Chapter 1
Overview
1. A market participant has a time horizon of one week. He is typically:
(a) A trader
(b) An investor
(c) A speculator
(d) A gambler
(e) None of the above
2. Which one of the following is not one among the broad categories in which shares are classified into?
(a) Speculative shares
(b) Advancing shares
(c) Cyclical shares
(d) Income shares
(e) None of the above
3. A preference share is a hybrid instrument.
(a) True (b) False
4. Resilience of a market means:
(a) There are no frequent price changes in the market
(b) New orders emerge in response to price changes
(c) The market volume is resilient
(d) All the above
(e) None of the above
5. Traditionally the cut off between short-term and long-term financial claims has been:
(a) Three years
(b) Five years
(c) Six months
(d) One year
(e) None of the above
6. Which one of the following factors is not behind the globalisation of financial markets?
(a) Deregulation
(b) Institutionalisation
(c) Liberalisation.
(d) Cartelisation
(e) None of the above
7. The most important decision in portfolio management is the:
(a) Choice of the market
(b) Choice of the instruments
(c) Choice of the asset mix
(d) Cost of the management
(e) None of the above
8. The true value of a security is its:
(a) Market value
(b) Discounted value
(c) Value at which it was issued
(d) Long-term average value
(e) None of the above
9. Investor performance in the long run may not depend on:
(a) Maintaining composure
(b) Sticking to a pattern
(c) Patience
(d) Diligence
(e) None of the above
10. The ‘reflexivity’ principle is a special insight developed by
(a) George Soros
(b) Warren Buffett
(c) J.M.Keynes
(d) Benjamin Graham
(e) None of the above
KEY
1 (a) / 2 (b) / 3 (a) / 4 (b) / 5 (d) / 6 (d) / 7 (c) / 8 (e) / 9 (b)10 (a)
Chapter 2
Investment Alternatives
1. Deposits in scheduled banks are very safe because:
(a) They are fully insured by the bank
(b) They are supervised by RBI
(c) They are guaranteed by RBI upto an extent
(d) Both b and c
(e) None of the above
2. A fixed deposit in a bank cannot be withdrawn before maturity.
(a) True (b) False
3. Fixed deposits mobilised by finance companies are regulated by:
(a) RBI
(b) Company Law Board
(c) SEBI
(d) Registrar of Companies
(e) None of the above
4. A non-banking finance company can issue deposits for a longer period than a manufacturing company:
(a) True (b) False
5. Which one of the following is the most liquid?
(a) National Savings Certificate
(b) Kisan Vikas Patra
(c) Public Provident Fund
(d) Bank fixed deposit
(e) None of the above
6. There is a ceiling in India on the interest paid on:
(a) Savings Bank deposit
(b) Fixed deposit in bank
(c) Debentures issued by private companies
(d) Taxable bonds issued by PSUs
(e) None of the above
7. An asset play will typically be a:
(a) Turnaround
(b) Stalwart
(c) Cyclical
(d) Fast grower
(e) None of the above
8. A participating policy allows an investor to:
(a) Receive dividend
(b) Receive bonus
(c) Allow inclusion of close dependents
(d) All the above
(e) None of the above
9. A paid-up policy can only be a:
(a) Participating Endowment Assurance
(b) Non commutable deferred annuity
(c) Term assurance policy
(d) Endowment benefit policy
(e) None of the above
KEY
1 (e) / 2 (b) / 3 (a) / 4 (a) / 5 (d) / 6 (a) / 7 (e) / 8 (b) / 9 (e)
Chapter 3
Securities Market
1. Book building is used to help in better
(a) Price discovery
(b) Retail participation
(c) Institutional participation
(d) Investor communication
(e) None of the above
2. Sensex is an equal-weighted index.
(a) True (b) False
3. Nifty is a
(a) Value weighted index
(b) Equal weighed index
(c) Price weighted index
(d) Hybrid index
(e) None of the above
4. An example of a collateralised short term lending transaction is
(a) Sterilization
(b) Repo
(c) Bank overdraft
(d) Commercial paper
(e) None of the above
5. Commercial Papers form part of
(a) Bills limit
(b) Working capital limit
(c) LC limit
(d) Guarantee limit
(e) None of the above
6. In a Dutch auction successful bidders pay the actual price (yield) they bid for:
(a) True (b) False
7. In a French auction successful bidders pay the actual price (yield) they bid for:
(a) True (b) False
8. A merchant banker:
(a) Underwrites an issue of securities
(b) Finances an issue of securities
(c) Manages an issue of securities
(d) Collects the subscriptions in an issue of securities.
