Security Analysis Portfolio Management 10

8/7/2019 Security Analysis Portfolio Management 10

1/54

LIST OF ATTEMPTED QUESTIONS AND ANSWERSMultiple Choice Multiple Answer

Question Active investment managers :-

Correct Answer Do not believe that markets are efficient , Puts efforts to searchmispriced securities in the market , Are relatively active tradersin securities to acquire abnormal returns

Multiple Choice Multiple AnswerQuestion Equity analysts provides estimates of earnings and earnings

growth for future, using historical data and :-Correct Answer Macro economic information that may impact future growth ,

Private information about the firm , Firm's specific informationand public information

Multiple Choice Multiple Answer

Question What are the features of short-term trends?Correct Answer They last from 1 to 3 or 4 weeks , They interrupt the course of

the intermediate cycle , They are usually influenced by randomnews events

Multiple Choice Multiple AnswerQuestion What are the features of trend lines

Correct Answer A simple and useful tool in technical analysis , Prices move intrends , The trend lines represent points of support andresistance

Multiple Choice Multiple AnswerQuestion What are the features of candle stick charts?

Correct Answer Indicates in black if the closing price is lower than the opening price , Indicates in white if the closing price is higher than theopening price

Your Answer , Displays the correlation between the high and low prices

Multiple Choice Multiple AnswerQuestion The growth rate in the initial phase is not constant but declines

linearly over time to reach the stable growth rate in steady stateis a phenomena of :-

Correct Answer H- Model for valuing growth , H-Two stage model for growth ,H-Model unlike the classic two stage model

Multiple Choice Multiple AnswerQuestion What are the features of line charts?


2/54

Correct Answer It connects closing prices from one period to the next , It isideal for securities with no high or low price data

Multiple Choice Multiple AnswerQuestion What are the ways of measuring relative strength?

Correct Answer Calculate the rates of return and classify securities that haveearned superior historical returns , Calculating certain ratioswill help in analyzing whether a security has relative strength

Your Answer Calculating the Return on investment

Multiple Choice Multiple AnswerQuestion The Peer group of Bharat Forge consists of which all

companies?Correct Answer Am forge industries , Kalyani Forge , EL Forge

Multiple Choice Multiple AnswerQuestion Which were the initiatives which the chairman said would

focus on in 2003-04 in the speech in annual report for the year 2003-03?

Correct Answer Research and development , Capital investment and focus on balance sheet , Overseas acquisitions

Multiple Choice Multiple AnswerQuestion The Two-Stage dividend discount model is best suited for the

firms that are :-

Correct Answer In high growth rate phase , Expecting to maintain the growthrate phase steadily for a specific time period , Sources of highgrowth are expected to disappear after specific period of time

Multiple Choice Multiple AnswerQuestion The features of bond are :-

Correct Answer Collateral , Call provision , Sinking fund and protectivecovenants

Multiple Choice Multiple Answer Question What are the features of

company fixed deposits?Correct Answer Interest rate offered is

higher than banks , Nobenefits under 80 L , NoTDS for interest incomeupto Rs. 5000

Your Answer Interest rate offered ishigher than banks , No


3/54

benefits under 80 L , NoTDS for interest incomeupto Rs. 5000

Multiple Choice Multiple Answer Question What are the features of point

and figure charts?Correct Answer Charts are constructed using a

combination of X's and O'sknown as boxes. , X's show thatthe prices are moving up , O'sshow that the prices are movingdown

Your Answer Charts are constructed using acombination of X's and O'sknown as boxes. , X's show thatthe prices are moving up , O'sshow that the prices are movingdown

Multiple Choice Multiple Answer Question What are the features of post

office monthly income scheme?Correct Answer Investor earns bonus of 10% on

completion of term , Rate of return is 8 % , Interest payablemonthly

Your Answer Rate of return is 8 % , Interestpayable monthly , Investor earnsbonus of 10% on completion of term

Multiple Choice Multiple Answer Question The firm issuing bonds

operating sinking fund andrepurchases bonds either :-

Correct Answer Calling in a certain number of bonds by lot , Buyingbonds in the open market ,Buying bonds issued tobanks and financialinstitutions

Your Answer Calling in a certain number

of bonds by lot , Buyingbonds in the open market ,Buying bonds issued tobanks and financialinstitutions

Multiple Choice Multiple Answer Question If option is given to you to

receive Rs.1,000/- today or after


4/54


5/54

entails fixed outgo of periodicpayments , Help in assessing therisk arising using the debt capital

Your Answer Help in assessing the risk arisingusing the debt capital , Debt equityratio and interest coverage ratio

and DSCR are important leverageratios , Debt is riskier source of finance as it entails fixed outgo of periodic payments

Multiple Choice Multiple Answer Question What developments had taken

place during the year 2000 in caseof Bharat Forge Ltd.?

Correct Answer Demerger of investment divisionand windmills , Nominee director of UTI resigned and ceased to be the

director - nomination withdrawn byUTIYour Answer Demerger of investment division

and windmills , Nominee director of UTI resigned and ceased to be thedirector - nomination withdrawn byUTI

Multiple Choice Multiple Answer Question The investor in bonds receives income

from :-Correct Answer Interest payments at coupon rates ,

Capital gain/loss arising out of the sale of the bond , Redemption of the bond of theissuer at a contracted value

Your Answer Interest payments at coupon rates ,Capital gain/loss arising out of the sale of the bond , Redemption of the bond of theissuer at a contracted value

Multiple Choice Multiple Answer Question 1 Return can be in the form of :-

Correct Answer Dividends , Interests , Capital appreciation

Your Answer Dividends , Interests , Capital appreciation

Multiple Choice Multiple Answer Question 5 What were the achievements of Bharat Forge

during the year 2003?Correct Answer Secured second largest customer in China ,

Appointed a Company Secretary to act ascompliance officer , New contracts won in


6/54

passenger car components

Your Answer Secured second largest customer in China ,Appointed a Company Secretary to act ascompliance officer , New contracts won inpassenger car components

Multiple Choice Multiple Answer Question 35 An option is :-

Correct Answer A contract between two parties , Where buyer receives a privilege for which he pays apremium , Where the seller accepts an obligationfor which he receives a fee

Your Answer A contract between two parties , Where buyer receives a privilege for which he pays apremium , Where the seller accepts an obligation

for which he receives a fee

Multiple Choice Multiple Answer Question 41 Formula for calculation of portfolio variance

requires :-Correct Answer Expected return on portfolio , Expected return on

assets , Weight of asset in the portfolioYour Answer Expected return on portfolio , Expected return on

assets , Weight of asset in the portfolio

Multiple Choice Multiple Answer Question 46 What were the objectives for 2002-03 the

chairman of Bharat forge had emphasised on inthe annual report for 2001 - 02Correct Answer Maintain aggressive exports thrust , Increase

shares of value added products , Continuereducing costs

Your Answer Maintain aggressive exports thrust , Increaseshares of value added products , Continuereducing costs

Multiple Choice Multiple Answer Question 47 Which are the most popular types of orders

placed through an online trading account?Correct Answer Limit orders , Market orders

Your Answer Market orders , Hedging orders , Arbitrage orders

Multiple Choice Multiple Answer Question 4 A firm's growth is determined by how

much is re-invested into new assets andthe quality of these investments, andthese includes :-


7/54

Correct Answer Acquisitions , Building distributionchannels , Expanding marketingcapabilities and investing in new facilities

Your Answer Acquisitions , Expanding marketingcapabilities and investing in new facilities ,Mergers

Multiple Choice Multiple Answer Question 5 Which of the following are important

momentum indicators used widely?Correct Answer Rate of change (ROC) , Relative strength

indicator (RSI) , Moving averageconvergence divergence(MACD)

Your Answer Rate of change (ROC) , Relative strengthindicator (RSI) , Moving averageconvergence divergence(MACD)


Question 14 Which ratios are commonly used?

