1.

Critical Path Net Work helps an engineer

A. To concentrate his attention on critical activities
B. To divert the resources from noncritical advanced activities to critical activities
C. To be cautious for avoiding any delay in the critical activities to avoid delay of the whole project
D. All of the above

2. In break-even analysis, total cost consists of

A. Fixed cost
B. Variable cost
C. Fixed cost + variable cost
D. Fixed cost + variable cost + overheads

3. Which one of the following techniques is used for determining allowances in time study?
A. Acceptance sampling
B. Linear regression
C. Performance rating
D. Work sampling

4. Which one of the following chart gives simultaneously information about the progress of work and
machine loading?
A. Process chart
B. Machine load chart
C. Man-machine chart
D. Gantt chart

5. Delphi method is used in

A. Judgmental technique
B. Time series technique
C. Associate technique
D. All the above
1. The Treynor-Black model is a model that shows how an investment manager can use security analysis and
statistics to construct __________.
A) A market portfolio
b) A passive portfolio
c) An active portfolio
d) An index portfolio

2. In the Treynor-Black model

A) Portfolio weight are sensitive to large alpha values which can lead to infeasible long or short
position for many portfolio managers.
B) Portfolio weight are not sensitive to large alpha values which can lead to infeasible long or short
position for many portfolio managers.
C) Portfolio weight are sensitive to large alpha values which can lead to the optimal portfolio for most
portfolio managers.
D) Portfolio weight are not sensitive to large alpha values which can lead to the optimal portfolio for
most portfolio managers.

3. Benchmark portfolio risk is defined as

A) The return difference between the portfolio and the benchmark
B) The variance of the return of the benchmark portfolio
C) The variance of the return difference between the portfolio and the benchmark
D) The variance of the return of the actively-managed portfolio

4. If a portfolio manager consistently obtains a high Sharpe measure the manager's forecasting ability
A) is above average
B) is average
C) is below average
D) does not exist.
E) cannot be determined based on the Sharpe measure

Answer: A Difficulty: Easy

Rationale: The manager with the highest Sharpe measure presumably has true forecasting abilities.

5. Active portfolio management consists of

A) Market timing
B) Security analysis
C) Indexing
D) A and B
1. In the Treynor-Black model, the weight of each security in the portfolio should be proportional to its
A) Alpha/beta
B) Alpha/beta/residual variance
C) Beta/residual variance
D) Alpha/residual variance

2. Active portfolio managers try to construct a risky portfolio with __________.

A) A higher Sharpe measure than a passive strategy
B) A lower Sharpe measure than a passive strategy
C) The same Sharpe measure as a passive strategy
D) Very few securities

3. A purely passive strategy is defined as

A) One that uses only index funds.
B) One that allocates assets in fixed proportions that do not vary with market conditions.
C) One that is mean-variance efficient.
D) Both A and B.

4. The Treynor-Black model assumes that

A) The objective of security analysis is to form an active portfolio of a limited number of mispriced
securities.
B) The cost of less than full diversification comes from the nonsystematic risk of the mispriced stock.
C) The optimal weight of a mispriced security in the active portfolio is a function of the degree of
mispricing, the market sensitivity of the security, and its degree of nonsystematic risk.
D) All of the above are true.

5. Benchmark portfolio risk

A) is inevitable and is never a significant issue in practice.
B) is inevitable and is always a significant issue in practice.
C) Cannot be constrained to keep a Treynor-Black portfolio within reasonable weights.
D) Can be constrained to keep a Treynor-Black portfolio within reasonable weights.
 EXPERIMENT – 4

1. Financial calculators:
a.A Make most computations easier.
b.Eliminate the need to understand the concepts behind time value.
Are used almost exclusively in real-life.
c.a and c only.

2. The continuous compounding of interest:

a.Is mathematically impossible.
b.Can easily be calculated without a calculator.
c.Requires a calculator to calculate.
d.None of the above.

3. The future or present value of an amount depends upon:

a.The interest rate.
b.The number of periods.
c.Number of times per year compounding occurs.
d.All of the above.

4. When a firm is valued at the present value of its annual earnings divided by the relevant interest rate:
a. This is called the Capitalization of Earnings.
b. The firm is being valued as a perpetuity.
c. a and b.
d. None of the above.

5. In which case will an investor receive the most interest:

a. 10%, compounded annually.
b. 10%, compounded monthly.
c. 10%, compounded continuously.
d. 10%, compounded daily.

6.When a banker quotes an interest rate of 8% compounded semiannually, he is quoting the:

a.Nominal rate.
b.APR.
c.EAR.
d. Both a and b.

7.Annuities:
are a stream of equal payments at unequal time intervals.
are a stream of equal payments at equal time intervals.
are a stream of equal payments that continue forever.
all of the above.

8.Sinking funds:
are a series of equal payments.
are made to an account designated to pay off a bond’s principal.
help to reassure bondholders that a company can repay a bond’s principal at maturity.
all of the above.
9. At 12% interest compounded quarterly for 5 years, what is the interest rate and the number of periods that
will be computed before a present or future value table can be used?
12%, 5 periods
6%, 10 periods
3%, 20 periods
4%, 15 periods

10. :
are used to purchase real estate.
are primarily long term.
usually have more than half the balance remaining when the loan is half-way to maturity.
all of the above.

