

1. Arisk-free✓
2. Bnon-investment grade or high-yield (junk)✓
3. Cgovernment guaranteed✓
4. Dtop investment grade✓

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

1. Adefault (credit) risk✓
2. Bcoupon frequency✓
3. Ccurrency of issue✓
4. Dtrading volume✓

The intrinsic value of a security is best described as

1. Athe present value of its expected future cash flows✓
2. Bits current market trading price✓
3. Cits original purchase cost✓
4. Dits face or par value✓

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

1. Alower interest-rate risk✓
2. Bgreater price sensitivity to interest-rate changes✓
3. Cno interest-rate risk✓
4. Da fixed price✓

Bond duration is a measure of

1. Aa bond's price sensitivity to changes in interest rates✓
2. Bthe bond's credit rating✓
3. Cthe coupon payment frequency✓
4. Dthe issuer's tax rate✓

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

1. Adiscount✓
2. Bpar✓
3. Cyield✓
4. Dpremium✓

Fundamental analysis primarily focuses on

1. Ahistorical price charts and trading volume✓
2. Ba company's financial statements, industry and the economy✓
3. Cinvestor mood on social media only✓
4. Drandom walk simulations✓

Technical analysis mainly studies

1. Amacroeconomic GDP forecasts✓
2. Baudited balance sheets✓
3. Cdividend policies✓
4. Dpast price and trading-volume patterns✓

According to the Efficient Market Hypothesis, security prices

1. Acan always be predicted using charts✓
2. Bfully and quickly reflect all available information✓
3. Cnever change with new information✓
4. Dare set arbitrarily by exchanges✓

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

1. Apremium✓
2. Bpar✓
3. Cdiscount✓
4. Dcoupon✓

The weak form of market efficiency implies that

1. Ainsider information gives no advantage✓
2. Bfundamental analysis is always profitable✓
3. Cprices ignore public news✓
4. Dpast price data cannot be used to earn consistent abnormal returns✓

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

1. Aall publicly available information✓
2. Bonly past prices✓
3. Conly private insider information✓
4. Dno information at all✓

The strong form of market efficiency asserts that prices reflect

1. Aonly technical indicators✓
2. Bonly historical prices✓
3. Call information, both public and private✓
4. Donly accounting data✓

The dividend discount model values a share as the

1. Apresent value of all expected future dividends✓
2. Bsum of past dividends paid✓
3. Cbook value of total assets✓
4. Dface value plus coupon✓

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

1. Athe dividend growth rate alone✓
2. Bthe market price✓
3. Cthe required return minus the growth rate✓
4. Dthe number of shares outstanding✓

Dollar-cost averaging is a strategy of investing

1. Aall funds at a single market peak✓
2. Bonly when prices are highest✓
3. Ca lump sum once and never again✓
4. Da fixed amount at regular intervals regardless of price✓

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

1. Abuying interest tends to halt a further price decline✓
2. Bselling always accelerates✓
3. Ctrading is suspended by law✓
4. Ddividends are paid✓

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

1. Abondholders only✓
2. Bthe government as tax✓
3. Csuppliers✓
4. Dequity shareholders after operating costs, reinvestment and debt payments✓

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

1. Athe dividend yield✓
2. Bthe inflation rate✓
3. Cthe earnings yield✓
4. Dbeta multiplied by the market risk premium✓

The price-earnings (P/E) ratio equals

1. Adividends divided by price✓
2. Bmarket price per share divided by earnings per share✓
3. Cearnings divided by total assets✓
4. Dequity divided by liabilities✓

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

1. Aimminent bankruptcy✓
2. Bfalling revenues✓
3. Czero dividends forever✓
4. Dhigher future earnings growth✓

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

1. Arise✓
2. Bstay the same✓
3. Cfall✓
4. Dbecome zero✓

The dividend yield of a share is

1. AEPS divided by price✓
2. Bannual dividend per share divided by market price per share✓
3. Cretained earnings divided by equity✓
4. Dcoupon divided by par✓

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

1. Athe dividend yield✓
2. Bthe earnings growth rate✓
3. Cthe beta✓
4. Dthe current ratio✓

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

1. Atotal sales✓
2. Btotal assets✓
3. Cshareholders' equity✓
4. Dmarket capitalization✓

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

1. Atotal liabilities✓
2. Bsales revenue✓
3. Cthe number of outstanding common shares✓
4. Dtotal dividends✓

Book value per share equals

1. Acommon shareholders' equity divided by number of shares✓
2. Bmarket capitalization divided by EPS✓
3. Cnet income divided by sales✓
4. Dtotal debt divided by equity✓

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

1. Amarket price✓
2. Bface (par) value✓
3. Cyield to maturity✓
4. Dduration✓

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

1. Athe bond's current market price✓
2. Bthe face value✓
3. Cthe years to maturity✓
4. Dthe coupon rate✓

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

1. AHarry Markowitz✓
2. BWilliam Sharpe✓
3. CBenjamin Graham✓
4. DEugene Fama✓

A value stock is typically one that has

1. Aan extremely high P/E ratio✓
2. Ba low price relative to its fundamentals✓
3. Cno earnings✓
4. Dthe highest beta in the market✓

The Security Market Line (SML) plots expected return against

1. Astandard deviation✓
2. Bbeta✓
3. Cthe dividend yield✓
4. Dmarket price✓

A growth stock is typically characterized by

1. Ahigh dividend payout and low growth✓
2. Bvery low P/E and high yield✓
3. Cdeclining earnings✓
4. Dhigh earnings growth and low dividend payout✓

Yield to maturity (YTM) is

1. Athe coupon rate only✓
2. Bthe current yield only✓
3. Cthe dividend yield✓
4. Dthe 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. Abuy✓
2. Bshort sell immediately✓
3. Cignore it✓
4. Dsell at a loss✓

A security plotting above the Security Market Line is considered

1. Aundervalued✓
2. Bovervalued✓
3. Cfairly valued✓
4. Drisk-free✓

The Capital Asset Pricing Model assumes that investors are

1. Arisk-seeking✓
2. Bindifferent to risk✓
3. Crisk-averse✓
4. Dunable to diversify✓