Correct Answer Debt equity ratio , Interest coverage ratios ,Debt service coverage ratios

Your Answer Debt equity ratio , Interest coverage ratios ,Debt service coverage ratios

Multiple Choice Multiple Answer Question 15 What were the Chairman's comments during

the speech in the Annual report of the FY2002-03?

Correct Answer Best year in the history of the company ,

146% growth in exports , Highest pre andpost tax profitsYour Answer Best year in the history of the company ,

146% growth in exports , Highest pre andpost tax profits

Multiple Choice Multiple Answer Question 20 Who are the constituents of a

mutual fund?Correct Answer Sponsor & trustees , Asset

management company ,Custodian

Your Answer Sponsor & trustees , Assetmanagement company ,Custodian

Multiple Choice Multiple Answer Question 26 What are the features of Kisan Vikas Patra?

Correct Answer Term is for 8 years seven months , Provisionof premature withdrawal , Interest rate is 8.4%


8/54

compounded annually

Your Answer Term is for 8 years seven months , Provisionof premature withdrawal , Interest rate is 8.4%compounded annually

Multiple Choice Multiple Answer Question 38 The security analysis process will achieve :-

Correct Answer True picture of a company , Normal earningpower , Projection of future profitability

Your Answer True picture of a company , Normal earningpower , Projection of future profitability

Multiple Choice Multiple Answer Question 41 The return to the bond investor can be

measured in terms of :-Correct Answer Current yield , Yield to maturity , Realised

yieldYour Answer Yield to maturity , Realised yield

Multiple Choice Multiple Answer Question 5 Which are the different types of accounts offered to

investors by the stock brokers?Correct Answer Cash trading , Margin trading

Your Answer General trading , Cash trading , Margin trading

Multiple Choice Multiple Answer Question 7 What are the features of Retail government securities

(G-secs) ?Correct Answer Safest investment option available , Demat account is

required for investment , Choice of tenure varies fromless than 1 year to 30 years

Your Answer Securities can be bought from the RBI , Safestinvestment option available , Demat account is requiredfor investment

Multiple Choice Multiple Answer Question 10 To measure the movement of stocks in the market

which indices were constructed by Dow?

Correct Answer Dow Jones industrial Average , Dow JonesTransportation AverageYour Answer Dow Jones Transportation Average

Multiple Choice Multiple Answer Question 16 The security market is the market for :-


9/54

Correct Answer Equity , Debt , Derivatives

Your Answer Equity , Debt , Bank deposits


Question 18 In a typical stock market cycle which are the types of trends?Correct Answer Trends upward , Trend downward , Sideway trend

Your Answer Trends upward , Trend downward , Flat trend

Multiple Choice Multiple Answer Question 22 Mutual fund schemes could be broadly classified as :-

Correct Answer Open ended scheme , Close ended scheme

Your Answer Open ended scheme , Close ended scheme , Growthschemes

Multiple Choice Multiple Answer Question 24 What was the final analysis on the performance of

Bharat forge for the year FY 02?Correct Answer Aim to become US$1 billion Company by Fy 08 from

US$100 million , Stock currently trades at 15 times itsFY 05 consensus EPS forecasts , Stock will trade at aninexpensive PEG of 0.6x.

Your Answer Aim to become US$1 billion Company by Fy 08 fromUS$100 million , Stock currently trades at 15 times itsFY 05 consensus EPS forecasts , Stock will trade at aninexpensive PEG of 0.6x.

Multiple Choice Multiple Answer Question 26 Gilt Edged Securities are :-

Correct Answer State Govt. , Quasi-Govt , Central Govt

Your Answer Central Govt , State Govt. , Quasi-Govt

Multiple Choice Multiple Answer Question 33 What are the ways of measuring relative strength?

Correct Answer Calculate the rates of return and classify securities that

have earned superior historical returns , Calculatingcertain ratios will help in analyzing whether a securityhas relative strength

Your Answer Calculate the rates of return and classify securities thathave earned superior historical returns , Calculatingcertain ratios will help in analyzing whether a securityhas relative strength , Calculating the Return oninvestment


10/54

Multiple Choice Multiple Answer Question 44 What are the different types of profitability ratios?

Correct Answer Gross profit margin ratio , Earnings power , Return onequity

Your Answer Gross profit margin ratio , Earnings power , Return on

equity

Multiple Choice Multiple Answer Question The Gordon growth model is best suited for firms :-

Correct Answer Growing at a rate equal to or lower that the growth in the economy ,Which have well established dividend payout ratio policy , Whoseearnings are steady and perpetual

Your Answer Growing at a rate equal to or lower that the growth in the economy ,Which have well established dividend payout ratio policy


Question The Two-Stage dividend discount model is based on the assumptionof :-Correct Answer An initial phase where the growth is not a stable growth rate , A

subsequent steady state of growth rate being stable and lasts nyears , A stable growth phase lasts forever

Your Answer An initial phase where the growth is not a stable growth rate , Asubsequent steady state of growth rate being stable and lasts nyears , A stable growth phase lasts forever

Multiple Choice Multiple Answer Question Features of PSU Bonds are :-

Correct Answer No TDS , Transferable by endorsement , No stamp duty on transfer

Your Answer No TDS , Transferable by endorsement , No stamp duty on transfer

Multiple Choice Multiple Answer Question An options contract allows the investor :-

Correct Answer To earn a profit while restricting the downside risk , To use theoptions for speculation , Either to honour or walk away from thecontract

Your Answer Either to honour or walk away from the contract , To earn a profitwhile restricting the downside risk , To use the options for

speculation

Multiple Choice Multiple Answer Question Major steps involved in construction of a index are :-

Correct Answer Selecting a set of scrips to be used , Fixing starting date ,Calculating market capitalisation

Your Answer Selecting a set of scrips to be used , Fixing starting date , Fixingending date


11/54

Multiple Choice Multiple Answer Question How can the financial statements can be manipulated while

giving the estimates for growth?Correct Answer Change method of rate of depreciation , Change method of stock

valuation , Inflating sales for current year by advancing sales for the following year

Your Answer Change method of rate of depreciation , Change method of stockvaluation , Inflating sales for current year by advancing sales for the following year

Multiple Choice Multiple Answer Question The underlying assumptions of Technical analysis are that :-

Correct Answer Prices move in predictable patterns , Market value is determinedby supply & demand , Investors are emotional than being rational

Your Answer Prices move in predictable patterns , Investors are emotionalthan being rational

Multiple Choice Multiple Answer Question Which are the different styles of displaying charts?

Correct Answer Bar and line charts , Candle stick charts , Point and figure charts

Your Answer Candle stick charts , Point and figure charts , Bar and line charts

Multiple Choice Multiple Answer Question What are the features of public provident scheme?

Correct Answer 15 year instrument , Rate of interest is 8% , Partial withdrawal isavailable from 7th year

Your Answer 15 year instrument , Rate of interest is 8% , Partial withdrawal isavailable from 7th year

Multiple Choice Multiple Answer Question Growth of the firm can be estimated through :-

Correct Answer Firm's past earnings/historical growth rate , Estimates made byequity research analyst who follow the firm , Estimates from afirm's fundamentals

Your Answer Firm's past earnings/historical growth rate , Estimates made byequity research analyst who follow the firm , Estimates from a

firm's fundamentals

Multiple Choice Multiple Answer Question Characteristics of Preference shares are :-

Correct Answer Carry a fixed rate of dividend , Dividend payable out of profit ,Redemption in 7 to 12 years

Your Answer Carry a fixed rate of dividend , Dividend payable out of profit ,Redemption in 7 to 12 years


12/54

Multiple Choice Multiple Answer Question What are the SEBI regulations with respect to mutual funds?

