Portfolio Management MCQs

Welcome to our comprehensive collection of Multiple Choice Questions (MCQs) on Portfolio Management, a fundamental topic in the field of IC 89 Management Accounting. Whether you're preparing for competitive exams, honing your problem-solving skills, or simply looking to enhance your abilities in this field, our Portfolio Management MCQs are designed to help you grasp the core concepts and excel in solving problems.

In this section, you'll find a wide range of Portfolio Management mcq questions that explore various aspects of Portfolio Management problems. Each MCQ is crafted to challenge your understanding of Portfolio Management principles, enabling you to refine your problem-solving techniques. Whether you're a student aiming to ace IC 89 Management Accounting tests, a job seeker preparing for interviews, or someone simply interested in sharpening their skills, our Portfolio Management MCQs are your pathway to success in mastering this essential IC 89 Management Accounting topic.

Note: Each of the following question comes with multiple answer choices. Select the most appropriate option and test your understanding of Portfolio Management. You can click on an option to test your knowledge before viewing the solution for a MCQ. Happy learning!

So, are you ready to put your Portfolio Management knowledge to the test? Let's get started with our carefully curated MCQs!

Portfolio Management MCQs | Page 5 of 10

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Q41.
According to the Arbitrage Pricing Theory Model, what are the four factors that explain the risk premium relationship of a particular security?

a.

Risk-free rate, market rate, inflation, and interest rate

b.

Inflation and money supply, interest rate, industrial production, and personal consumption

c.

Beta values, market rate, inflation, and risk-free rate

d.

Industrial production, market rate, personal consumption, and risk-free rate

Discuss
Answer: (b).Inflation and money supply, interest rate, industrial production, and personal consumption Explanation:According to the Arbitrage Pricing Theory Model, the four factors explaining the risk premium relationship are inflation and money supply, interest rate, industrial production, and personal consumption.
Q42.
What does the upward-sloping line in the Security Market Line (SML) indicate?

a.

The risk-free rate

b.

The risk premium

c.

The risk-free asset

d.

The expected return

Discuss
Answer: (b).The risk premium Explanation:The upward-sloping line in the Security Market Line (SML) indicates the risk premium, representing the relationship between systematic risk and return.
Q43.
What is the main advantage of the Arbitrage Pricing Theory Model?

a.

It only considers one factor in determining risk premium

b.

It provides a multi-factor model considering various factors

c.

It assumes a risk-free asset in all portfolios

d.

It focuses solely on individual security analysis

Discuss
Answer: (b).It provides a multi-factor model considering various factors Explanation:The main advantage of the Arbitrage Pricing Theory Model is that it provides a multi-factor model considering various factors to explain the risk premium relationship.
Q44.
When considering debt investments in portfolio management, what important factor should investors pay attention to?

a.

Nominal returns

b.

Tax impact

c.

Inflation impact

d.

Maturity period

Discuss
Answer: (c).Inflation impact Explanation:Investors should pay attention to the impact of inflation when considering debt investments in portfolio management. Real returns, accounting for inflation, provide a more accurate assessment of the investment's performance.
Q45.
What does default risk refer to in the context of debt instruments?

a.

The risk of interest rate movements

b.

The issuer's inability to return principal at maturity

c.

The sensitivity of bond prices to market conditions

d.

The risk associated with longer-tenure bonds

Discuss
Answer: (b).The issuer's inability to return principal at maturity Explanation:Default risk in the context of debt instruments refers to the possibility that the issuer may not be able to return the principal amount at the time of maturity.
Q46.
How does interest-rate risk affect bond prices and debt funds in portfolio management?

a.

Bond prices rise when interest rates rise

b.

Bond prices fall when interest rates rise

c.

Interest-rate changes have no impact on bond prices

d.

Longer-duration bonds are less sensitive to interest-rate changes

Discuss
Answer: (b).Bond prices fall when interest rates rise Explanation:Interest-rate risk in portfolio management results in bond prices falling when interest rates rise. This impact is observed in the Net Asset Values (NAVs) of debt funds, especially affecting longer-duration bonds more than short-duration ones.
Q47.
What is advisable when investing in longer-duration bonds in the context of interest-rate expectations?

a.

Invest in longer-duration bonds when rates are expected to rise

b.

Avoid longer-duration bonds when rates are expected to rise

c.

Longer-duration bonds are always a safe investment

d.

The impact of interest-rate changes is the same for all bond durations

Discuss
Answer: (a).Invest in longer-duration bonds when rates are expected to rise Explanation:It is advisable to invest in longer-duration bonds when interest rates are expected to fall and avoid them when rates are expected to rise.
Q48.
How did bond yields and NAVs of debt funds react when the RBI did not hike interest rates as expected?

a.

Bond yields increased, and NAVs of debt funds decreased

b.

Bond yields decreased, and NAVs of debt funds increased

c.

Bond yields and NAVs remained unchanged

d.

The impact on bond yields and NAVs depends on other market factors

Discuss
Answer: (b).Bond yields decreased, and NAVs of debt funds increased Explanation:When the RBI did not hike interest rates as expected, bond yields decreased, leading to an increase in the Net Asset Values (NAVs) of debt funds.
Q49.
What is the lock-in period for the Public Provident Fund (PPF)?

a.

5 years

b.

10 years

c.

15 years

d.

20 years

Discuss
Answer: (c).15 years Explanation:The Public Provident Fund (PPF) has a lock-in period of 15 years, making it a long-term investment option.
Q50.
What is a key advantage of tax-free bonds?

a.

Guaranteed returns

b.

Low-risk profile

c.

High interest income without tax incidence

d.

Short maturity period

Discuss
Answer: (c).High interest income without tax incidence Explanation:Tax-free bonds offer the advantage of earning high interest income without any tax incidence, making them attractive for investors.
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