P. Vijay Kumar

Question and Answer Bank in Financial Markets - Part 3

(200 questions and answers)

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Which of the following is a wholesale market activity? {Financial Markets}
1. Execution-only stock broking
2. Life insurance
3. Mergers and acquisitions
4. Private banking

Which is the principal activity associated with international banking? {Financial Markets}
1. Cross border transactions
2. Deposit accounts
3. Issuing foreign currency to travellers
4. Making loans to customers

Advice on new issues of securities to raise finance would be provided by? {Financial Markets}
1. Custodian bank
2. Investment bank
3. Retail bank
4. Stock exchange

Holding assets in safe-keeping is one of the principal activities of which of the following? {Financial Markets}
1. Custodian bank
2. International bank
3. Investment bank
4. Retail bank

A financial adviser who must offer their clients the option of paying for advice by fee rather than commission is known as? {Financial Markets}
1. Independent financial adviser
2. Multi-tied adviser
3. Tied-adviser
4. Whole of market adviser

An economy that is characterised by an absence of barriers to trade and controls over foreign exchange is known as? {Financial Markets}
1. A market economy
2. A mixed economy
3. A state-controlled economy
4. An open economy

Which of the following is NOT a tool that a government would use to manage the economy? {Financial Markets}
1. Economic policy
2. Monetary policy
3. Taxation
4. Welfare provision

Which of the following is NOT a function normally undertaken by a central bank? {Financial Markets}
1. Controlling the money supply
2. Lending to commercial banks
3. Managing the national debt
4. Regulating stock markets

High levels of inflation would have which of the following effects on someone with a fixed income? {Financial Markets}
1. Allow them to save more from their income
2. Have no impact either way
3. Improve their ability to buy goods
4. Reduce the amount of goods they can buy

Which of the following is a measure of inflation? {Financial Markets}
1. GDP
2. GNP
3. HICP
4. NDP

Which of the following is NOT an asset class? {Financial Markets}
1. Cash
2. Bonds
3. Derivatives
4. Equities

Which type of foreign exchange transactions would normally settle two days later? {Financial Markets}
1. Forward
2. Future
3. Spot
4. Swap

Which one of the following markets would normally trade metal derivatives? {Financial Markets}
1. ICE
2. LME
3. LSE
4. NYSE Liffe

Which of the following is the main stock market for France? {Financial Markets}
1. BME
2. CASE
3. Eurex
4. Euronext

The CAC 40 is an index of which country? {Financial Markets}
1. England
2. France
3. Germany
4. Japan

Which of the following would you NOT normally associate as risk of holding equities? {Financial Markets}
1. Seniority risk
2. Issuer risk
3. Liquidity risk
4. Price risk

In the event of a company going into liquidation, who would normally have the lowest priority for payment? {Financial Markets}
1. Banks
2. Bond holders
3. Ordinary shareholders
4. Preference shareholders

What type of corporate action would have taken place if an investor increased the number of shares they hold by making a payment to the company for them? {Financial Markets}
1. Bonus issue
2. Capitalization issue
3. Right issue
4. Scrip issue

The Depository Trust Company is responsible for stocks, bonds and money market instruments in which country? {Financial Markets}
1. France
2. Germany
3. UK
4. US

Trades in India settle on which day? {Financial Markets}
1. T+1
2. T+2
3. T+3
4. T+4

The risk that the issuer of a bond may not repay the capital amount at maturity is known as? {Financial Markets}
1. Inflation risk
2. Default risk
3. Liquidity risk
4. Price risk

3¹/₂% War Stock is an example of which type of UK Government bond? {Financial Markets}
1. Conventional
2. Dual-dated
3. Index-linked
4. Irredeemable

Which type of bond can the holder exchange for shares? {Financial Markets}
1. Floating rate note
2. Convertible bond
3. Medium-term note
4. Zero coupon bond

A bond which is secured on mortgages is which type of instrument? {Financial Markets}
1. Eurobond
2. Money market instrument
3. Asset-backed bond
4. Zero-coupon bond

If interest rates increase, what will be the effect on the price of a 5% government bond? {Financial Markets}
1. Price will rise
2. Price will fall
3. There will be no impact on price
4. Price will remain the same but the interest received will rise

For which reasonw would an investment manager most likely use a derivative to reduce the impact of adverse price movements? {Financial Markets}
1. Anticipating future cash flows
2. Arbitrage
3. Asset allocation changes
4. Hedging

An investor who is committed to buying the underlying asset of a future is described as? {Financial Markets}
1. Closed
2. Long
3. Open
4. Short

An investor who purchases a derivative that gives the right, but not the obligation, to sell an asset at a fixed price and at a future date would have acquired which type of derivative? {Financial Markets}
1. Long future
2. Short future
3. Call option
4. Put option

Which of the following is NOT a feature of an interest rate swap? {Financial Markets}
1. Exchange of principal amount
2. Payment of floating interest by one party
3. Payment of fixed interest rate by one party
4. Quarterly resetting of interest rates