1.The basic rule of the time value of money is:

investments will always be worth more tomorrow than they are today
it’s always wiser to save a dollar for tomorrow than to spend it today
a dollar in hand today is worth more than a dollar promised at some time in the future
all of the above express an aspect of the basic rule of time value of money

2.The present value of a future amount:

will always be less than the future amount
can be calculated precisely if the discount rate and number of periods is known
is worth less than the future value
both a. and b. above are true

3.Which of the following formulas is the correct way to express a future value two years into the future based
on a present value and an interest rate? FV2 =
PV (1 + k) + PV (1 + k) (k)
PV (1 +k) (1 + k)
PV ( 1 + k)2
all of the above are correct

4.If you want to know how much money you will have at the end of 15 years if you make quarterly deposits in a
bank that pays 6% interest compounded quarterly, you should go to Table A-3 and look up the value for
n = _____ and k = _____.
a.15, 6%
b.15, 1.5%
c.60, 6%
d. 60, 1.5%

5.If you use a financial calculator to solve a mortgage problem and you are given the amount of the loan, the
interest rate and the term of the loan, you will be solving for:
a. n
b. I/Y
c. PV
d. PMT

6.When comparing an annuity due with an ordinary annuity with the same payment and duration, the annuity
due will always have a _______ present value and will always have a _______ future value.
a.higher; higher
b.higher; lower
c.lower, higher
 d.lower, lower

7.Which of the following terms mean the same thing

a.APR, EAR, nominal rate
b. APR, annual rate, nominal rate
c.EAR, annual rate, nominal rate
d.APR, EAR, annual rate

8.With amortized loans, such as a mortgage:

interest is always more than half of the payment amount
return of principal is always more than half of the payment amount
the proportion of interest to the total decreases later in the payment schedule
the proportion of interest to the total increases later in the payment schedule.

9.An imbedded annuity is:

a.an annuity that starts at the beginning of a stream of payments but doesn’t continue for the entire payment
stream
b.an annuity that starts during a payment stream (not at the beginning) and continues to the end of the
payment stream
c.an annuity that starts after the beginning of a payment stream and concludes before the end of the payment
stream
d. all of the above describe imbedded annuities

10.A perpetuity:
has infinite value because the payments continue forever
can be valued (PV) if the payment amount and interest rate are known
don’t exist in the financial world
none of the above are true

Experiment - 5
1 . Operations research is the application of ____________methods to arrive at the optimal
Solutions to the problems.
  A. economical
  B. scientific
  C. a and b both
  D. artistic
 Correct Answer : B
2 . OR can evaluate only the effects of
  A. Personnel factors.
  B. Financial factors
  C. Numeric and quantifiable factors.
  D. Procedures
 Correct Answer : C
3 . OR has a characteristics that it is done by a team of
  A. Scientists
  B. Mathematicians
  C. Academics
  D. all of the above.
 Correct Answer : D
4 . A solution can be extracted from a model either by
  A. Conducting experiments on it
  B. Mathematical analysis
  C. Both A and B
  D. Diversified Techniques
 Correct Answer : C
5 . What is the objective function in linear programming problems?
  A. A constraint for available resource
  B. An objective for research and development of a company
  C. A linear function in an optimization problem
  D. A set of non-negativity conditions
 Correct Answer : C
6 . In Degenerate solution value of objective function
  A. increases infinitely
  B. basic variables are nonzero
  C. decreases infinitely
  D. One or more basic variables are zero
 Correct Answer : D

1 . In graphical method the restriction on number of constraint is .

  A. 2
  B. not more than 3
  C. 3
  D. None of the above.
 Correct Answer : D
2 . In LPP the condition to be satisfied is
  A. Constraints have to be linear
  B. Objective function has to be linear
  C. none of the above
  D. Both A and B.
 Correct Answer : D
3 . Optimal solution of an assignment problem can be obtained only if
  A. Each row & column has only one zero element
  B. Each row & column has at least one zero element
  C. The data is arrangement in a square matrix
  D. None of the above
 Correct Answer : A
4 . In assignment problem of maximization, the objective is to maximise
  A. Profit
  B. optimization
  C. cost
  D. None of the above.
 Correct Answer : A
5 . The transportation method assumes that
  A. there are no economies of scale if large quantities are shipped from one source to one
destination.
  B. the number of occupied squares in any solution must be equal to the number of rows in the
table plus the number of columns in the table plus 1.
  C. there is only one optimal solution for each problem.
  D. the number of dummy sources equals the number of dummy destinations.
 Correct Answer : A
6 . In a transportation problem, we must make the number of______ and ______ equal
  A. destinations; sources
  B. units supplied; units demanded
  C. columns; rows
  D. positive cost coefficients; negative cost coefficients
 Correct Answer : B
7 . The procedure used to solve assignment problems wherein one reduces the original assignment
costs to a table of opportunity costs is called
  A. stepping-stone method
  B. matrix reduction
  C. MODI method
  D. northwest reduction
 Correct Answer : B
8 . Both transportation and assignment problems are members of a category of LP problems called
  A. shipping problems
  B. logistics problems
  C. generalized flow problems
  D. network flow problems
 Correct Answer : D
9 . If an opportunity cost value is used for an unused cell to test optimality, it should be
  A. Equal to zero
  B. Most negative number
  C. Most positive number
  D. Any value
 Correct Answer : B
10 . When total supply is equal to total demand in a transportation problem, the problem is said to
be
  A. Balanced
  B. Unbalanced
  C. Degenerate
  D. None of the above.
 Correct Answer : A