Practice Test

Q1) Security Analysis is a process of estimating ................. for individual securities. Show Answer

Q2) Standard deviation determine - Show Answer

Q3) Financial Assets are - Show Answer

Q4) ................. is one who exercises any degree of discretion as to the investment or management of the portfolio of the securities or the funds of the client. Show Answer

Q5) Return from listed security is in two forms - Show Answer

Q6) Which of the following is correct formula to calculate returns of listed security? Show Answer

Q7) If probability of occurrence is assigned, then the expected return would be: Show Answer

Q8) Standard deviation is a deviation from - Show Answer

Q9) Standard deviation is expressed - Show Answer

Q10) The market price of a bond depend on - Show Answer

Q11) Investment with lower standard deviation carries Show Answer

Q12) Which of the following is on the horizontal axis of the Security Market Line? Show Answer

Q13) Covariance is a measurement of - Show Answer

Q14) Expected worth is the - Show Answer

Q15) Positive Covariance indicates that - Show Answer

Q16) Liquidity risk: Show Answer

Q17) Correlation Coefficient supplements and upgrades the - Show Answer

Q18) Consider a graph with standard deviation on the horizontal axis and expected return on the vertical axis. The line that connects the risk-free rate and the optimal risky portfolio is called: Show Answer

Q19) A risk associated with project and way considered by well diversified stockholder is classified as - Show Answer

Q20) Which of the following is correct formula to Correlation Coefficient? Show Answer

Q21) An attempt to make correction by adjusting historical beta to make it closer to an average beta is classified as - Show Answer

Q22) The efficient frontier - Show Answer

Q23) A corporate bond is a corporation's write undertaking that it will refund a specific amount of money plus - Show Answer

Q24) The common stock of a company must provide a higher expected return than the debt of the same company because Show Answer

Q25) As per 'Efficient Frontier' concept, if the security falls below the frontier - Show Answer

Q26) Capital Market Line is firstly initiated by: Show Answer

Q27) For an all-equity financed firm, a project whose expected rate of return plots should be rejected. Show Answer

Q28) Portfolio risk will be when two components of a portfolio stand perfectly positively correlated and will be when the same are perfectly negatively correlated. Show Answer

Q29) A main difference among real and nominal interest proceeds is that - Show Answer

Q30) The beta of the market is: Show Answer

Q31) Non-systematic risk is furthermore identified as - Show Answer

Q32) Beta is measure of - Show Answer

Q33) Investors should be agreeing to invest in riskier investments merely - Show Answer

Q34) Negative covariance indicates that - Show Answer

Q35) Holding two securities as an alternative of will not decrease hazard occupied by an investor if two securities are: Show Answer

Q36) A beta of 1.15 for a security would indicate that - Show Answer

Q37) Choice of correlation coefficient is between - Show Answer

Q38) A beta of 0.8 for a security would indicate that - Show Answer

Q39) Markowitz model presumed generally investors are - Show Answer

Q40) Zero covariance indicate that - Show Answer

Q41) Which of the following is correct formula to calculate beta (P) Rs. Show Answer

Q42) Capital Asset Pricing Model (CAPM) provides the link between - Show Answer

Q43) Which of the following investment advice will you provide to your client investor if CAPM Return < Expected return? Show Answer

Q44) As per 'Efficient Frontier' concept, if the security falls on frontier - Show Answer

Q45) Capital market line (CML) represents - I. Portfolios that optimally combine risk and return. II. The trade-off between risk and return for efficient portfolios. III. Covariance value in order to help comparison with corresponding values for the other pairs of securities constituting the portfolio. IV. The relationship between return and risk. Select the correct answer from the options given below. Show Answer

Q46) Which of the following investment advice will you provide to your client investor if CAPM Return > Expected return? Show Answer

Q47) If expected return is more than required return as per CAPM, then - Show Answer

Q48) The Security Market Line (SML) is a line drawn on a chart that serves as a graphical representation of the - Show Answer