Which of the following is a call option on HSBC shares traded on the London Stock Exchange most likely to be? {Financial Markets}
1. Covered warrant
2. Future
3. Option
4. Swap

A fund that aims to mimic the performance of an index deploys which type of investment style? {Financial Markets}
1. Contrarian
2. Growth
3. Passive
4. Thematic

What type of investment fund can be sold throughout the EU, subject to regulation by its home country regulator? {Financial Markets}
1. ITC
2. OEIC
3. SICAV
4. UCITS

What type of investment vehicle makes extensive use of short position? {Financial Markets}
1. ETF
2. Hedge Fund
3. Passive Fund
4. SICAV

Which of the following types of collective investment scheme is most likely to be priced at a discount ot its net asset value? {Financial Markets}
1. Unit trust
2. OEIC
3. SICAV
4. Investment trust

A private equity fund is likely to use which of the following types of structure? {Financial Markets}
1. OEIC
2. Investment trust
3. Limited partnership
4. Trust

Which organisation sets standards for regulators globally? {Financial Markets}
1. Bank for International Settlements
2. IOSCO
3. OECD
4. World Bank

Which of the following is NOT a stage in money laundering? {Financial Markets}
1. Integration
2. Investment
3. Layering
4. Placement

Inside information is NOT regarded as which of the following? {Financial Markets}
1. If made public would affect prices
2. Is specific or precise
3. Has not been made public
4. Has been made public

To whom should an individual first report suspicion of money laundering? {Financial Markets}
1. Regulator
2. Police
3. MLRO
4. The Customer

Which of the following is NOT an objective of the International Organisation of Securities Commissions? {Financial Markets}
1. Protection of investors
2. Ensuring fair and efficient markets
3. Reduction of systemic risk
4. Stability of the banking system

If a credit card company quotes its interest rate as 20% p.a., charged half-yearly, what is the effective annual rate? {Financial Markets}
1. 20%
2. 21%
3. 22%
4. 23%

During a period of increasing interest rates, which type of mortgage is most suitable for someone buying their first home? {Financial Markets}
1. Discounted mortgage
2. Fixed rate mortgage
3. Interest-only mortgage
4. Repayment mortgage

If there is expected to be a period of declining interest rates, which mortgage payment terms are likely to be least favourable? {Financial Markets}
1. Capped rate
2. Discounted rate
3. Fixed rate
4. Variable rate

A policy that only pays out if death occurs within the next ten years is which of the following? {Financial Markets}
1. Non-profit
2. Term
3. Unit-linked
4. With-profit

A policy that has an annual and terminal bonus is known as? {Financial Markets}
1. Term
2. Non-profit
3. Unit-linked
4. With-profit

Which of the following is an example of a direct tax? {Financial Markets}
1. Sales tax
2. Customs duties
3. Income tax
4. Value-added tax

The tax that is charged on the estate of someone who had died is known as? {Financial Markets}
1. Capital gains tax
2. Corporation tax
3. Income tax
4. Inheritence tax

The tax that is charged when a profit is made on a share transaction is known as? {Financial Markets}
1. Capital gains tax
2. Corporation tax
3. Income tax
4. Inheritence tax

A trust where the funds are held absolutely for a beneficiary is which of the following? {Financial Markets}
1. Accumulation trust
2. Bare trust
3. Discretionary trust
4. Interest in possession trust

The individual charged with looking after the assets of a trust is known as? {Financial Markets}
1. Beneficiary
2. Executor
3. Settlor
4. Trustee

What is inflation? {Financial Markets}
1. A sustained rise in interest rates
2. A persistent rise of the general level of prices
3. An investment return in excess of the rate of price increases
4. An excess of imports over exports

One of the three main objectives of the International Organisation of Securities Commissions (IOSCO) is the reduction of what type of risk? {Financial Markets}
1. Investment risk
2. Systemic risk
3. Operational risk
4. Market risk

XYZ Plc has 25p nominal value shares trading at GBP 6.22. It has earnings for the current year of GBP 1.04 and a dividend of 29p. What is its dividend yield? {Financial Markets}
1. 3.6%
2. 4.7%
3. 16.7%
4. 27.9%

Which of the following statements is true? {Financial Markets}
1. The buyer of a call has the right to sell an asset
2. The buyer of a put has the right to buy or sell an asset
3. The seller of a call has the right to sell an asset
4. The buyer of a call has the right to buy an asset

XETRA is the trading system in which country? {Financial Markets}
1. France
2. Germany
3. Spain
4. UK

What is the name of the trading system on NYSE Liffe? {Financial Markets}
1. Connect
2. LCH
3. SETS
4. LME

The BSE Sensex is an index in which country? {Financial Markets}
1. Bahrain
2. Dubai
3. India
4. Singapore

An investor holds 20 shares in Company ABC, currently priced at GBP 2 each. If there is a one for four scrip issue, how much will the investor have to subscribe (if anything) to receive the full quota of extra shares? {Financial Markets}
1. Nothing
2. GBP 10
3. GBP 20
4. GBP 40