Correct Answer Mutual funds to be registered with SEBI before the launching anyscheme , 2/3rds of the directors of the trustee company must beindependent , An AMC approved by SEBI manages the fund

Your Answer Mutual funds to be registered with SEBI before the launching anyscheme , 2/3rds of the directors of the trustee company must beindependent , An AMC approved by SEBI manages the fund

Multiple Choice Multiple Answer Question The security analysis process will achieve :-

Correct Answer True picture of a company , Normal earning power , Projection of future profitability

Your Answer True picture of a company , Normal earning power , Projection of future profitability

Multiple Choice Multiple Answer Question The return to the bond investor can be measured in terms of :-

Correct Answer Current yield , Yield to maturity , Realised yield

Your Answer Realised yield

Multiple Choice Multiple Answer Question What are the features of bank deposits?

Correct Answer Interest is presently around 6% , Benefits under section 80 L ,Banks offer cheque facility for investors making it convenient towithdraw

Your Answer Interest is presently around 6% , Banks offer cheque facility for investors making it convenient to withdraw

Multiple Choice Multiple Answer Question What are the important macro economic indicators?

Correct Answer GNP growth rate , Price Conditions , Monsoons

Your Answer GNP growth rate , Price Conditions , Monsoons

Multiple Choice Single AnswerQuestion When an investor invests in stock, expects to get the dividends and

an expected price for the period the stock is held is the rule of :-Correct Answer The General model


13/54

Multiple Choice Single AnswerQuestion Stock Exchanges are the part of :-

Correct Answer Secondary market

Your Answer Money Market

Multiple Choice Single AnswerQuestion The index futures symbols of BSE are represented as :-

Correct Answer BSX JAN 2005 (January contract)

Multiple Choice Single AnswerQuestion More than half the variation in stock price could be attributed

to which factor?Correct Answer Market influence

Multiple Choice Single AnswerQuestion In India we have index futures contracts based on :-

Correct Answer S&P CNX Nifty and the BSE sensex

Multiple Choice Single AnswerQuestion In India, the futures on individual securities have been

introduced from :-Correct Answer 2001

Multiple Choice Single AnswerQuestion What do you understand by the term redemption price?

Correct Answer Price or NAV at which a scheme purchases its units

Multiple Choice Single AnswerQuestion A security analysis is done :-

Correct Answer For decision making for investments

Multiple Choice Single AnswerQuestion As per the exhibit 18-1 for individual stock futures on NSE,

the price steps in respect of all futures contract admitted tothe dealings of the exchange shall be :-

Correct Answer 0.05


14/54

Multiple Choice Single AnswerQuestion What is a technical approach to investment?

Correct Answer A reflection of the idea that prices move in trends which aredetermined by various factors

Multiple Choice Single AnswerQuestion A pledge of real assets as insurance against the non-payment

of default by the buyer representsCorrect Answer Collateral

Multiple Choice Single AnswerQuestion Who developed Dow's Principles and organised them into a

theory as it is known today?Correct Answer William Peter Hamilton

Your Answer Charles.H.DowMultiple Choice Single Answer Question We can compare the price earning ratio of a market to its

historical average to make judgements about, whether marketis :-

Correct Answer Under valued or over valued

Your Answer Under valued or over valued

Multiple Choice Single Answer Question When a firm can grow net profits by issuing equity, the expected

growth rate in net profits is determined by :-Correct Answer Equity reinvestment rate X return on equity

Your Answer Price earning ratio X return on equity

Multiple Choice Single Answer Question What is a load fund?

Correct Answer Fund charging a fee for entry and exit

Your Answer Fund charging a fee for entry and exit

Multiple Choice Single Answer Question Investment is a risk free investment when :-

Correct Answer Actual return is = expected return

Your Answer Actual return is = expected return

Multiple Choice Single Answer


15/54

Question Debt instruments that have a maturity period of more than oneyear are called as :-

Correct Answer Bonds

Your Answer Bonds

Multiple Choice Single Answer Question Mr. Sharma is expecting to receive Rs. 50,000/- at the end of 5

years. He wanted to know what is the present value of thisamount, if the rate of interest is 6% p.a?

Correct Answer Rs. 37363/-

Your Answer Rs. 37363/-

Multiple Choice Single Answer Question Which of these is a short-maturity debt issue?

Correct Answer Money market funds and gilts

Your Answer Money market funds and gilts

Multiple Choice Single Answer Question What is Support level?

Correct Answer A point where the prices become relatively attractive for buyers

Your Answer Market resistance to a price fall

Multiple Choice Single Answer Question During the 1980's rate of savings in India has hovered around

what percentage?Correct Answer 0.21

Your Answer 0.22

Multiple Choice Single Answer Question A market that is trading at a Price earning ratio that is much

higher than its historical norms is considered to be :-Correct Answer Over valued

Your Answer Over valued

Multiple Choice Single Answer Question The average historical growth rate can be calculated as :-

Correct Answer Arithmetic average or a geometric average


16/54

Your Answer Geometric average

Multiple Choice Single Answer Question 4 What are short term trends?

Correct Answer Trends which interrupt the course of the intermediate cycleYour Answer They are counter-cyclical trends within the confines of a primary

trendMultiple Choice Single Answer Question 8 When the firm is not raising equity by issuing new shares, the

growth rate in net profits is given by :-Correct Answer Retention ratio X return on equity

Your Answer Price earning ratio X return on equity


Question 9 The historical growth rate and the past earnings of a firm areused in valuing :-

Correct Answer Stable firms, but not appropriate for high growth firms

Your Answer Consistent stable firms, but not appropriate for high growth firms

Multiple Choice Single Answer Question 10 Efficient market hypothesis is based on the assumption that

market comprises of :-Correct Answer Rational Investors

Your Answer Heterogeneous investors

Multiple Choice Single Answer Question 11 Co variance of asset with market portfolio 85 and variance of

market portfolio is 100 then beta is :-Correct Answer 0.0085

Your Answer 0.0085


Question 13 Mr. Tiwari is expecting to receive Rs.25,000/- at the end of 10years. He wanted to know what is the present value of thisamount, if the rate of interest is 10% p.a:-





17/54

Question 18 What does flow-of fund analysis help in understanding?

Correct Answer Availability of money for the stock market

Your Answer Financial strength of various companies

Multiple Choice Single Answer Question 23 A security represent evidence of :-

Correct Answer A property right

Your Answer Safety

Multiple Choice Single Answer Question 24 Mr.Saurabh invests Rs. 5,000/- today. The rate of interest is 4%

compounded annually. What will be the value of his investmentafter 5 years?

Correct Answer Rs. 6083/-Your Answer Rs. 6083/-

Multiple Choice Single Answer Question 27 In India futures on individual securities have been introduced

by :-Correct Answer BSE & NSE

Your Answer BSE & NSE

Multiple Choice Single Answer Question 43 The issuing firm enjoys the flexibility to call the bonds if the

interest rates fall significantly and it can issue :-Correct Answer New bonds at a lower rates

Your Answer New bonds at a lower rates

Multiple Choice Single Answer Question 2 When was the first mutual fund set up?

Correct Answer 1963

Your Answer 1963

Multiple Choice Single Answer Question 7 How can transition phases be projected?