Q49) The opportunity line is the: Show Answer

Q50) The Security Market Line (SML) is a line drawn on a chart that serves as a graphical representation of the Capital Asset Pricing Model, which shows different levels of ............ of various marketable securities plotted against the expected return. Show Answer

Q51) Market risk is also called: Show Answer

Q52) As per 'Efficient Frontier' concept, if the security falls above the frontier - Show Answer

Q53) Which of the following investment advice will you provide to your client investor if CAPM Return = Expected return? Show Answer

Q54) If required return as per CAPM is more than expected return, then - Show Answer

Q55) If an asset's expected return plots above the security market line, the asset is: Show Answer

Q56) The X-axis of the Security Market Line (SML) chart represents - Show Answer

Q57) The market risk premium is the slope of the: Show Answer

Q58) ................................ is also called a Characteristic Line. Show Answer

Q59) According to the CAPM, overpriced securities have: Show Answer

Q60) Consider following two statements: P. Beta coefficient is the measure of risk in CML. Q. Standard deviation determines the risk factors of the SML. Select correct answer from the options given below. Show Answer

Q61) The beta of the risk-free asset is: Show Answer

Q62) Security Market Line graphs defines - Show Answer

Q63) Capital asset pricing theory asserts that portfolio returns are best explained by: Show Answer

Q64) According to security market line, the expected return of any security is a function of: Show Answer

Q65) According to the capital market line, the expected return of any efficient portfolio is a function of: Show Answer

Q66) Which of the following statements about the market portfolio is false? Show Answer

Q67) Alpha is an indicator of the extent to which the - Show Answer

Q68) Alpha is denoted by symbol - Show Answer

Q69) Negative alpha value indicates that - Show Answer

Q70) Systematic Risk is - Show Answer

Q71) Positive alpha value indicates that - Show Answer

Q72) Systematic risk = Rs. Show Answer

Q73) ................................is also called specific risk. Show Answer

Q74) Which of the following is objective of Fundamental Approach to valuation of securities? Show Answer

Q75) Efficient-market hypothesis (EMH) was developed by- Show Answer

Q76) The advocates of Efficient-market hypothesis (EMH) theory contend that securities markets are - Show Answer

Q77) The EMH was developed by Professor Eugene Fama who argued that - Show Answer

Q78) Dow Jones theory was formulated by - Show Answer

Q79) According to Dow Jones theory, share prices demonstrate a pattern over 4 to 5 yeaRs. These patterns can be divided into three distinct cyclical trends - Show Answer

Q80) ................................suggests that stock price changes have the same distribution and are independent of each other, so the past movement or trend of a stock price or market cannot be used to predict its future movement. Show Answer

Q81) According to the Sharpe single index model the return for each security can be given by the - Show Answer

Q82) Covariance between Security X and Security Y is zero. This indicate that - Show Answer

Q83) Covariance between Security X and Security Y is + 45.8. This indicate that - Show Answer

Q84) Covariance between Security X and security Y is - 42. This indicate that - Show Answer

Q85) Covariance between Security P & Q is 48.91. Standard deviation of Security P is 5.36 while that of Security Q is 9.13. Compute value of correlation coefficient. Show Answer

Q86) An investor has invested in Security A & B in the ratio of 70:30. Standard deviation of Security A & B is 4.47 & 7.62 respectively. Covariance AB is 34. Correlation Coefficient of Security A & B is 1. Risk of portfolio is - Show Answer

Q87) Suppose risk free rate is 496 and k is 2.596. If an investor takes 1396 risk, he can expect a return of - Show Answer

Q88) Yogesh invest Rs. 1,25,000 in shares of BABA Ltd., a listed company. At the end of period investment value is Rs. 1,32,000. He gets dividend of Rs. 8,000. Return from investment is - Show Answer

Q89) Actual return of GK Ltd. for last four year is 20%, 14%, 17% and 18%. GK Ltd. has beta of 1.15. Return on market portfolio is 15%. Risk free rate of return is 6%. Compute Alpha value and decide whether to hold, buy or to sell the security? Show Answer

