Security Analysis And Portfolio Management - 18

Security Analysis And Portfolio Management - 18

True/False
Question Risk on a portfolio of assets is always same as the risk on
individual asset.
Correct Answer False

Multiple Choice Single Answer
Question The price of the index futures contract is defined as :-
Correct Answer Future price = Spot price + Carry cost

Multiple Choice Single Answer
Question In India we have index futures contracts based on :-
Correct Answer S&P CNX Nifty and the BSE sensex

Match The Following
Question - Correct Answer
Future value of a series of cash flows occurring at the end of each period. - Future value of annuity

Value today of a stream of cash flows that occurs in future. - Present Value

Value at a certain future date today of a stream of cash flows that occurs over a period of time. - Future Value

Series of equal payments or receipts occurring at regular intervals of time. -Present value of annuity

True/False
Question Bond ratings by credit rating agencies provide superior and low
cost information to the investor serving as a basis for a proper
risk-return trade off by investors.
Correct Answer True

Multiple Choice Multiple Answer
Question 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 the
opening price

Select The Blank
Question Risk can be referred as the ________ in the return with respect
to the expected return.
Correct Answer Volatility

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

True/False
Question A higher value of current ratio indicates a better short term
solvency of the firm.
Correct Answer True

Multiple Choice Multiple Answer
Question What are the features of trend lines
Correct Answer A simple and useful tool in technical analysis , Prices move in
trends , The trend lines represent points of support and
resistance

Multiple Choice Single Answer
Question The GDP growth rate in the economy in real terms has
fluctuated between :-
Correct Answer 4% and 5%

Multiple Choice Single Answer
Question Mr.Saurabh invests Rs. 5,000/- today. The rate of interest is 4%
compounded annually. What will be the value of his investment
after 5 years?
Correct Answer Rs. 6083/-

Multiple Choice Single Answer
Question More than half the variation in stock price could be attributed to
which factor?
Correct Answer Market influence

Match The Following
Question -Correct Answer

Technical collaboration of
Bharat Forge with SIFCO
industries USA
-1981
Bharat Forge was
incorporated at Mumbai
-1961

Shares of 100 each
subdivided of Bharat forge
-1971

930000 bonus shares
issued by Bharat Forge
-1976

True/False
Question A rally that develops on contracting volumes is suspect and
warns of a potential trend reversal in price
Correct Answer True

Multiple Choice Single Answer
Question What does lower level of unemployment indicates?
Correct Answer Positive economic conditions

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

Select The Blank
Question The ________ phase carries a lot of significance because it
marks the turning point between a rising and a falling market.
Correct Answer Transitional

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's
known as boxes. , X's show that the prices are moving up , O's
show that the prices are moving down

Select The Blank
Question The 8% taxable savings bonds are repayable after ________
years.
Correct Answer 6

Multiple Choice Multiple Answer
Question The features of bond are :-
Correct Answer Collateral , Call provision , Sinking fund and protective
covenants

Multiple Choice Multiple Answer
Question An options contract allows the investor :-
Correct Answer To earn a profit while restricting the downside risk , To use the
options for speculation , Either to honour or walk away from the
contract

Select The Blank
Question Current liabilities include all liabilities due in the next ________
and provisions.
Correct Answer 12 months

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

Multiple Choice Multiple Answer
Question Mutual fund schemes could be broadly classified as :-
Correct Answer Open ended scheme , Close ended scheme
True/False
Question Balance of payments surplus augments foreign reserves of the
country and have a favourable impact on he exchange rate.
Correct Answer True

Select The Blank
Question ________ model is based on the principle that an initial phase
where the growth rate is not stable and subsequent steady
growth rate and remains for the long-term.
Correct Answer The Two-Stage dividend discount

True/False
Question The cost structure remaining the same, better price realisation
results in lower gross profit ratio.
Correct Answer False

Select The Blank
Question ________ 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

Multiple Choice Multiple Answer
Question 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 as compliance officer , New contracts
won in passenger car components