Correct Answer Transition phases are signalled by clearly definable pricepatterns


18/54

Your Answer By working out the resistance and support levels

Multiple Choice Single Answer Question 8 If the price of a share at the beginning of the year was Rs.50/-,

dividend received during the year was Rs.10/-per share and the

price at the end is Rs.60/-. What is the rate of return?Correct Answer 0.4

Your Answer 0.2

Multiple Choice Single Answer Question 27 Investing in this avenue enable you participate in the equity

market indirectly :-Correct Answer Mutual Funds

Your Answer Mutual Funds

Multiple Choice Single Answer Question 29 In any Economy, bridge is created between savers and who

need the funds by this system :-Correct Answer Financial

Your Answer Economic

Multiple Choice Single Answer Question 30 Agriculture account for how much portion of the economy?

Correct Answer Quarter

Your Answer Three fourths

Multiple Choice Single Answer Question 37 Who operates the sinking fund under the sinking fund provision

of a firm?Correct Answer The bond trustee or the issuer

Your Answer The bond trustee or the issuer

Multiple Choice Single Answer Question 40 How did Dow use the behaviour of stock markets?

Correct Answer As a barometer of business conditions rather than a basis for forecasting stock prices

Your Answer As a barometer of business conditions rather than a basis for forecasting stock prices

Multiple Choice Single Answer Question 42 The growth period in the industry life cycle is defined as :-


19/54

Correct Answer Period of rapid market acceptance and substantial profitimprovement

Your Answer Period of rapid market acceptance and substantial profitimprovement

Multiple Choice Single Answer Question 3 What is the limitation of Flow-of funds analysis method?

Correct Answer Cannot give indication of the inclination of market participants topurchase stock

Your Answer Cannot give indication of the inclination of market participants topurchase stock

Multiple Choice Single Answer Question 6 Sentiment indicators are based on what assumption

Correct Answer Different groups of investors are consistent in their actions atmajor market turning points

Your Answer Different groups of investors are consistent in their actions atmajor market turning points

Multiple Choice Single Answer Question 12 An agreement to buy or sell a specified quantity of an asset at a

certain future date or a certain price is know as :-Correct Answer Forward contract

Your Answer Futures contract

Multiple Choice Single Answer Question 25 What are intermediate trends?

Correct Answer They are counter-cyclical trends within the confines of a primarytrendYour Answer They are counter-cyclical trends within the confines of a primary

trend

Multiple Choice Single Answer Question 29 What are index funds?

Correct Answer Investment in securities in the same weightage which replicatesa particular index

Your Answer Investment in securities in the same weightage which replicatesa particular index

Multiple Choice Single Answer Question 38 What are the assumptions of the Dow theory?

Correct Answer Majority of stocks follow the underlying trend of the market mostof the time

Your Answer Majority of stocks follow the underlying trend of the market mostof the time



20/54

Question 39 Mr.Rohan invests Rs.25,000/- today. The rate of interest is 6%compounded annually. What will be the value of his investmentafter 3 years?



Multiple Choice Single Answer Question 41 How many measures of money supply are used commonly?

Correct Answer 2

Your Answer 2

Multiple Choice Single Answer Question 43 Under which simple model the value of the stock is the present

value of expected dividends on it :-

Correct Answer The Dividend discount model

Your Answer The Dividend growth model

Multiple Choice Single Answer Question 46 Avenues can be broadly classified into the which type of assets?

Correct Answer Financial and Real

Your Answer Tangible and Intangible

Multiple Choice Single Answer Question The average investor in the market is driven more by emotions

than by rational analysis is a rule of :-Correct Answer Technical analysis

Your Answer Fundamental Analysis

Multiple Choice Single Answer Question What is the objective of an income fund?

Correct Answer To provide regular and steady income

Your Answer To provide guaranteed returns to investors

Multiple Choice Single Answer Question What does lower level of unemployment indicates?

Correct Answer Positive economic conditions


21/54

Your Answer Economic slowdown

Multiple Choice Single Answer Question The GDP growth rate in the economy in real terms has

fluctuated between :-

Correct Answer 4% and 5%

Your Answer 4% and 5%

Multiple Choice Single Answer Question Mr.Satish invests Rs.10,000/- today. The rate of interest is 8%

compounded annually. What will be the value of his investmentafter 5 years?

Correct Answer Rs.14.693/-

Your Answer Rs.14.693/-

Multiple Choice Single Answer Question Which market is affected with the improving and higher growth

rate in economy?Correct Answer Stock market

Your Answer Stock market

Multiple Choice Single Answer Question What do you understand by money supply?

Correct Answer Total money in existence at any given time

Your Answer Total money in existence at any given time

Multiple Choice Single Answer Question What is Gross National Product ?

Correct Answer Gross income generated from within the country

Your Answer Gross income generated from within the country

Multiple Choice Single Answer Question The greater the deviation of the actual returns from the actual

return :-Correct Answer Greater the variance

Your Answer Greater the variance



22/54

Question What is GDP at factor cost ?

Correct Answer Excludes net income received from abroad

Your Answer Includes indirect taxes

Multiple Choice Single Answer Question More than half the variation in stock price could be attributed to

which factor?Correct Answer Market influence

Your Answer Market influence

Multiple Choice Single Answer Question Free Float index considers this to calculate market

capitalisation :-Correct Answer Actual no. of shares available

Your Answer Actual no. of shares available

Multiple Choice Single Answer Question The Top-down approach is also known as :-

Correct Answer Economy-industry-company approach

Your Answer Economy-industry-company approach

Multiple Choice Single Answer Question What is a technical approach to investment?

Correct Answer A reflection of the idea that prices move in trends which aredetermined by various factors

Your Answer A reflection of the idea that prices move in trends which aredetermined by various factors

Multiple Choice Single Answer Question What are index funds?

Correct Answer Investment in securities in the same weightage which replicatesa particular index

Your Answer Investment in securities in the same weightage which replicatesa particular index

Multiple Choice Single Answer Question What could be a better approach to flow-of -funds analysis?

Correct Answer An examination of liquidity trends in the banking system

Your Answer A study of macro economical changes


23/54

Multiple Choice Single Answer Question The general dividend model is based on the principle of :-

Correct Answer Present value of the expected future cash flow

Your Answer Present value of the expected future cash flow

Multiple Choice Single Answer Question What are short term trends?

Correct Answer Trends which interrupt the course of the intermediate cycle

Your Answer Trends which interrupt the course of the intermediate cycle

Multiple Choice Single Answer Question What is the aim of growth funds?

Correct Answer To provide capital appreciation over medium to long term

Your Answer To provide capital appreciation over medium to long term

Multiple Choice Single Answer Question This is not a stock exchange :-

Correct Answer MCX

Your Answer MCX

Multiple Choice Single Answer Question Under EMH it is assumed that if markets are efficient, securities are

priced to provide a :-Correct Answer Normal returns for their given level of risk

Your Answer Normal returns for their given level of risk

Multiple Choice Single Answer Question Mr. Shekhar invests Rs.50,000/- in a scheme of LIC, the rate of interest

is 8% compounded annually. What will be the value of his investmentafter 5 years?



Multiple Choice Single Answer Question The price of the index futures contract is defined as :-

Correct Answer Future price = Spot price + Carry cost


24/54

Your Answer Future price = Spot price + Carry cost

Multiple Choice Single Answer Question Financial assets can be classified as :-

Correct Answer Marketable and non-marketableYour Answer Marketable and non-marketable

Multiple Choice Single Answer Question Mr. Suresh is expecting to receive Rs.1,50,000/- at the end of 3

years. He wanted to know what is the present value of thisamount, if the rate of interest is 9% p.a ?

Correct Answer Rs.1,15,827/-

Your Answer Rs.1,15,827/-

Multiple Choice Single Answer Question What is Flow-of-funds analysis?