Who is responsible for setting base rates in the UK? {Financial Markets}
1. Financial Services Authority
2. London Stock Exchange
3. Bank of England
4. HM Treasury

Which of the following can be said of UK corporate bonds? {Financial Markets}
1. They have market risk and default risk
2. They have market risk but no default risk
3. They have default risk but no market risk
4. They have neither market risk nor default risk

What is likely to be the view of an investor who buys call option? {Financial Markets}
1. The market will remain static
2. The market is inefficient
3. The underlying asset price will rise
4. The underlying asset price will fall

An investor buys a covered warrant for 25p each and with an exercise price of 180p. If the current price of the underlying asset is 160p on the purchased date, what is the investor's maximum possible loss? {Financial Markets}
1. 20p
2. 25p
3. 135p
4. 155p

If a trader deliberately gives the misleading impression that demand for a particular share is greater than it really is, this type of behaviour is likely to be classed as: {Financial Markets}
1. front running
2. product churning
3. money laundering
4. market abuse

Trades on the Tokyo Stock Exchange settle on? {Financial Markets}
1. T+1
2. T+2
3. T+3
4. T+4

Which of the following is a recognised advantage of listing? {Financial Markets}
1. Greater prestige
2. Less likely to be taken over
3. Less regulation
4. Lower taxation levels

Which one of the following countries operates an index called SSE Composite? {Financial Markets}
1. Korea
2. Japan
3. China
4. India

JGBs are issued in which country? {Financial Markets}
1. Germany
2. Japan
3. UK
4. US

How are investment trust shares bought? {Financial Markets}
1. By application to CREST
2. Direct from the trust manager
3. Through an ACD
4. On the stock market

What is the FTSE Actuaries 350? {Financial Markets}
1. An index of the 350 largest companies in the UK by profits
2. An index of the 350 largest companies by number of employees
3. Another name for the FTSE Smaller Companies Index
4. A combination of the FTSE 100 and FTSE 250 indices

An airline establishes an agreement with an oil company to pay a specific price in three months' time for a specific quantity of fuel at that time. This type of agreement is normally called: {Financial Markets}
1. An option
2. A future
3. A swap
4. A warrant

An investor holds £1,000 nominal value of a 7% gilt trading at £97. What is the next gross interest payment that the investor can normally expect to receive? {Financial Markets}
1. £ 28.00
2. £ 33.95
3. £ 35.00
4. £ 36.05

Which one of the following types of financial instrument is normally covered by the insider dealing rules? {Financial Markets}
1. Options on agricultural products
2. Futures on energy products
3. Technology shares
4. OEIC shares

How often do UK gilts normally pay interest? {Financial Markets}
1. Every three months
2. Twice a year
3. Annually
4. Every two years

Who normally issues Permanent Interest Bearing Shares in the UK? {Financial Markets}
1. Unit trust managers
2. Regional custodians
3. Local authorities
4. Building societies

ABC Plc plans a right issue. The shares currently trade at £3 per share and the rights issue offers one new share at £2.94 for every two shares held. On the ex-date of the issue, what would be the expected price of each share? {Financial Markets}
1. £ 2.94
2. £ 2.98
3. £ 3.00
4. £ 3.08

Person A established a trust and appointed Person B as a trustee. The terms of the trust means that income is paid to Person C during her life and, on her death, the remaining proceeds are paid to Person D. Who is therefore classed as the settlor? {Financial Markets}
1. Person A
2. Person B
3. Person C
4. Person D

If a company share has a price of 100p, a dividend of 5p and EPS of 10p, then what is the dividend yield? {Financial Markets}
1. 50%
2. 15%
3. 10%
4. 5%

A FCP (Fonds Commum de Placement) is a type of: {Financial Markets}
1. Collective investment scheme
2. Money market instrument
3. Agricultural commodity product
4. Life assurance policy

Which one of the following events is an example of a mandatory corporate action with options? {Financial Markets}
1. Scrip issue
2. Takeover bid
3. Dividend payment
4. Rights issue

Which of the following products is most likely to track the performance of an index? {Financial Markets}
1. ETF
2. Investment trust
3. SICAV
4. Unit trust

Michael bought some shares one day after the dividend distribution declaration date. What proportion, if any, of this dividend will he normally be entitled to? {Financial Markets}
1. None
2. 10%
3. 90%
4. 100%

On what day would a share price normally be expected to fall by the amount of dividend? {Financial Markets}
1. Record day
2. Ex-dividend day
3. Dividend payday
4. Dividend announcement day

A company has in issue 20 million ordinary shares of 50p nominal, originally issued at a price of £2 and currently trading at £4. It has a 1:2 capitalisation issue. How much cash will the company receive as a result of this issue? {Financial Markets}
1. Nil
2. £ 10m
3. £ 20m
4. £ 40m

Which type of advisers are obliged to offer their clients the option of fees in lieu of commission? {Financial Markets}
1. Tied advisers
2. Multi-tied advisers
3. Whole of market advisers
4. Independent financial advisers