Multiple Choice Single Answer
Question The financial contract between the issuer and the purchaser of
the bonds is termed as :-
Correct Answer Bond indenture

True/False
Question With the use of diversification you can reduce the risk.
Correct Answer True

Multiple Choice Multiple Answer
Question An option is :-
Correct Answer A contract between two parties , Where buyer receives a
privilege for which he pays a premium , Where the seller accepts
an obligation for which he receives a fee

Select The Blank
Question Dow Jones transportation average was previously known as
________.
Correct Answer Rail average

Multiple Choice Multiple Answer
Question What are the features of company fixed deposits?
Correct Answer Interest rate offered is higher than banks , No benefits under 80
L , No TDS for interest income upto Rs. 5000

Multiple Choice Single Answer
Question In estimating the growth of a firm, analyst's forecasts have an
advantage over historical data-based models because :-
Correct Answer They incorporate more recent information about the firm and
inputs future prospects

Multiple Choice Single Answer
Question What do you understand by money supply?
Correct Answer Total money in existence at any given time

Select The Blank
Question Under ________ EMH investors cannot earn abnormal/superior
profits on securities on a consistent basis.
Correct Answer Semi-strong form

Multiple Choice Single Answer
Question What is the limitation of Flow-of funds analysis method?
Correct Answer Cannot give indication of the inclination of market participants to
purchase stock

Select The Blank
Question ________ measures the profitability of equity funds invested in
the firms.
Correct Answer Return on equity

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 investment
after 5 years?
Correct Answer Rs.14.693/-

True/False
Question Equity shares is a high return high risk instrument.
Correct Answer True

True/False
Question The returns of sector specific funds are solely dependant on the
performance of the respective sectors / industries.
Correct Answer True

True/False
Question Certificate of Deposits offers high rate of interest than Treasury
Bills.
Correct Answer True

Multiple Choice Multiple Answer
Question 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 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 this
amount, if the rate of interest is 9% p.a ?
Correct Answer Rs.1,15,827/-

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






Security Analysis And Portfolio Management - 17


Multiple Choice Single Answer
Question The greater the deviation of the actual returns from
the actual return :-
Correct Answer Greater the variance

Select The Blank
Question 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

True/False
Question Penetration of a trend line denotes a bearish phase.
Correct Answer False

Multiple Choice Single Answer
Question Free Float index considers this to calculate market
capitalisation :-
Correct Answer Actual no. of shares available

True/False
Question The performance of a scheme is reflected in its NAV
which is disclosed on a daily basis in case of open
ended schemes.
Correct Answer True

Match The Following
Question -Correct Answer

Under options contract -Cost of Carry model Options contract

When you expect
prices to fall, then, you
take a long position by
buying puts. When you
expect prises to rise,
then you take a short
position by selling
puts.

A contract where both
the parties are equally
responsible
-Futures contract

The amount which the
buyer of the option has
to pay to the option
writer to induce him to
accept the risk
associated with the
contract.
-Option price
NSE&BSE are
regulated by
Securities Exchange
Board of India


True/False
Question Balance of payments surplus augments foreign
reserves of the country and have a favourable impact
on he exchange rate.
Correct Answer True

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's known as boxes. , X's show that the prices are
moving up , O's show that the prices are moving down

Multiple Choice Single Answer
Question What is the art of technical analysis?
Correct Answer To identify trend changes at an early stage and
maintain investment posture till the trend has reversed

True/False
Question Investment in gilt edged securities carry a higher
element of risk.
Correct Answer False

Multiple Choice Multiple Answer
Question What was the final analysis on the performance of
Bharat forge for the year FY 02?
Correct Answer Stock currently trades at 15 times its FY 05 consensus
EPS forecasts , Stock will trade at an inexpensive
PEG of 0.6x. , Aim to become US$1 billion Company
by Fy 08 from US$100 million