Q90) Return of last 5 years of listed security is 16.2%, 19.8%, 18%, 15% & 21%. Five years ago price of the security was 120 per share. What is its average return? Show Answer

Q91) Return of last 5 years of listed security is 16.2%, 19.8%, 18%, 15% & 21%. Five years ago price of the security was 120 per share. What is its holding period returns. Show Answer

Q92) Dividend for last 4 years of Tara Ltd. was Rs. 7, Rs. 5, 12.8 & Rs. 10 and market price was Rs. 120, Rs. 80, Rs. 130 & Rs. 150 respectively. What is the average return of last 3 years considering capital gain and dividend? Show Answer

Q93) Given the probability of 0.1,0.4,0.3 & 0.2 estimated returns of the security are 36%, 26%, 20% & 15% respectively. Risk free rate is 6% and cost of capital is 13%. Total risk of security is - Show Answer

Q94) Given the probability of 0.05, 0.20, 0.50, 0.20, 0.05 estimated returns of Security A are 14%, 20%, 27%, 34% & 40% respectively. For same probability estimated returns of Security B are 10%, 20%, 28%, 36% & 46% respectively. Which security you will choose for investment and why? Show Answer

Q95) Raman has made investment in two securities in ratio of 60:40. Following data is available for these two securities: Standard Deviation: Security A: 6.04%; Security B: 7.62%. Covariance between Security A & B is +45.80. Raman's portfolio risk is - Show Answer

Q96) Security A has return of 12% with 10% risk (o). Security B has return of 18% with 15% risk (a). If investor makes investment in two securities in weight of 20:80 his return for portfolio is 16.80% with 13.12% risk (a). If investor makes investment in two securities in weight of 14.29 : 85.71 his return for portfolio is 17.14% with 13.63% risk (a). Which of the following strategy will be adopted by the rational investor? Show Answer

Q97) Standard deviation of Market is 8.4%. Covariance of Security X with Market is 35.7. Risk free rate is 7% while GDP of the economy is growing at 8%. What is market sensitivity index of Security X? Show Answer

Q98) Standard deviation of Security X and Market are 12% & 16% respectively. Covariance of Security X with Market is +96. What is market sensitivity index of Security X? Show Answer

Q99) Beta factor of Security Z is 0.506. Market risk is 8.4%. Correlation coefficient for Security Z and Market is 0.3965. What is the standard deviation of security Z's. Show Answer

Q100) Beta factor of Security Z is 0.506. Market risk is 8.4%. Correlation coefficient for Security Z and Market is 0.3965. Covariance between Security Z and Market is - Show Answer

Q101) Return on XM Ltd. shares has a standard deviation of 23%, as against the standard deviation of the market at 19%. Correlation co-efficient between market and stock of XM Ltd. is 0.8. Compute the systematic risk of XM Ltd.'s shares. Show Answer

Q102) Return on Lucky Ltd. shares has a standard deviation of 20%, as against the standard deviation of the market at 15%. Correlation co-efficient between market and stock of XM Ltd. is 0.9. Compute the unsystematic risk of Lucky Ltd.'s shares. Show Answer

Q103) ABC Ltd beta is 1.45. Rate of market return is 16%. Rate of return on government securities is 8%. What is the expected return as per Capital Asset Pricing Model? If the risk premium on the market goes up by 2.5% points, what would be revised expected return on this stock? Show Answer

Q104) A financial consultant has gathered following facts for H Ltd. Systematic risk of the firm is 1.4. 182 days Treasury bill yield is 8%; Expected yield on market portfolio is 13%. Calculate expected return based on capital asset pricing model (CAPM). Show Answer

Q105) An investor is seeking the price to pay for a security, whose standard deviation is 3%. The correlation coefficient for the security with the market is 0.8 and the market standard deviation is 2.2%. The return from government security is 5.2% and from the market portfolio is 9.8%. The investor knows that, by calculating the required return, he can then determine the price to pay for security. What is the required return on the security? Show Answer

Q106) Calculate the required return on the security from the following information: Standard deviation 2.5%; Market standard deviation 2.0%; Risk free rate of return 13%; Expected rate of return on 15%; market portfolio Correlation coefficient of 0.8; portfolio with the market. Show Answer