Which one of the following activities is MOST likely to fall into the "professional sector" rather than the "retail sector"? {Financial Markets}
1. Mortgage protection insurance sales
2. Fund management
3. Personal pensions advice
4. Financial planning

One of the key objectives of the European Central Bank is to keep inflation (as defined by the HICP) close to, but below, what threshold interest rate? {Financial Markets}
1. 2%
2. 3%
3. 4%
4. 5%

Which of the following economic measurements, if either, includes net property income from abroad? {Financial Markets}
1. Gross National Product only
2. Gross Domestic Product only
3. Both Gross National Product and Gross Domestic Product
4. Neither Gross National Product nor Gross Domestic Product

The corporate equivalent of government treasury bills is normally known as: {Financial Markets}
1. Supranatinal bonds
2. Commercial paper
3. Structured products
4. Certificate of Deposits

In UK, where an annual general meeting includes a proposal to change the company's constitution, what minimum proportion of votes are normally required to carry it through? {Financial Markets}
1. 51%
2. 67%
3. 75%
4. 90%

The key difference between the primary market and the secondary market is that: {Financial Markets}
1. the primary market relates to equities and the secondary market relates to bonds
2. the primary market covers regulated and protected activities and the secondary market covers unregulated and unprotected activities
3. the primary market is where new shares are first marketed and the secondary market is where existing shares are subsequently traded
4. the primary market involves domestic trading and secondary market involves overseas trading

A bond with a coupon of 5%, redeemable in 2017, is currently trading at £80 per £100 nominal. What would be the impact on the flat yeild if the price increases by £5? {Financial Markets}
1. It would rise from 5.88% to 6.25%
2. It would rise from 6.25% to 6.75%
3. It would fall from 6.25% to 5.88%
4. It would fall from 6.75% to 6.25%

What terms is used to describe a situation where a trader bought, and is currently holding, a future which has two weeks to go until the specified future date? {Financial Markets}
1. Call
2. Put
3. Long
4. Short

Which one of the following combinations of underlying assets is most likely to be used to form a structured product? {Financial Markets}
1. Shares and derivatives
2. Shares and unit trusts
3. Bonds and investment trusts
4. Bonds and deposit accounts

70% of a fund's assets are indexed to the FTSE 100 index and the balance is actively managed. This type of investment approach is normally known as: {Financial Markets}
1. Controlled growth management
2. Momentum investment management
3. Core satellite management
4. Differential strategy management

Which one of the following types of investment vehicle is most likely to be highly geared? {Financial Markets}
1. Hedge funds
2. Real estate investment trusts
3. Unit trusts
4. Open-ended investment companies

The final stage of the three recognised stages of the money laundering process is normally known as: {Financial Markets}
1. Integration
2. Placement
3. Phasing
4. Layering

A life office has written procedures in place for handling complaints. These procedures: {Financial Markets}
1. need only cover written complaints
2. need only cover justifiable complaints
3. are only used if the complaint is both written and justified
4. must cover complaints irrespective of whether they are written and/or justified

Where a Muslim client uses as 'ijara' arrangement to borrow money to acquire a property, what proportion, if any, of the property will the bank normally buy at outset? {Financial Markets}
1. None
2. A variable amount between 10% and 25%
3. 50%
4. 100%

Which one of the following types of life assurance policy has a significant investment element? {Financial Markets}
1. Level term
2. Increasing term
3. Family income benefit
4. Whole of life

A trust is set up under which annual income is paid to Person A during her life, and, on her death, the remaining capital passes to Person B. This type of trust is normally known as: {Financial Markets}
1. a bare trust
2. an accumulation trust
3. an interest in possession trust
4. an absolute trust

_____________ would mean that no investor would be able to outperform the market without trading strategies based on publicly available information. {Investment Analysis and Portfolio Management}
1. Semi strong form efficiency
2. Weal form efficiency
3. Strong form efficiency

A company's ________________ provide the most accurate information to its management and shareholders about its operations. {Investment Analysis and Portfolio Management}
1. Advertisements
2. Financial statements
3. Products
4. Vision statement

______________ fund managers try to replicate the performance of a benchmark index, by replicating the weights of its constituent stocks. {Investment Analysis and Portfolio Management}
1. Active
2. Passive

Unlike term insurance, ______________ ensure a return of capital to the policyholder on maturity, along with the death benefits. {Investment Analysis and Portfolio Management}
1. High premium or low premium policies
2. Fixed or variable policies
3. Assurance or endowment policies
4. Growth or value policies

Gross Profit Margin = Gross Profit / Net Sales {Investment Analysis and Portfolio Management}
1. False
2. True

Security of ABC Ltd., trades in the spot market at Rs. 595. Money can be invested at 10% per annum. The fair value of one-month futures contract on ABC Ltd. is (using continuously compunded method): {Investment Analysis and Portfolio Management}
1. 630.05
2. 620.05
3. 600.05
4. 610.05