(e) None of the above
9. Allotment of shares in a public issue is decided in consultation with:
(a) SEBI
(b) The stock exchange where the share will be listed
(c) Registrar and Transfer Agents
(d) Registrar of Companies in whose jurisdiction the Corporate office of the issuing firm falls
(e) None of the above
10. The purpose of IPO rating is to assess the:
(a) Investment attractiveness of the issue
(b) Creditworthiness of the company
(c) Fundamental strength of the company
(d) Regulatory compliance of the company
(e) None of the above
11. Preferential allotment of shares in India is given mainly to:
(a) Promoters or friendly investors
(b) Employees
(c) Preference share holders
(d) Reserved categories
(e) None of the above
12. In a block deal, the price is:
(a) Discovered by transparent bidding
(b) Negotiated in advance
(c) Arrived at as per a formula set by the exchange
(d) Average of the top ten bids
(e) None of the above
13. By holding shares in the physical form as against the demat form, an investor can retain his voting rights:
(a) True (b) False
14. Market impact cost will come down:
(a) With the deepening of the market
(b) If the open cry system is reintroduced
(c) If there are large number of institutional investors
(d) If there are restrictions on the speculators
(e) None of the above
15. For non-delivery based trades (day trades and arbitrage trades) in equity the STT is less than that for delivery based trades:
(a) True (b) False
16. Liquidity in a market is supplied by:
(a) Those placing active limit orders
(b) Market makers
(c) Jobbers
(d) All the above
(e) None of the above
17. While matching orders for equity trading in NSE, which one of the following gets precedence over all the others?
(a) Time of the order
(b) Price of the order
(c) Size of the order
(d) Both b and c
(e) None of the above
18. Free float represents:
(a) Promoters’ non-strategic shareholding
(b) Non-promoter non-strategic shareholding
(c) Shareholdings by non- FIs and non-FIIs
(d) Non-government shareholdings
(e) None of the above
19. EDIFAR is maintained by
(a) SEBI
(b) RBI
(c) NSE
(d) BSE
(e) None of the above
20. Which one of the following is not one of the factors that attract young technology companies to list on NASDAQ?
(a) Relatively low listing costs
(b) Relatively low listing requirements
(c) Relatively low settlement time
(d) All the above
(e) None of the above
21. Spot the odd member in the following group:
(a) PDAI
(b) FIMMDA
(c) AMFI
(d) TRAI
22. The largest holders of G-secs in India are:
(a) Insurance companies
(b) FIIs
(c) Banks
(d) Provident funds
(e) None of the above
23. Which one of the following facilities is provided by RBI?
(a) SGL
(b) WDM
(c) BOLT
(d) STT
(e) None of the above.
24. The most popular bond market index in India is provided by:
(a) CRISIL
(b) NSE
(c) I-Sec
(d) CCIL
(e) None of the above.
25. The bulk of corporate debt in India is issued through:
(a) Preferential allotment
(b) Private placement
(c) Dutch auction
(d) French auction.
(e) None of the above.
26. If you are doing a reverse repo, you:
(a) Lend the securities
(b) Borrow the securities
(c) Pledge the securities
(d) Auction the securities
(e) None of the above
27. All trades on NSE are guaranteed by:
(a) SEBI
(b) NSDL
(c) NSCC
(d) CDSL
(e) None of the above.
28. In respect of the sample shares, Sensex reflects the movement of:
(a) Average total market value of the floating stocks
(b) Average market value of the floating stocks times a fixed multiple
(c) Average capitalisation of the issued and paid up stocks
(d) Average aggregate market value of the subscribed stocks
(e) None of the above
KEY
1 (a) / 2 (b) / 3 (a) / 4 (b) / 5 (b) / 6 (b) / 7 (a) / 8 (c) / 9 (b)10 (c) / 11(a) / 12(b) / 13(b) / 14(a) / 15(a) / 16(d) / 17(b) / 18(b)
19(a) / 20(c) / 21(d) / 22(c) / 23(a) / 24(c) / 25(b) / 26(b) / 27(c)
28(e)
Chapter 4
Risk and Return
1. Variance will always be
(a) Positive
(b) Negative
(c) Variable
(d) Very high
(e) None of the above
2. An investor for whom the certainty index is less than the expected value, is
(a) Risk loving
(b) Risk averse
(c) Risk neutral
(d) Risk allergic
(e) None of the above
3. A normal distribution is completely characterised by
(a) Expected return and standard deviation
(b) Required return and variance
(c) Expected return and range
(d) Standard return and expected variance
(e) None of the above
4. If a variable is normally distributed what percentage of the values fall within a band of one standard deviation on either side of the arithmetic mean.