Correct Answer Consists of an analysis of the financial positions of variousinvestor groups

Your Answer Consists of an analysis of the financial positions of variousinvestor groups


Question Mr. Suhas is expecting to receive Rs.1,00,000/- at the end of 7years. He wanted to know what is the present value of thisamount, if the rate of interest is 7% p.a ?

Correct Answer Rs. 62,275/-

Your Answer Rs. 62,275/-

Multiple Choice Single Answer Question What do you understand by term pioneering stage in the industry

life cycle analysis?Correct Answer Slow sales growth product recently introduced

Your Answer Slow sales growth product recently introduced

Multiple Choice Single Answer Question Till 1990's secular Indian economy's inflation rate has been of

what percentage?Correct Answer 0.07


25/54

Your Answer 0.07

Multiple Choice Single Answer Question Credit rating companies assign ratings for which of these

investments?

Correct Answer Company depositsYour Answer Company deposits

Multiple Choice Single Answer Question If index future is taken under futures contract, the underlying

asset would be :-Correct Answer Stock index

Your Answer Stock index


Question What is balance of payments?Correct Answer Credit and debit transactions of a country

Your Answer Credit and debit transactions of a company

Multiple Choice Single Answer Question Profits are non existent in pioneering stage because of :-

Correct Answer Heavy expenses on product introduction

Your Answer Heavy expenses on product introduction

Multiple Choice Single Answer Question What is the indicator of buoyant economy?

Correct Answer Increased level of housing construction activity

Your Answer Increased level of housing construction activity

Multiple Choice Single Answer Question What does a transitional phase indicate?

Correct Answer It marks the turning point between a rising and falling market

Your Answer It marks the turning point between a rising and falling market

Multiple Choice Single Answer Question Dividend discount model is considered as the simplest model

for :-Correct Answer Valuing Equity


26/54

Your Answer Valuing Equity

Multiple Choice Single AnswerQuestion The present value of all the future cash payments to be

paid on the security to the investor is termed as :-Correct Answer Intrinsic value of a securityYour Answer Intrinsic value of a security

Multiple Choice Single AnswerQuestion If the price of a share at the beginning of the year was

Rs.100/-, no dividend received during the year and the price at the endis Rs.115/-. What is the rate of return?

Correct Answer 0.15Your Answer 0.15

Multiple Choice Single AnswerQuestion What is the objective of Portfolio management?Correct Answer To Minimize risk and maximize returnYour Answer To Minimize risk and maximize return

Multiple Choice Single Answer Question Capital expenditure -depreciation +change in working capital -(new debt

issued - debt repaid) =Correct Answer Equity reinvested in businessYour Answer Equity reinvested in business

Multiple Choice Single Answer Question What is the percentage of variation the market and industry influence account

for?Correct Answer 2/3rdYour Answer 75%

Multiple Choice Single Answer Question What is the rate of interest on the tax free bonds issue by the government?

Correct Answer 6.5%Your Answer 6.5%

Multiple Choice Single Answer Question Investments could be made in retail government securities through :-Correct Answer Primary dealersYour Answer Primary dealers


27/54

Question The growth rate is used to forecast future revenues and earnings andare inputs in valuing :-

Correct Answer Stable firms

Your Answer High growth firms

Multiple Choice Single Answer Question The objective of fundamental analysis for a security in a market is to

identify either it is :-Correct Answer Under priced and over priced

Your Answer Under priced and over priced

Multiple Choice Single Answer Question We can compare the price earning ratio of a market to its historical

average to make judgements about, whether market is :-Correct Answer Under valued or over valued

Your Answer Under valued or over valued

Multiple Choice Single Answer Question The growth rate is used to forecast future revenues and earnings and

are inputs in valuing :-Correct Answer Stable firms

Your Answer High growth firms

Multiple Choice Single Answer Question How can transition phases be projected?

Correct Answer Transition phases are signalled by clearly definable price patterns

Your Answer Transition phases are signalled by clearly definable price patterns

Multiple Choice Single Answer Question When was the Dow theory first published?

Correct Answer Between 1900 and 1902

Your Answer Between 1900 and 1902

Multiple Choice Single Answer Question When was the first mutual fund set up?

Correct Answer 1963

Your Answer 1963


28/54

Multiple Choice Single Answer Question What is the art of technical analysis?

Correct Answer To identify trend changes at an early stage and maintain investmentposture till the trend has reversed

Your Answer To identify trend changes at an early stage and maintain investmentposture till the trend has reversed

Multiple Choice Single Answer Question The expected price of the stock at the end of the holding period is

determined by future dividends and the value of the stock is thepresent value of dividends through infinity are the underlyingassumptions of :-

Correct Answer The General model

Your Answer The Dividend discount model

Multiple Choice Single Answer Question How would you rate a portfolio with 90% investment in stocks?

Correct Answer Highly aggressive

Your Answer Highly aggressive

Multiple Choice Single Answer Question What are primary trends?

Correct Answer Reflection of investor's attitudes towards unfolding fundamentals in thebusiness cycle

Your Answer Long term trends

Multiple Choice Single Answer Question In a forward contract there is :-

Correct Answer No Exchange of cash

Your Answer No Exchange of cash

Multiple Choice Single Answer Question Under EMH it is assumed that if markets are efficient, securities are

priced to provide a :-Correct Answer Normal returns for their given level of risk

Your Answer Equal returns for their given level of risk

Multiple Choice Single Answer Question The approach followed to assess the growth rate by looking at how

much a firm reinvests for future growth and the quality of its re-investments is :-

Correct Answer Estimating growth from a firm's fundamentals


29/54

Your Answer Earnings multiplier approach

Select The BlankQuestion The possibility of reduction of risk through the construction of a portfolio

depends on the value of ________ between the two assets.Correct Answer Correlation coefficient

Your Answer Time

Select The BlankQuestion Dow Jones transportation average was previously known as ________.

Correct Answer Rail average

Your Answer Rail average

Select The BlankQuestion The compounded annual return of Kisan Vikas patra is ________.

Correct Answer 0.084

Your Answer 0.084

Select The BlankQuestion Under futures market ________ process provides for collection of losses

that have already occurred.Correct Answer The daily settlement

Your Answer The daily settlement

Select The BlankQuestion The regulations of SEBI with respect to mutual funds were fully revised in

the year ________.Correct Answer 1996

Your Answer 1996

Select The BlankQuestion The Dow theory states that there are simultaneously ________

movements in the stock market.Correct Answer 3

Your Answer 3

Select The Blank


30/54

Question Under the options contract ________ gives the holder the right, but not theobligation to buy or sell the underlying instrument only on the expiry date.

Correct Answer European option

Your Answer European option

Select The BlankQuestion ________ ratio indicates the margin available after meeting the

manufacturing expenses.Correct Answer Gross Profit margin

Your Answer Gross Profit margin

Select The BlankQuestion Secondary reactions occurs because of ________ which arise in the

market as a result of over optimism and over pessimism.Correct Answer Technical distortions

Your Answer Bearish trends

Select The BlankQuestion Debentures rated as "A" are judged to offer ________ of timely payment of

interest and principal.Correct Answer Adequate safety

Your Answer Adequate safety

Select The BlankQuestion Debentures rated ________ are judged to offer sufficient safety of timely

payment of interest and repayment of principal.Correct Answer "BBB"

Your Answer "BBB"

Select The Blank Question The value of the stock in the ________ model is sensitive to the estimates of the growth

rate.Correct Answer The Gordons dividend growth

Select The Blank Question ________ is due to the fact that a borrower may not pay interest and/or

principal on time.Correct Answer Default risk


31/54

Select The Blank Question A pattern which does not result in reversal of a trend but reaffirmation of

the underlying trend is called ________.Correct Answer Consolidation pattern

Select The Blank Question ________ bonds are generally called for prepayment after interest rates

have fallen, investors will not be able to find comparable investmentavenues.