True/False
Question With the use of diversification you can reduce the risk.
Correct Answer True

Multiple Choice Multiple Answer
Question What are the important macro economic indicators?
Correct Answer GNP growth rate , Price Conditions , Monsoons

True/False
Question The basic assumption of Technical analysis is that,
price discounts everything and it is the outcome of all
forces affecting a stock.
Correct Answer True

Multiple Choice Single Answer
Question What are primary trends?
Correct Answer Reflection of investor's attitudes towards unfolding
fundamentals in the business cycle

Select The Blank
Question ________ 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

Select The Blank
Question The Derivative market is divided into Future market
and ________ market.
Correct Answer Options

Match The Following
Question- Correct Answer

NSE Nifty Nifty
-SEBI Redressal of investor
complaints

NAV- Net asset value

AMFI- Association of mutual
funds of India

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

Multiple Choice Single Answer
Question What is an open ended fund or scheme?
Correct Answer Which is available for subscription and repurchase on
a continuous basis

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 any scheme , 2/3rds of the directors of the
trustee company must be independent , An AMC
approved by SEBI manages the fund

Select The Blank
Question ________is a hybrid form of security which has
characteristics of both equity and debentures
Correct Answer Preference shares

Select The Blank
Question The 6.________% tax saving bonds of government of
India have a tenure of 5 years.
Correct Answer 5

Multiple Choice Multiple Answer
Question The underlying assumptions of Technical analysis are
that :-
Correct Answer Prices move in predictable patterns , Market value is
determined by supply & demand , Investors are
emotional than being rational

Select The Blank
Question ________ ratio is the ratio of net profit to the sales.
Correct Answer Net Profit Margin

True/False
Question If rupee weakens against the dollar, it has favourable
impact for the importers.
Correct Answer False

Multiple Choice Multiple Answer
Question A firm's growth is determined by how much is reinvested
into new assets and the quality of these
investments, and these includes :-
Correct Answer Acquisitions , Building distribution channels ,
Expanding marketing capabilities and investing in new
facilities

Multiple Choice Single Answer
Question What does flow-of fund analysis help in
understanding?
Correct Answer Availability of money for the stock market

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 is available from 7th year

Select The Blank
Question Current liabilities include all liabilities due in the next
________ and provisions.
Correct Answer 12 months

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

Select The Blank
Question A ________ rally for stocks generally takes place
because of an improved outlook for business
conditions over what was anticipated.
Correct Answer Bear market

Multiple Choice Multiple Answer
Question What are the different types of profitability ratios?
Correct Answer Gross profit margin ratio , Earnings power , Return on
equity

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

Multiple Choice Single Answer
Question What is the objective of an income fund?
Correct Answer To provide regular and steady income

Multiple Choice Single Answer
Question Mr.Saurabh invests Rs. 5,000/- today. The rate of
interest is 4% compounded annually. What will be the
value of his investment after 5 years?
Correct Answer Rs. 6083/-

Multiple Choice Multiple Answer
Question The commonly used charts to measure the
movements in price under the technical analysis are :-
Correct Answer Line Charts , Bar Charts , Point and Figure Charts
True/False
Question The normal relationship is for the volume to expand on
rallies and contract on declines.
Correct Answer True

Multiple Choice Multiple Answer
Question Growth of the firm can be estimated through :-
Correct Answer Firm's past earnings/historical growth rate , Estimates
made by equity research analyst who follow the firm ,
Estimates from a firm's fundamentals

Select The Blank
Question 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 specific date.
Correct Answer Right but not obligation

Multiple Choice Single Answer
Question 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 end is Rs.115/-. What is the rate of return?
Correct Answer 0.15

True/False
Question Because of statutory compulsion, generally Govt.
securities are held by banks, financial institutions,
insurance companies etc.
Correct Answer True

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

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 to withdraw

Multiple Choice Single Answer
Question What is the minimum investment amount in G-secs?
Correct Answer 1000