Q107) As an Investment Manager you are given the following information: Cement Ltd. 0.8; Steel Ltd. 0.7; Liquor Ltd. 0.5; GOI bonds 0.99. Risk free return may be taken at 14%. Expected rate of return on market portfolio is 26.33%. Average return on portfolio = Rs. Show Answer

Q108) A Ltd. has an expected return of 21 % and standard deviation of 39%. B Ltd. has an expected return of 23% and standard deviation of 37%. A Ltd. has beta of 0.76 and B Ltd. a beta of 1.14. Market return is 20%. A rational and risk averse investor shall make investment in - Show Answer

Q109) A Ltd. has an expected return of 22% and standard deviation of 40%. B Ltd. has an expected return of 24% and standard deviation of 38%. A Ltd. has beta of 0.86 and B Ltd. a beta of 1.24. The correlation of coefficient between return of A Ltd. and B Ltd. is 0.72. The standard deviation of market return is 20%. If you invest 30% in B Ltd. and 70% in A Ltd. what is your expected return and portfolio standard deviation? Show Answer

Q110) Expected return of Security A is 22% while that of Security B is 24%. Beta of Security A is 0.86 while that of Security B is 1.24. What is risk free rate? Show Answer

Q111) Expected return of Security A is 20% while that of Security B is 25%. Beta of Security A is 0.85 while that of Security B is 1.25. What is market rate of return? Show Answer

Q112) Following details are made available to you for a security. Beta (P) : 1.4; Risk free rate of return : 6.3%; Market rate of return : 13.2%. If the alpha value is + 1.8 what investment action would you suggest? Show Answer

Q113) Following details are made available to you for a security. Beta (p) : 1.4; Risk free rate of return : 6.3%; Market rate of return : 13.2%. If the alpha value is + 1.2 what investment action would you suggest? Show Answer

Q114) Following details are made available to you for a security. Beta (p) : 1.4; Risk free rate of return : 6.3%; Market rate of return : 13.2%. If the alpha value is zero what investment action would you suggest? Show Answer

Q115) Following details are made available to you for a security. Beta (p) : 1.4; Risk free rate of return : 6.3%; Market rate of return : 13.2%. If the alpha value is negative ie. - 2.82 what investment action would you suggest? Show Answer

Q116) Following details are gathered by the investor: Standard deviation 2.8%; Market standard deviation 2.3%; Risk free rate of return 8%; Expected rate of return on market 18%. Portfolio Correlation coefficient of portfolio with 0.8 the market required return on security is - Show Answer

Q117) Following details are made available to you for particular security: Beta of security : 0.5; Expected return on portfolio : 15%; Risk free rate of return : 0.06. In another security has an expected rate of return of 18%, what would be its beta? Show Answer

Q118) The market portfolio has a historically based expected return of 10% and a standard deviation of 4% during a period when risk-free assets yielded 3%. The 7% risk premium is thought to be constant through time. You are required to find market's return-risk trade-off. Show Answer

Q119) The market portfolio has a historically based expected return of 0.10 and a standard deviation of 0.04 during a period when risk-free assets yielded 0.03. The 0.07 risk premium is thought to be constant through time. Riskless investments may now be purchased to yield 0.09. A security has a standard deviation of 0.08 and a coefficient of correlation with the market portfolio is 0.85. The market portfolio is now expected to have a standard deviation of 0.04. You are required to find equilibrium required expected return of the security. Show Answer

Q120) Dhanpat, an investor, is seeking the price to pay for a security, whose standard deviation is 5%. The correlation coefficient for the security with the market is 0.75 and the market standard deviation is 4%. The return from risk-free securities is 6% and from the market portfolio is 11%. Dhanpat knows that only by calculating the required rate of return, he can determine the price to pay for the security. What is the required rate of return on the security? Show Answer