Correct Answer Call risk

Select The Blank Question ________ deal in futures to offset a pre-existing risk.

Correct Answer Hedger

Select The Blank Question ________are good benchmark to compare the ratios for a firm.

Correct Answer Industry averages

Select The Blank Question The ________ phase is characterized by resistance area and support level.

Correct Answer Transition

Select The Blank Question ________ measures the efficiency of credit management.

Correct Answer Average collection period

Select The BlankQuestion 16 ________ is affected by the leverage decisions of the firm.

Correct Answer Return on equity

Your Answer Return on equity

Select The Blank


32/54

Question 20 ________ refers to the possibility that there may not be a readily availablemarket for the particular bond.

Correct Answer Liquidity risk

Your Answer Interest rate risk

Select The BlankQuestion 21 The govt allowed public sector banks and institutions in mutual funds in

________.Correct Answer Early 90's

Your Answer Early 90's

Select The BlankQuestion 36 The 8% taxable savings bonds are repayable after ________ years.

Correct Answer 6

Your Answer 5

Select The BlankQuestion 39 Security analysis serves the investment decision maker by identifying

________securities.Correct Answer Under priced

Your Answer Blue chip

Select The BlankQuestion 42 ________ absorbs the excess demand or supply generated by hedgers

and assume the risk of price fluctuations.Correct Answer Speculators

Your Answer Brokers

Select The BlankQuestion 44 A ________ rally for stocks generally takes place because of an improved

outlook for business conditions over what was anticipated.Correct Answer Bear market

Your Answer Bullish market

Select The BlankQuestion 1 UTI was set up in the year ________.

Correct Answer 1963

Your Answer 1963


33/54

Select The BlankQuestion 6 An ________ is a series of equal payments or receipts occurring at regular

intervals of time.Correct Answer Annuity

Your Answer Annuity

Select The BlankQuestion 12 An option is a contract which gives the buyer ________ to buy or sell

shares of the underlying security at a specific price on or before a specificdate.

Correct Answer Right but not obligation

Your Answer Right but not obligation

Select The BlankQuestion 13 Measures of ________ tells us what we can expect a typical or middle

data point of a distribution to be.Correct Answer Central tendency

Your Answer Central tendency

Select The BlankQuestion 28 ________ identified five forces that determine the intrinsic long run profit

attractiveness of a market or market segment.Correct Answer Michael Porter

Your Answer Michael Porter

Select The BlankQuestion 36 ________is a hybrid form of security which has characteristics of both

equity and debenturesCorrect Answer Preference shares

Your Answer Preference shares

Select The BlankQuestion 39 Debentures rated "BB" refers ________ of timely payment of interest and

principal.Correct Answer Inadequate safety

Your Answer Inadequate safety

Select The BlankQuestion 43 The Derivative market is divided into Future market and ________ market.


34/54

Correct Answer Options

Your Answer Options

Select The Blank

Question 46 The Dow theory was published in a series of editorials in the ________.Correct Answer Wall street journal

Your Answer Wall street journal

Select The BlankQuestion 1 ________ deal in futures to offset a pre-existing risk.

Correct Answer Hedger

Your Answer Speculator

Select The BlankQuestion 8 Under ________ EMH investors cannot earn abnormal/superior profits on

securities on a consistent basis.Correct Answer Semi-strong form

Your Answer Semi-strong form

Select The BlankQuestion 11 ________ take long or short positions only with the intention of making

profits by getting out of the market when conditions favor them.

Correct Answer SpeculatorsYour Answer Hedgers

Select The BlankQuestion 14 ________ model is based on the principle that an initial phase where the

growth rate is not stable and subsequent steady growth rate and remainsfor the long-term.

Correct Answer The Two-Stage dividend discount

Your Answer The Gordons dividend growth

Select The BlankQuestion 17 ________ ratio is estimated by dividing the market value of a firm's assets

by the replacement cost of these assets.Correct Answer Market value to replacement cost ratio

Your Answer PEG ratio


35/54

Select The BlankQuestion 19 ________involves a simultaneous sale and repurchase agreement.

Correct Answer Repos

Your Answer Repos

Select The BlankQuestion 28 Current liabilities include all liabilities due in the next ________ and

provisions.Correct Answer 12 months

Your Answer 12 months

Select The BlankQuestion 30 S&P NSE 50 index is known as ________.

Correct Answer NIFTYYour Answer NIFTY

Select The BlankQuestion 31 ________seeks to safeguard against potential losses on the outstanding

position in futures market.Correct Answer Initial margin

Your Answer Daily settlement

Select The BlankQuestion 35 ________ ratio is the ratio of net profit to the sales.

Correct Answer Net Profit Margin

Your Answer Net Profit Margin

Select The BlankQuestion Mutual fund is to be registered with ________ before raising funds from

public.Correct Answer SEBI

Your Answer SEBI

Select The BlankQuestion An investor with a higher tolerance of risk should tilt his portfolio in favour

of ________.Correct Answer Stocks


36/54

Your Answer Bank deposits

Select The BlankQuestion The ________ phase carries a lot of significance because it marks the

turning point between a rising and a falling market.

Correct Answer Transitional

Your Answer Sideways

Select The BlankQuestion Acid test ratio is more stringent measure of liquidity compared to the

________.Correct Answer Current ratio

Your Answer Current ratio

Select The BlankQuestion ________ measures the efficiency of credit management.

Correct Answer Average collection period

Your Answer Average collection period

Select The BlankQuestion ________ measures the profitability of operations without considering the

influence of financial structure and tax rate.Correct Answer Earnings power

Your Answer Earnings power

Select The BlankQuestion A line is defined as a price movement two or three weeks or longer, during

which period the price variation of both averages moves within a pricerange of approximately________%.

Correct Answer 5

Your Answer 5

Select The BlankQuestion ________ measures the profitability of equity funds invested in the firms.

Correct Answer Return on equity

Your Answer Return on equity

Select The Blank


37/54

Question Risk can be referred as the ________ in the return with respect to theexpected return.

Correct Answer Volatility

Your Answer Difference

Select The BlankQuestion All trades in the futures market are cash settled on a ________ basis.

Correct Answer T+1

Your Answer T+1

Select The BlankQuestion ________ ratio is the ratio of net profit to the sales.

Correct Answer Net Profit Margin

Your Answer Net Profit Margin

Select The BlankQuestion When a debenture is sold to the general public a ________ is appointed.

Correct Answer Trustee

Your Answer Brokers

Select The Blank

Question A security is said to be ________ if its current market price is over itsintrinsic value.

Correct Answer Over priced

Your Answer Over priced

Select The BlankQuestion ________ is the value at a certain future date today of a stream of cash

flows that occurs over a period of time.Correct Answer Future value

Your Answer Future value

Select The BlankQuestion Mutual fund is to be registered with ________ before raising funds from

public.Correct Answer SEBI

Your Answer SEBI


38/54

Select The BlankQuestion In a heads and shoulders formation the deeper the pattern, the greater is

the ________ significance once it is completedCorrect Answer Bearish

Your Answer Bearish

Select The BlankQuestion The govt allowed public sector banks and institutions in mutual funds in

________.Correct Answer Early 90's

Your Answer Early 90's

Select The BlankQuestion Under ________ EMH investors cannot earn abnormal/superior profits on

securities on a consistent basis.Correct Answer Semi-strong form

Your Answer Semi-strong form

Select The BlankQuestion The 6.________% tax saving bonds of government of India have a tenure

of 5 years.Correct Answer 5

Your Answer 5

Select The BlankQuestion ________ is the ratio of the market price per share to the earnings per

share.Correct Answer Price earning ratio

Your Answer Price earning ratio

Select The BlankQuestion ________ absorbs the excess demand or supply generated by hedgers

and assume the risk of price fluctuations.