Accounts payable appears in the Balance Sheet of companies. {Investment Analysis and Portfolio Management}
1. True
2. False

A portfolio comprises of two stocks A and B. Stock A gives a return of 8% and stock B gives a return of 7%. Stock A has a weight of 60% in the portfolio. What is the portfolio return? {Investment Analysis and Portfolio Management}
1. 9%
2. 11%
3. 10%
4. 8%

Evidence accumulated through research over the past two decades suggests that during many episodes the markets are not efficient even in the weak form. {Investment Analysis and Portfolio Management}
1. False
2. True

A buys a Put Option at a strike price of Rs. 100 for a premium of Rs. 5. On expiry of the contract the underlying shares are trading at Rs. 106. Will Mr. A exercise his option? {Investment Analysis and Portfolio Management}
1. No
2. Yes

Price movement between two Information Technology stocks would generally have a ______________ co-variance. {Investment Analysis and Portfolio Management}
1. Zero
2. Positive
3. Negative

In the case of callable bonds, the callable price (redemption price) may be different from the face value. {Investment Analysis and Portfolio Management}
1. False
2. True

Term Structure of interest rates is also called as the ____________________ {Investment Analysis and Portfolio Management}
1. Term curve
2. Yield curve
3. Interest rate curve
4. Maturity curve

Each investment company is run by an _________________ {Investment Analysis and Portfolio Management}
1. Asset deployment company
2. Revenue management company
3. Asset management company
4. Asset reconstruction company

A ______________, is a time deposit with a bank with a specified interest rate. {Investment Analysis and Portfolio Management}
1. Certificate of Deposit (CD)
2. Commercial Paper (CP)
3. T-Note
4. T-Bill

Price (returns) which are not according to CAPM shall be quickly identified by the market and brought back to the __________ {Investment Analysis and Portfolio Management}
1. Average
2. Standard deviation
3. Mean
4. Equilibrium

Net acquisitions / disposals appear in the Cash Flow statements of companies. {Investment Analysis and Portfolio Management}
1. True
2. False

____________ are a fixed income security. {Investment Analysis and Portfolio Management}
1. Equities
2. Forex
3. Derivatives
4. Bonds

Investment advisory firms manage _________________. {Investment Analysis and Portfolio Management}
1. Each client's account separately
2. All clients accounts in a combined manner
3. Only their own money and not client's money

______________ measures the percentage of net income not paid to the shareholders in the form of dividends. {Investment Analysis and Portfolio Management}
1. Withholding ration
2. Retention ratio
3. Preservation ratio
4. Maintenance ratio

In a Bond the ____________ is paid at the maturity date. {Investment Analysis and Portfolio Management}
1. Face value
2. Discounted value
3. Compunded value
4. Present value

Banks and other financial institutions generally create a portfolio of fixed income securities to funds known __________ {Investment Analysis and Portfolio Management}
1. Assets
2. Liabilities

Which of the following accounting statements form the backbone of financial analysis of a company? {Investment Analysis and Portfolio Management}
1. The income statement (profit & loss)
2. The balance sheet
3. Statement of cash flows
4. All of the above

The balance sheet of a company is a snapshot of the ___________ of the firm at a point in time. {Investment Analysis and Portfolio Management}
1. The sources and application of funds of the company
2. Expenditure structure
3. Profit structure
4. Income structure

The need to have an understanding about the ability of the market to imbibe information into the prices has led to countless attempts to study and characterize the levels of efficiency of different segements of the financial markets. {Investment Analysis and Portfolio Management}
1. True
2. False

In investment decisions, _______________ refers to the marketability of the asset. {Investment Analysis and Portfolio Management}
1. Value
2. Profitability
3. Price
4. Liquidity

Mr. A buys a Call Option at a strike price of Rs. 700 for a premium of Rs. 5. Mr. A expectes the price of the underlying shares to rise above Rs. ____________ on expiry date in order to make a profit. {Investment Analysis and Portfolio Management}
1. 740
2. 700
3. 720
4. 760

The ________________ refers to the length of time for which an investor expects to remain invested in a particular security or portfolio, before realizing the returns. {Investment Analysis and Portfolio Management}
1. Investment horizon
2. Credit cycle horizon
3. Duration horizon
4. Constant horizon

A _____________ provides an account of the total revenue generated by a firm during a period (usually a financial year, or a quarter) {Investment Analysis and Portfolio Management}
1. Accounting analysis statement
2. Financial re-engineering statement
3. Promotional expenses statement
4. Profit & Loss statement

New stocks/bonds are sold by the issuer to the public in the _______________. {Investment Analysis and Portfolio Management}
1. Fixed income market
2. Secondary market
3. Money market
4. Primary market

Security of ABC Ltd., trades in the spot market at Rs. 525. Money can be invested at 10% per annum. The fair value of a one-month futures contract on ABC Ltd., is (using continuously compunded method): {Investment Analysis and Portfolio Management}
1. 559.46
2. 549.46
3. 539.46
4. 529.46