Q121) Security-A offers an expected rate of return of 14% with a standard deviation of 8%. Security-B offers an expected rate of return of 11 % with a standard deviation of 6%. If an investor wishes to construct a portfolio with a 12.8% expected return, what percentage of the portfolio will consist of Security-A & Security-B? Show Answer

Q122) Mohan has a portfolio of 6 securities, each with a market value of Rs. 10,000. The current beta ((3) of the portfolio is 1.30 and 3 of the riskiest security is 1.80, Mohan wishes to reduce his portfolio p to 1.15 by selling the riskiest security and replacing it with another security with a lower p. What must be the p of the replacement security? Show Answer

Q123) Return on Lucky Ltd.'s shares has a standard deviation of 22%, as against the standard deviation of the market at 12%. Correlation co-efficient between market and stock of Lucky Ltd. is 0.7%. Compute unsystematic risk of Lucky Ltd.'s shares. Show Answer

Q124) In a portfolio of the company, Rs. 2,00,000 have been invested in Asset-X which has an expected return of 8.5%, Rs. 2,80,000 in Asset-Y, which has an expected return of 10.2% and Rs. 3,20,000 in Asset-Z which has an expected return of 12%. What is the expected return for the portfolio? Show Answer

Q125) ……………… is defined as instruments issued by seekers of funds in the investment market to the providers of funds in lieu of funds. Show Answer

Q126) Securities include: Show Answer

Q127) Securities include “security receipt as defined in clause (zg) of Section 2 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.� Show Answer

Q128) .....................is the employment of funds on assets with the aim of earning income or capital appreciation Show Answer

Q129) Investment has the following attribute Show Answer

Q130) Investment and Speculation are one and the same thing Show Answer

Q131) ............. is an act of conducting a risky financial transaction, in the hope of substantial profit Show Answer

Q132) Time horizon of Specualtion is: Show Answer

Q133) Time horizon of Investment is: Show Answer

Q134) Risk in speculation is: Show Answer

Q135) Which of the following statement is not correct ? Show Answer

Q136) .....................is the game of chance in which return is dependent upon a particular event happening. Show Answer

Q137) Which of the following statement is not correct ? Show Answer

Q138) Risk in security analysis is generally associated with the possibility that the realized returns will be .....................than the returns that were expected Show Answer

Q139) Risk can be: Show Answer

Q140) Those forces that are uncontrollable, external and broad in their effect are called sources of ..................... Show Answer

Q141) Systematic risk is due to the influence of .............factors on an organization Show Answer

Q142) Systematic risk is a macro in nature as it affects a large number of organizations operating under a similar stream or same domain. Show Answer

Q143) Systematic risk can be planned by the organization. Show Answer

Q144) Type of systematic risk include: Show Answer

Q145) Economic, political and sociological changes are sources of ............. Show Answer

Q146) Unsystematic risk is due to the influence of ..............factors prevailing
within an organization
Show Answer

Q147) Type of systematic risk include: Show Answer

Q148) .....................originates from the sale and purchase of securities affected by business cycles, technological changes, etc. Show Answer

Q149) .....................arises due to change in the capital structure of the organization Show Answer

Q150) Total return for any security is defined as: Show Answer

Q151) .....................is the periodic cash flow (income), such as dividend or interest, generated by the investment. Show Answer

Q152) .....................is the price appreciation (or depreciation) divided by the
beginning price of the asset.
Show Answer

Q153) Which of the following formula is correct ? Show Answer

Q154) Holding period return is calculated on the basis of total returns from the asset or portfolio - i.e. income plus changes in value Show Answer

Q155) Mr. A invested Rs. 10,000 in shares of XYZ Company 10 years ago, and that his shares (including reinvested dividends) are currently worth Rs. 23,800. Using this information, calculate total investment return of Mr.A. Show Answer

Q156) What is the annualised return of Mr A based on the data of above question Rs. Show Answer

Q157) Mr. X invested Rs. 10,000 in shares of XYZ Company 20 years ago, and that his shares (including reinvested dividends) are currently worth Rs. 18,800. Using this information, calculate total investment return of Mr. A. Show Answer