(a) 95.4 percent
(b) 68.3 percent
(c) 99.7 percent
(d) 57.5 percent
(e) None of the above
5. If a variable is normally distributed what percentage of values will fall within a band of three standard deviations on either side of the arithmetic mean?
(a) 95.4 percent
(b) 68.3 percent
(c) 99.7 percent
(d) 99.9 percent
(e) None of the above
6. A return relative is
(a) Total return +1
(b) 1- Total return
(c) 1/ Total return
(d) 1 + 1/ Total return
(e) None of the above
7. Bond horizon premium refers to the difference between the returns on
(a) Long term corporate bonds and treasury bills
(b) Long term government bonds and treasury bills
(c) Long term corporate bonds and long term government bonds
(d) Short term corporate bonds and treasury bonds
(e) None of the above
8. Which of the following is true?
(a) The geometric mean is always less than the arithmetic mean
(b) The geometric mean is always greater than the arithmetic mean
(c) The geometric mean and the arithmetic mean are always the same
(d) The geometric mean is always less than the arithmetic mean, except when all the return values being considered are equal
(e) None of the above
9. Which one of the following cannot be negative?
(a) Current return
(b) Capital return
(c) Total return
(d) Both a and b
(e) None of the above
10. Geometric measure is more accurate than arithmetic mean:
(a) True (b) False
11. Real returns are typically less than notional returns:
(a) True (b) False
12. In general, investors are:
(a) Risk-neutral
(b) Risk-loving
(c) Risk-averse
(d) None of the above
13. Use of probability distribution in investment analysis makes it:
(a) More rational
(b) More objective
(c) More subjective
(d) Both a and b
(e) None of the above
14. When the probability distribution of rate of return of a security is defined, the possible outcomes:
(a) Should be mutually exclusive
(b) Should be collectively exhaustive
(c) Should not add to more than 1
(d) All the above
(e) None of the above
15. Preparing the probability distribution of rate of return of a security is:
(a) An objective exercise based on the prevailing market conditions
(b) An objective exercise based on the past history of the securities performance
(c) An objective exercise based on the future prospects of the security
(d) A subjective exercise
(e) None of the above
16. While analysing the returns of a security based on a continuous probability distribution, probabilities are assigned to:
(a) Individual points on the curve
(b) Intervals between two points on the curve
(c) The gradient between any two referenced points on the curve
(d) Either b or c
(e) None of the above
KEY
1 (a) / 2 (b) / 3 (a) / 4 (b) / 5 (c) / 6 (a) / 7 (b) / 8 (d) / 9 (a)10 (b) / 11(a) / 12(c) / 13(e) / 14(d) / 15(d) / 16(b)
Chapter 5
THE Time value of money
1. If you were scheduled to receive Rs. 100,000 five years hence, but you wish to sell your contract note for its present value, which type of compounding would you rather have the purchaser of your contract note to use to find the purchase price, 8 percent compounded:
(a) Continuously
(b) Quarterly
(c) Semi-annually
(d) Annually
(e) Monthly
2. According to the rule of 69, the doubling period is equal to
(a) 0.25 + (69/ Interest rate)
(b) 0.35 + (69/ Interest rate)
(c) 0.69 + (0.35/ Interest rate)
(d) 0.69 + (0.25 / Interest rate)
(e) None of the above
3. For a depositor, when the frequency of compounding is increased
(a) Additional gains increase
(b) Additional gains dwindle
(c) Additional gains are unaffected
(d) There are no additional gains
(e) None of the above
4. Present value interest factor of a perpetuity represents
(a) Interest rate in percentage terms
(b) Reciprocal of interest rate in percentage terms
(c) Reciprocal of interest rate in decimal terms
(d) Interest rate in decimal terms
(e) None of the above