True/False
Question Sensex is the index of Calcutta Stock Exchange.
Correct Answer False

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

Security Analysis And Portfolio Management - 16

Multiple Choice Single Answer
Question The historical growth rate and the past earnings of a firm
are used in valuing :-
Correct Answer Stable firms, but not appropriate for high growth
firms

Select The Blank
Question The 8% taxable savings bonds are repayable after ________
years.
Correct Answer 6

Multiple Choice Single Answer
Question Mr. Tiwari is expecting to receive Rs.25,000/- at the end of
10 years. He wanted to know what is the present value of this amount, if
the rate of interest is 10% p.a:-
Correct Answer Rs. 9639/-

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

Multiple Choice Single Answer
Question Which year marked increase in growth rate?
Correct Answer 2003 -04

Select The Blank
Question Security analysis serves the investment decision maker by
identifying ________securities.
Correct Answer Under priced

Multiple Choice Multiple Answer
Question The Peer group of Bharat Forge consists of which all
companies?
Correct Answer Am forge industries , Kalyani Forge , EL Forge

Multiple Choice Multiple Answer
Question The features of bond are :-
Correct Answer Collateral , Call provision , Sinking fund and
protective covenants

Match The Following
Question- Correct Answer Your Answer
Equity shares High risk High risk
Government Securities No risk No risk
Bank Deposits Low risk Low risk
Mutual Funds Average risk Average risk
Multiple Choice Multiple Answer
Question What are the important macro economic indicators?
Correct Answer Price Conditions , Monsoons , GNP growth rate
Your Answer GNP growth rate , Price Conditions , Monsoons
Select The Blank
Question Debentures rated as "A" are judged to offer ________ of
timely payment of interest and principal.
Correct Answer Adequate safety
Your Answer Adequate safety
Multiple Choice Single Answer
Question What are primary trends?
Correct Answer Reflection of investor's attitudes towards unfolding
fundamentals in the business cycle
Your Answer Reflection of investor's attitudes towards unfolding
fundamentals in the business cycle
True/False
Question Bonds and Debentures represent long term debt instruments.
Correct Answer False
Your Answer False
True/False
Question The returns of sector specific funds are solely dependant on
the performance of the respective sectors / industries.
Correct Answer True
Your Answer True
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 Technical analysis
Multiple Choice Multiple Answer
Question The firm issuing bonds operating sinking fund and
repurchases bonds either :-
Correct Answer Calling in a certain number of bonds by lot , Buying
bonds in the open market , Buying bonds issued to banks and financial
institutions
Your Answer Buying bonds issued to banks and financial institutions ,
Calling in a certain number of bonds by lot , Buying bonds in the open
market
True/False
Question The Asset management company of the mutual fund must have
50% independent directors.
Correct Answer True
Your Answer True
Multiple Choice Single Answer
Question What is an open ended fund or scheme?
Correct Answer Which is available for subscription and repurchase on
a continuous basis
Your Answer Which is available for subscription and repurchase on a
continuous basis
True/False
Question A price rise accompanied by expanding volume denotes a
potential trend reversal.
Correct Answer False
Your Answer False
Multiple Choice Multiple Answer
Question 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
growth rate phase steadily for a specific time period , Sources of high
growth are expected to disappear after specific period of time
Your Answer In high growth rate phase , Expecting to maintain the
growth rate phase steadily for a specific time period , Sources of high
growth are expected to disappear after specific period of time
Multiple Choice Single Answer
Question If the price of a share at the beginning of the year was
Rs.70/-, dividend received during the year was Rs.5/-per share and the
price at the end is Rs.79/-. What is the rate of return?
Correct Answer 0.2
Your Answer 0.2
Multiple Choice Multiple Answer
Question If option is given to you to receive Rs.1,000/- today or
after one year, you will choose to receive it today because :-
Correct Answer You can use the amount to generate returns over the
next one year , The purchasing power of Rs.1,000/- today is more than
what it will be one year from now , There is an element of uncertainty
associated with the future receipt
Your Answer You can use the amount to generate returns over the next