Correct Answer Speculators

Your Answer Speculators


39/54

Select The BlankQuestion UTI was set up in the year ________.

Correct Answer 1963

Your Answer 1963

True/FalseQuestion The normal relationship is for the volume to expand on rallies and

contract on declines.Correct Answer True

True/FalseQuestion In case of assured returns, A scheme cannot promise returns unless

such returns are fully guaranteed by sponsor or AMC.Correct Answer True

True/FalseQuestion A firm uses a combination of equity and debt for financing its

assets.Correct Answer True

True/FalseQuestion Policies of the government and the attitude of the government

towards the industry have a considerable influence on theindustry.

Correct Answer True

True/FalseQuestion Investors in high tax bracket would benefit by investing in

equity schemes.Correct Answer False

True/FalseQuestion The price earning ratio is an increasing function of the payout

ratio and the growth rate and a decreasing function of theriskiness of the firm.

Correct Answer TrueTrue/FalseQuestion When we invest in only one asset we are not exposed to any

specific or market risk.Correct Answer False

True/False


40/54

Question Five paisa.com is an example of on line trading portal.

Correct Answer True

True/FalseQuestion A mutual fund is required to dispatch the dividend warrants

to the unit holders within thirty days of the declaration of dividend.

Correct Answer True

True/FalseQuestion Bearish actions come from a series of declining peaks and

troughs.Correct Answer True

True/FalseQuestion Default is normally evaluated and indicated by the rating

assigned to the debt instruments by independent credit ratings

agencies.Correct Answer True

Your Answer True

True/FalseQuestion With the use of diversification you can reduce the risk.

Correct Answer True

Your Answer True

True/FalseQuestion A segment is unattractive if the buyers possess strong or

growing bargaining powers.Correct Answer True

Your Answer True

True/FalseQuestion Risk on a portfolio of assets is always same as the risk on

individual asset.Correct Answer False

Your Answer False

True/FalseQuestion Debt is less riskier source of finance than equity.

Correct Answer False


41/54

Your Answer True

True/FalseQuestion Post office monthly schemes have a 10 year tenor.

Correct Answer FalseYour Answer False

True/FalseQuestion With the introduction of on-line trading by NSE and BSE, the role

of regional stock exchanges have diminished.Correct Answer True

Your Answer True

True/FalseQuestion Penetration of a trend line denotes a bearish phase.


Your Answer True

True/FalseQuestion Passive investment managers believe that markets are

inefficient and Active managers believe that markets areefficient.


Your Answer False

True/FalseQuestion 2 Currently in India index options are both European and American

in nature.Correct Answer False

Your Answer False

True/FalseQuestion 3 The cost structure remaining the same, better price realisation

results in lower gross profit ratio.Correct Answer False

Your Answer True

True/False


42/54

Question 6 A segment is more attractive when there are actual or potentialsubstitutes for the product.


Your Answer True

True/FalseQuestion 15 Bond ratings by credit rating agencies provide superior and lowcost information to the investor serving as a basis for a proper risk-return trade off by investors.

Correct Answer True

Your Answer True

True/FalseQuestion 29 The arithmetic mean is a set of observations is calculated by

finding the sum values and dividing by the number of observations.

Correct Answer TrueYour Answer True

True/FalseQuestion 30 Investment in gilt edged securities carry a higher element of risk.


Your Answer True

True/FalseQuestion 37 Following a decline, heavy volume with little price change is

indicative of accumulation and is normally a bearish factor.Correct Answer False

Your Answer True

True/FalseQuestion 45 Speculators buy or sell futures contract in an attempt to earn a

profit.Correct Answer True

Your Answer True

True/FalseQuestion 11 Investment decisions can be viewed as an integrated process to

which security analysis makes its unique contribution.Correct Answer True

Your Answer True


43/54

True/FalseQuestion 17 Given the accounting standards across firm, price to book value

ratios can be compared across similar firms for signs of under valuation.

Correct Answer True

Your Answer True

True/FalseQuestion 18 Quick assets consist of current assets less inventories.

Correct Answer True

Your Answer True

True/FalseQuestion 22 If a rupee weakens against the dollars it has favourable impact

for the exporters.Correct Answer True

Your Answer True

True/FalseQuestion 23 A price rise accompanied by expanding volume denotes a

potential trend reversal.Correct Answer False

Your Answer True

True/FalseQuestion 35 There may be convertible clause which gives the debenture

holder the option to convert the debentures into equity shares.Correct Answer True

Your Answer True

True/FalseQuestion 47 PPF is a good retirement planning and tax saving vehicle.

Correct Answer True

Your Answer True

True/FalseQuestion 2 Bonds and Debentures represent long term debt instruments.


Your Answer True


44/54

True/FalseQuestion 9 While calculating geometric mean calculation of root is not

important.Correct Answer False

Your Answer False

True/FalseQuestion 13 Certificate of Deposits offers high rate of interest than Treasury

Bills.Correct Answer True

Your Answer True

True/FalseQuestion 21 Sensex is the index of Calcutta Stock Exchange.


Your Answer False

True/FalseQuestion 27 Fundamental analysis focuses on predicting the future price of a

security and Technical analysis on estimating the intrinsic valueof a security.


Your Answer True

True/FalseQuestion 32 If rupee weakens against the dollar, it has favourable impact for

the importers.Correct Answer False

Your Answer False

True/FalseQuestion 36 The risk associated to get the required rate of return on the stock

is measure by market beta.


True/FalseQuestion 40 The basic inputs of the general model are expected dividends

and required rate of return on stock.Correct Answer True


45/54

Your Answer True

True/FalseQuestion 42 European style options are more expensive than American style

because they offer greater flexibility to the buyer.


Your Answer True

True/FalseQuestion When you are making an investment you are expecting certain

future benefits from your investment.Correct Answer True

Your Answer True

True/FalseQuestion The returns of sector specific funds are solely dependant on the

performance of the respective sectors / industries.Correct Answer True

Your Answer True

True/FalseQuestion The labour conditions do not play an important role in the

industry analysis.Correct Answer False

Your Answer False

True/FalseQuestion A rise in interest rates will push the market prises of outstanding bonds

where as a fall in interest rates will depress the market prices down.Correct Answer False

Your Answer True

True/FalseQuestion Because of statutory compulsion, generally Govt. securities are

held by banks, financial institutions, insurance companies etc.Correct Answer True

Your Answer True

True/False


46/54

Question The Asset management company of the mutual fund must have 50%independent directors.

Correct Answer True

Your Answer True

True/FalseQuestion In case of fixed income securities like debentures, you get the return in the

form of dividend.Correct Answer False

Your Answer False

True/FalseQuestion Investment in gilt edged securities carry a higher element of risk.


Your Answer False

True/FalseQuestion American option gives the holder the right, but not the obligation to buy or

sell the underlying instrument on or before the expiry date and the optioncan be exercised early.

Correct Answer True

Your Answer True

True/False

Question Prices of stocks usually move in trends.

Correct Answer True

Your Answer True

True/FalseQuestion The sideways trend is essentially a transitional one which separates the

two major market movements.Correct Answer True

Your Answer False

True/FalseQuestion With the use of diversification you can reduce the risk.

Correct Answer True

Your Answer True


47/54

True/FalseQuestion A higher value of current ratio indicates a better short

term solvency of the firm.


True/FalseQuestion The basic assumption of Technical analysis is that, price

discounts everything and it is the outcome of all forces affecting astock.