If the market is ______________, the period after a favourable (unfavourable) event would not generate returns beyond (less than) what is suggested by an equilibrium model such as CAPM. {Investment Analysis and Portfolio Management}
1. Weak form efficient
2. Strong form efficient
3. Semi-strong form efficient

A sell order comes into the trading system at a Limit Price of Rs. 120. The order will get executed at a price of _________. {Investment Analysis and Portfolio Management}
1. Rs. 120 or more
2. Rs. 120 or less

___________ have precedence over common stock in terms of dividend payments, and the residual claim to its assets in the event of liquidation. {Investment Analysis and Portfolio Management}
1. Preferred shares
2. Equity shares

One needs to average out the time to maturity and time to various coupon payments to find the effective maturity for a bond. The measure is called as _____________ of a bond. {Investment Analysis and Portfolio Management}
1. Duration
2. IRR
3. YTM
4. Yield

In case of continuous compund interest rate, we need to know the _______________ for which compounding is done. {Investment Analysis and Portfolio Management}
1. Period
2. Frequency
3. Time
4. Duration

Net change is Working Capital appears in the Cash Flow Statement of companies. {Investment Analysis and Portfolio Management}
1. False
2. True

A company's net income for a period is Rs. 15,00,000 and the average shareholder's fund during the period is Rs. 100,00,00,000. The return on average equity is: {Investment Analysis and Portfolio Management}
1. 13%
2. 12%
3. 15%
4. 16%

A portfolio comprises of two stocks A and B. Stock A gives a return of 14% and stock B gives a return of 1%. Stock A has a weight of 60% in the portfolio. What is the portfolio return? {Investment Analysis and Portfolio Management}
1. 10%
2. 9%
3. 12%
4. 11%

Average return of an investor's portfolio is 10%. The risk free return for the market is 8%. The Beta of the investor's portfolio is 1.2. Calculate the Treynor Ratio. {Investment Analysis and Portfolio Management}
1. 4
2. 8
3. 2
4. 6

The share price of PQR company on 1st April 2009 and 31st March 2010 is Rs. 20 and Rs. 24 respectively. The company paid a dividend of Rs. 5 for the year 2009-10. Calculate the return for a shareholder of PQR company in the year 2009-10. {Investment Analysis and Portfolio Management}
1. 45%
2. 65%
3. 75%
4. 55%

Portfolio management is the art of managing the expected ___________ requirement for the corresponding ____________. {Investment Analysis and Portfolio Management}
1. Income, expenditure
2. Gain, losses
3. Profit, loss tolerance
4. Return, risk tolerance

Average return of an investor's portfolio is 55%. The risk free return for the market is 8%. The beta of the investor's portfolio is 1.2. Calculate the Treynor ratio. {Investment Analysis and Portfolio Management}
1. 41
2. 39
3. 43
4. 45

In addition to the perceived benefits of professional fund management, the major reason for investment into funds is the ___________ they afford the investor. {Investment Analysis and Portfolio Management}
1. Specialisation
2. Diversification
3. Variety
4. Expansion

ABC Ltd., has paid a dividend of Rs. 10 per share last year and it is expected to grow at 5% every year. If an investor's expected rate of return from ABC Ltd. share is 7%, calculate the market price of the share as per the dividend discount model. {Investment Analysis and Portfolio Management}
1. 540
2. 530
3. 525
4. 535

The CAPM is founded on the following two assumptions (1) in the equilibrium every mean variance investor holds the same market portfolio and (2) the only risk the investor faces is the beta. {Investment Analysis and Portfolio Management}
1. True
2. False

Markets are inefficient when prices of securities assimilate and reflect information about them. {Investment Analysis and Portfolio Management}
1. True
2. False

Stock returns are generally expected to be independent across weekdays, but a number of studies have found returns on Monday to be lower than in the rest of the week. This departure from market efficiency is also sometimes called the ____________ effect. {Investment Analysis and Portfolio Management}
1. Monday-Friday
2. Weekday
3. Monday
4. Weekend

Over pricing in a stock presents an opportunity to engage in __________ the stock {Investment Analysis and Portfolio Management}
1. Short covering
2. Short selling
3. Active buying
4. Going Long

What is the amount an investor will get on a 1-year fixed deposit of Rs. 10,000 that pays 8% interest compounded quarterly? {Investment Analysis and Portfolio Management}
1. 12824.32
2. 13824.32
3. 10824.32
4. 11824.32

For longer investment horizons investors look at ____________ {Investment Analysis and Portfolio Management}
1. Riskier assets like equities
2. Low risk assets like government securities

Dividend per share = Total dividend / Number of shares in issue {Investment Analysis and Portfolio Management}
1. True
2. False

Price movement between two steel companies would generally have a _____________ co-variance {Investment Analysis and Portfolio Management}
1. Positive
2. Negative
3. Zero

The price of a derivative is dependent on the price of another security, called the _____________. {Investment Analysis and Portfolio Management}
1. Basis
2. Variable
3. Underlying
4. Options