one year , The purchasing power of Rs.1,000/- today is more than what it
will be one year from now , There is an element of uncertainty associated
with the future receipt
True/False
Question Investment in gilt edged securities carry a higher element
of risk.
Correct Answer False
Your Answer False
Multiple Choice Single Answer
Question What is the percentage of variation the market and industry
influence account for?
Correct Answer 2/3rd
Your Answer 2/3rd
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 the
issuer 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 the
issuer at a contracted value
True/False
Question A higher value of current ratio indicates a better short
term solvency of the firm.
Correct Answer True
Your Answer True
Multiple Choice Single Answer
Question Debt instruments that have a maturity period of one year or
less are called as:-
Correct Answer Money market instruments
Your Answer Short term debt instruments
Multiple Choice Single Answer
Question When was the first mutual fund set up?
Correct Answer 1963
Your Answer 1963
Select The Blank
Question ________ measures the efficiency of credit management.
Correct Answer Average collection period
Your Answer Average collection period
True/False
Question A share certificate indicates that the investor owns a
certain number of shares.
Correct Answer True
Your Answer True
Select The Blank
Question ________ take long or short positions only with the
intention of making profits by getting out of the market when conditions
favor them.
Correct Answer Speculators
Your Answer Speculators
Multiple Choice Multiple Answer
Question 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
Select The Blank
Question The ________ phase is characterized by resistance area and
support level.
Correct Answer Transition
Your Answer Transition
True/False
Question Sensex is the index of Calcutta Stock Exchange.
Correct Answer False
Your Answer False
Select The Blank
Question When a debenture is sold to the general public a ________ is
appointed.
Correct Answer Trustee
Your Answer Trustee
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 Multiple Answer
Question To measure the movement of stocks in the market which
indices were constructed by Dow?
Correct Answer Dow Jones industrial Average , Dow Jones
Transportation Average
Your Answer Dow Jones industrial Average , Dow Jones Transportation
Average
Multiple Choice Multiple Answer
Question What are the features of line charts?
Correct Answer It connects closing prices from one period to the next
, It is ideal for securities with no high or low price data
Your Answer It connects closing prices from one period to the next ,
It is ideal for securities with no high or low price data
Multiple Choice Multiple Answer
Question What are the features of post office monthly income scheme?
Correct Answer Rate of return is 8 % , Interest payable monthly ,
Investor earns bonus of 10% on completion of term
Your Answer Rate of return is 8 % , Interest payable monthly ,
Investor earns bonus of 10% on completion of term
Multiple Choice Single Answer
Question In India we have index futures contracts based on :-
Correct Answer S&P CNX Nifty and the BSE sensex
Your Answer S&P CNX Nifty and the BSE sensex
Select The Blank
Question ________ deal in futures to offset a pre-existing risk.
Correct Answer Hedger
Your Answer Hedger
Multiple Choice Multiple Answer
Question What are the different types of profitability ratios?
Correct Answer Gross profit margin ratio , Earnings power , Return on
equity
Your Answer Gross profit margin ratio , Earnings power , Return on
equity
True/False
Question 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 False
Select The Blank
Question 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 Bear market
True/False
Question Following a decline, heavy volume with little price change
is indicative of accumulation and is normally a bearish factor.
Correct Answer False
Your Answer False

Match The Following
Question Correct Answer Your Answer
Gross profit margin Indicates the margin available after meeting the
manufacturing expenses Valuation ratio
ROE Measure the profitability of equity funds Measures the profitability
of debt funds
Earnings power Measure the profitability of operations without
considering the influence of financial structure and tax rate Indicates
the margin available after meeting the manufacturing expenses
Net profit margin Ratio if net profit to sales Measure the profitability
of operations without considering the influence of financial structure
and tax rate

Select The Blank
Question The Derivative market is divided into Future market and
________ market.
Correct Answer Options