Correct Answer True

Your Answer True

True/FalseQuestion Fixed assets turnover ratio measures the efficiency of utilisation of total

assets, fixed as well as current.Correct Answer TrueYour Answer True

True/FalseQuestion The price earning ratio can be estimated for the firms with negative

earnings per share.Correct Answer False

Your Answer True

True/FalseQuestion A share certificate indicates that the investor owns a certain number of shares.

Correct Answer True

Your Answer True

True/FalseQuestion Balance of payments surplus augments foreign reserves of the

country and have a favourable impact on he exchange rate.Correct Answer True

Your Answer True

Select The BlankQuestion The ________ phase carries a lot of significance because it marks the

turning point between a rising and a falling market.Correct Answer Transitional


48/54

Your Answer Transitional

True/FalseQuestion Bonds and Debentures represent long term debt instruments.

Correct Answer FalseYour Answer True

True/FalseQuestion A price rise accompanied by expanding volume denotes a potential

trend reversal.Correct Answer False

Your Answer False

Select The BlankQuestion The ________ phase is characterized by resistance area and support

level.Correct Answer Transition

Your Answer Transition

True/FalseQuestion Currently in India index options are both European and American in

nature.Correct Answer False

Your Answer False

Select The BlankQuestion Debentures rated as "A" are judged to offer ________ of timely

payment of interest and principal.Correct Answer Adequate safety

Your Answer High safety

True/False

Question A rally that develops on contracting volumes is suspect and warns of apotential trend reversal in price

Correct Answer True

Your Answer True

Match The Following


49/54

Question Correct Answer Your Answer

Price pattern Resistance level Head and shoulders formation

Primary trend Last between 1-2 years Last between 1-2 years

Intermediate trend Last between 3 weeks to aslong as 6 months Last between 3 weeks to aslong as 6 monthsShort term trend Last 1 to 3-4 weeks Last 1 to 3-4 weeks

Match The FollowingQuestion Correct Answer Your Answer

MCX Commodity Exchange Commodity Exchange

Sensex BSE Index BSE Index

Nifty NSE Index NSE Index

Lifex ET Index Gold Index


Turnover ratios Help measure theefficiency of utilisation of assets

Help measure the efficiencyof utilisation of assets

Debt Equity ratio Debt / Equity Debt / Equity

Quick assets Highly liquid assets Highly liquid assets

Average collection period Similar to debtors turnover Similar to debtors turnover


Development of Dow'sprinciples

William Peter Hamilton Charles H.dow

Breadth Indicator Advance/decline line Moving average

Momentum indicator MACD MACD

Trend lines Useful tool in technicalanalysis

Useful tool in technicalanalysis

Match The FollowingQuestion 26 Correct Answer Your Answer

Under options contractWhen you expect prices tofall, then, you take a longposition by buying puts.

Cost of Carry model Futures contract


50/54

When you expect prises torise, then you take a shortposition by selling puts.A contract where both theparties are equallyresponsible

Futures contract Options contract

The amount which thebuyer of the option has topay to the option writer toinduce him to accept therisk associated with thecontract.

Option price Transaction cost model

NSE&BSE are regulatedby

Securities ExchangeBoard of India

Securities Exchange Boardof India


Equity shares High risk High riskGovernment Securities No risk Low risk

Bank Deposits Low risk No risk

Mutual Funds Average risk Average risk


Risk free investment Actual returns = expected

returns

Actual returns = expected

returnsRisk Volatility in the return Volatility in the return

Variance Measure of dispersion Measure of dispersion

Returns Future benefits frominvestments

Future benefits frominvestments


H-Model For ValuingGrowth

Initial growth rate is notconstant but linearly fallsover time to reach thestable growth rate

Initial growth rate is notconstant but linearly fallsover time to reach thestable growth rate

The general model Expected dividends andrequired rate of return

Expected dividends in thenext period, cost of equityand expected growth rate individends

The Gordons Growthmodel

Expected dividends in thenext period, cost of equityand expected growth rate

Assessment of the growthrate by looking at howmuch a firm reinvests for


51/54

in dividends future growth and thequality of its reinvestment

The Two-Stage DividendDiscount Model

Based on twoextraordinary growthphase lasting n years andstable growth phase thatlasts forever

Based on two extraordinarygrowth phase lasting nyears and stable growthphase that lasts forever


Future value of a series of cash flows occurring at theend of each period.

Future value of annuity Future value of annuity

Value today of a stream of cash flows that occurs infuture.

Present Value Future Value

Value at a certain future

date today of a stream of cash flows that occursover a period of time.

Future Value Present Value

Series of equal paymentsor receipts occurring atregular intervals of time.

Present value of annuity Present value of annuity


Weak form model is alsotermed as

Random walk model Random walk model

Investors are rational Efficient markethypothesis Efficient market hypothesis

Securities current pricesfully reflect all historicalinformation

Weak form EMH Fama

Framework on efficientcapital markets, a reviewof theory and empiricalwork

Fama Strong form


Technical collaboration of Bharat Forge with SIFCOindustries USA

1981 1981

Bharat Forge wasincorporated at Mumbai

1961 1961

Shares of 100 eachsubdivided of Bharat forge

1971 1971


52/54

930000 bonus sharesissued by Bharat Forge

1976 1976


The yield to maturity issame as the

Geometric mean return or the internal rate of return

Geometric mean return or the internal rate of return

Periodic interest paymentsand principal repayment atthe time of maturity

Debt instrument/Bonds Debt instrument/Bonds

The actual yield earned byan investor on a bond

Realised yield Realised yield

Present value interestfactor of annuities andpresent value interestfactor

Yield to maturity Yield to maturity

1. Treasury Bills 1. Foreign Institutional Investors

2. Commercial Papers 3

2. Government of India

3. Certificate of Deposits 3. Corporates

4. Bonds 5 4. Banks and Financial Institutions 5. Central/State Govts/PSU's 6. Post Office

1. ROE 3 1. Measure the profitability of operations without consideringthe influence of financial structure and tax rate

2. Earningspower

1 2. Ratio if net profit to sales

3. Net profitmargin

2 3. Measure the profitability of equity funds

4. Gross profitmargin

6 4. Valuation ratio

5. Measures the profitability of debt funds 6. Indicates the margin available after meeting the

manufacturing expenses

1. SEBI 5 1. Nifty

2. NAV 2 2. Net asset value


53/54

3. AMFI 6 3. Net average value 4. NSE 4. Association of merchant financers of India

5. Redressal of investor complaints 6. Association of mutual funds of India


Growth of income 40-60 % debt, 40-60 %equities

40-60 % debt, 40-60 %equities

Current income Short term debt portfolio Fixed - income portfolio

Stability of principal Fixed - income portfolio Short term debt portfolio

Appreciation 75-100 % in equities 75-100 % in equities


Ratio used as a measure of relative value

PEG ratio Price to book value ratio

The market value of thefirms assets divided by thereplacement cost of theseassets

Market value to replacementcost ratio

Market value to replacementcost ratio

Key determiner of revenuemultiples

Profit margin Profit margin

The market value of theequity in a firm reflects themarkets expectations of thefirms earnings power andcash flows.

Price to book value ratio Price earning ratio


Expiration period for options Nine months Nine months

The world's first largestoptions exchange

Chicago Board of optionsexchange

New York board of Optionsexchange

The most popular pricingoptions model published inthe year 1973

Black Scholes Black Scholes

When the writer gives thebuyer of the option the rightto sell the underlying asseton or before the expiry date

Put option Put option


54/54

Security Analysis Portfolio Management 10

Documents

Transcript of Security Analysis Portfolio Management 10