Call options can be classified as: {Investment Analysis and Portfolio Management}
1. European
2. American
3. All of the above

In India, commercial papers (CPs) can be issued by __________. {Investment Analysis and Portfolio Management}
1. Mutual fund agents
2. Insurance agents
3. Primary dealers
4. Sub-brokers

An endowment fund is an institutional investor. {Investment Analysis and Portfolio Management}
1. False
2. True

_______________ orders are activated only when the market price of the relevant security reaches a threshold price. {Investment Analysis and Portfolio Management}
1. Limit
2. Market-loss
3. Stop-loss
4. IOC

A portfolio comprises of two stocks A and B. Stock A gives a return of 9% and stock B gives a return of 6%. Stock A has a weight of 60% in the portfolio. What is the portfolio return? {Investment Analysis and Portfolio Management}
1. 11%
2. 9%
3. 10%
4. 8%

The issue price of T-Bills is generally decided at an ___________. {Investment Analysis and Portfolio Management}
1. OTC market
2. Inter-bank market
3. Exchange
4. Auction

____________ is a volatility index launched by NSE? {Financial Markets}
1. India VIX
2. Nifty VIX
3. Nifty India VIX
4. India Nifty VIX

The settlement system for transaction in government securities was standardised to _________ on May 11, 2005. {Financial Markets}
1. T+1
2. T+2
3. T+3
4. T+4

"Securities", which is defined in the Securities Contracts (Regulation) Act, 1956, includes _____________. {Financial Markets}
1. Derivatives
2. Bonds
3. Stocks
4. All of the above

Which of the following is a participant in the securities markets? {Financial Markets}
1. FIIs
2. Merchant Bankers
3. Mutual Funds
4. All of the above

The securities market has two interdependent and inseparable segements, ______________ {Financial Markets}
1. OTC and Exchange Traded Markets
2. The new issues (primary market) and the stock (secondary) market
3. Cash and derivatives market
4. Commodity and equity markets

_______________ enables participants who hold securities to adjust their holdings in response to changes in their assessment of risk and return. {Financial Markets}
1. Over the counter market
2. Derivatives market
3. The primary market
4. The secondary market

A company making a public issue of securities has to file a draft prospectus with SEBI, through an eligible merchant banker, at least ________ days prior to the filing of prospectus with the Registrar of Companies. {Financial Markets}
1. 30 days
2. 15 days
3. 10 days
4. 60 days

The promoters' contribution in case of public issues by unlisted companies and promoters' shareholding in case of "offers for sale" should not be less than ___________ of the post issue capital {Financial Markets}
1. 30%
2. 15%
3. 20%
4. 50%

For any issue of capital to the public, the minimum promoter's contribution is locked in for a period of ___________. {Financial Markets}
1. 5 years
2. 3 years
3. 2 years
4. 1 year

Out of the portion available for allocation to qualified institutional buyers in case when the company makes an issue through 100% or 75% book building, ___________ should be allocated proportionately to mutual fund. {Financial Markets}
1. 5%
2. 10%
3. 15%
4. 20%

Under book building, the bids must remain open for atleast _______ days. {Financial Markets}
1. 3
2. 4
3. 5
4. 7

As per SEBI mandate, all new IPOs are compulsorily traded in dematerialised form? {Financial Markets}
1. True
2. False

"Demutualisation" means the segregation of ownership and management from the trading rights of the members of a recognised stock exchange in accordance with the scheme approved by the Securities and Exchange Board of India. {Financial Markets}
1. True
2. False

A networth of ___________ is required for members clearing for self as well as for other trading members in the Futures & Options segment of NSE. {Financial Markets}
1. Rs. 200 lakhs
2. Rs. 100 lakhs
3. Rs. 500 lakhs
4. Rs. 300 lakhs

A trading member applying for membership of the Capital Markets, F&O and WDM segements of NSE must meet the following eligibility criteria: At least two directors should be graduates. Dealers should also have passed SEBI approved certification test for derivatives and NCFM capital markets (Basic or Dealers) module. {Financial Markets}
1. True
2. False

The primary objective of admission to dealings on the exchange is to provide liquidity and marketability to securities, as also to provide a mechanism for effective management of trading. {Financial Markets}
1. True
2. False

At the time of listing securities of a company on a stock exchange, the company is required to enter into a _____________ with the exchange. {Financial Markets}
1. Listing agreement
2. MOU
3. Understanding
4. Back to back arrangement

The stock exchange may de-list companies which have been suspended for a minimum period of six months for non-compliance with the listing agreement. {Financial Markets}
1. True
2. False

In order to list on the Capital Market segement of the NSE through an IPO, a company should have a minimum paid up equity capital of Rs. ___________ (in crores) and a market capitalization of Rs. ____________ (in crores). {Financial Markets}
1. 100, 250
2. 25, 10
3. 10, 25
4. 250, 100

The Depositories Act envisages transfer of ownership of securities electronically by book entry without making the securities move from person to person. {Financial Markets}
1. True
2. False

In order to promote dematerialisation of securities, NSE joined hands with leading financial institutions to establish the _________________. {Financial Markets}
1. National Securities Depository Limited (NSDL)
2. Central Depository Serices Limited (CDSL)
3. Depository Services of India Limited (DSIL)
4. Stock Holding Corporation of India Limited

The NEAT system of NSE supports an _______________. {Financial Markets}
1. Quote driven market
2. Market maker system
3. Order driven system
4. Jobber driven system

All orders which are of regular lot size or multiples thereof are traded in the Normal Market in the Capital Market segment of NSE. {Financial Markets}
1. True
2. False

In the case of a public issue through 100% book building route, what is the minimum percentage of shares that can be allocated to the retail investors applying for subscription. {Financial Markets}
1. 35%
2. 20%
3. 25%
4. 45%

The main instruments in the government securities market are fixed rate bond, floating rate bonds, zero coupon bonds and inflation index bonds, partly paid securities, securities with embedded derivatives, treasury bills and the state government bonds. {Financial Markets}
1. True
2. False

The market for government securities comprises the securities issued by the ____________ {Financial Markets}
1. Central government
2. State government
3. State sponsored entities
4. All of the above

The best buy order in the trading system is the order with the _________? {Financial Markets}
1. Lowest quantity
2. Highest quantity
3. Lowest price
4. Highest price

If an order does not find a match in the trading system, it is _________________ {Financial Markets}
1. Removed from the trading system after seven days
2. Removed from the trading system at the end of the day
3. Removed from the trading system on the expiry day
4. Removed from the trading system when the buyer/seller wishes

Mr. Kiran has placed a stop-loss buy order for the securities XYZ Ltd., in the F&O trading system. The following are the details of the order: the trigger price is kept at Rs. 1025.00 and the limit price is kept at Rs. 1030.00. This order will be released into the system in which of the following scenarious: {Financial Markets}
1. The market price of the security reaches or exceeds Rs. 1,025.00
2. Only if the market price of the security reaches or exceeds Rs. 1,030.00
3. Only if the market price of the security falls below Rs. 1,025.00
4. The market price of the security reaches or exceeds Rs. 1,022.00

Derivative products initially emerged as hedging devices against fluctuations in _____________. {Financial Markets}
1. Bond prices
2. Equity prices
3. Commodity prices
4. Interest rates

Arbitrageurs are in the business to take advantage of a discrepancy between price in two different markets. {Financial Markets}
1. True
2. False

While entering a stop loss order, one needs to specify the ____________ {Financial Markets}
1. High price
2. Trigger price
3. Low price
4. Price band

Forward markets world-wide are afflicted by ____________ {Financial Markets}
1. Lack of centralisation of trading
2. Illiquidity
3. Counterparty risk
4. All of the above

________________ can be defined as the futures price minus the spot price. {Financial Markets}
1. Basis
2. Cost of carry
3. Minimum lot size
4. Premium

On May 16 closing price of equity shares of ABC Ltd., is Rs. 200. Mr. Gopal holds 8,000 call options on ABC Ltd., at a strike price of Rs. 195, which he had purchased on 5th April at a premium of Rs. 11 per call. What would be his net payment to/receipt from the clearing corporation if he exercises his option on 5,000 on May 16. {Financial Markets}
1. Pays Rs. 25,000 to the clearing corporation
2. Receives Rs. 25,000 to the clearing corporation
3. Receives Rs. 40,000 from the clearing corporation
4. None of the above

A trading member has the following position in a particular security: ABC Ltd. {Financial Markets}

Client	Buy Quantity	Sell Quantity
A	2,000	1,000
B	4,300	200
C	2,000	4,600
D	0	4,800
E	3,400	0

What will be the final settlement obligation in ABC Ltd. for the member?

Pay-in obligation of 10,600 shares
Pay-out obligation of 11,700 shares
Pay-out obligation for 1,100 shares
None of the above

Spot value of Nifty is 4,240. An investor buys a one-month Nifty 4,227 put option for a premium of Rs. 70. The option is __________. {Financial Markets}
1. Out of the money
2. In the money
3. At the money
4. Above the money

Spot value of Nifty is 4,245. An investor buys a one-month Nifty 4,225 call option for a premium of Rs. 120. The option is _________. {Financial Markets}
1. Out of the money
2. In the money
3. At the money
4. Above the money

Trading member Mr. Albert took proprietary purchase in a March 2008 contract. He bought 1,500 units @ Rs. 1,200 and sold 1,300 @ Rs. 1,220. The end of day settlement price was Rs. 1,221. What is the outstanding position on which initial margin will be calculated? {Financial Markets}
1. 1,500 units
2. 200 units
3. 1,300 units
4. 2,800 units

Calculate the value 5 years hence of a deposit of Rs. 1,000 made today if the interest rate is 7% (compounded annually) {Financial Markets}
1. Rs. 5,000
2. Rs. 1,305
3. Rs. 1,300
4. Rs. 1,403