Q158) Approach to valuation of security can be: Show Answer

Q159) The .....................suggests that every stock has an intrinsic value and the intrinsic value is more than the market value, the fundamentalists recommend buying of the security and vice versa. Show Answer

Q160) .....................(ECMH) is based on the assumption that in efficient capital markets prices of traded securities always fully reflect all publicly available information concerning those securities Show Answer

Q161) The .....................endeavours to predict future price levels of stocks by examining one or many series of past data from the market itself. Show Answer

Q162) Which of the following is correct ? Show Answer

Q163) .....................of the security is the denominating value. It is also called the nominal value. Show Answer

Q164) Money has a “time value.� Show Answer

Q165) The investor seeks to arrive at the real value or the intrinsic value of a security through the process of ..................... Show Answer

Q166) An investor is holding 1000 shares of Right Choice Ltd. The current rate of dividend paid by the company is Rs. 51- per share. The long term growth rate is expected to be 10% and the expected rate of return is19.62%. Find the current market price of the share. Show Answer

Q167) Fundamental analysis is a .....................level systematic process that analyse the overall external and internal environment of the company before placing a value on its shares Show Answer

Q168) The level./analysis at which the fundamental analysis is carried out before placing a value on its shares is: Show Answer

Q169) If the country has an improving GDP growth rate, controlled inflation and increasing investment activity then chances are that the valuation of securities shall be liberal. Show Answer

Q170) Industry level analysis focuses on: Show Answer

Q171) Which of the following is not the assumption of Technical analysis Rs. Show Answer

Q172) Dow Jones Theory was given by: Show Answer

Q173) According to Dow Jones Theory, share prices demonstrate a pattern over ..................... Show Answer

Q174) Share price demonstrate a pattern over a period of time as per Dow Jones Theory. Pattern can be: Show Answer

Q175) If the primary trend is upward, it is called as: Show Answer

Q176) In Dow theory, a .....................is the main direction in which the market is moving. Show Answer

Q177) As per Dow Jones Theory, a secondary trend moves in the same direction of the primary trend. Show Answer

Q178) As per Dow Jones Theory, minor trends are changes occurring every day within a narrow range and are not decisive of any major movement Show Answer

Q179) Technical Analysts use following type of tool for their analysis: Show Answer

Q180) A .....................is a style of chart chat is created by connecting a series of past prices together with a line. Show Answer

Q181) Which of the statement is correct ? Show Answer

Q182) A .....................indicates the bottom which the share values are unable to pierce. Show Answer

Q183) A .....................is that level after which the share price refuses to move up in repeated efforts. Show Answer

Q184) Double Top Formation represents a bearish development, signaling that the price is expected to ..................... Show Answer

Q185) Double bottom Formation represents a bearish development, signaling that the price is expected to ..................... Show Answer

Q186) Which of the following is the limitation of charts while analysing price of a share Rs. Show Answer

Q187) Which of the following is an example of technical price indicators Rs Show Answer

Q188) Advance Decline ratio is the ratio of the number of stocks that increase to the number of stocks that have declined. Show Answer

Q189) If the Advance Decline ratio is more than one, the trend is assumed to be ..................... Show Answer

Q190) A moving average is the average of share values of a set of consecutive number of ..................... Show Answer

Q191) If share value is below the moving average, it has scope for appreciation. Show Answer

Q192) According to the .....................share prices will rise and fall on the whims and fancies of manipulative individuals. As such, the movement in share values is absolutely random and there is no need to study the trends and movements prior to making investment decisions. Show Answer

Q193) Efficient market hypothesis accords supremacy to ..................... Show Answer

Q194) As per Efficient market hypothesis, a market is treated as efficient when ap known information is immediately discounted by all investors and reflected in share prices and the only price changes that occur are those resulting from new information Show Answer

Q195) Major requirement for an efficient securities market include: Show Answer

Q196) Which of the following is not the category of Efficient Capital Market Hypothesis (ECMH)Rs. Show Answer

Q197) .....................holds that the prices reflect all information that is known and contemplates that even the corporate officials cannot benefit from the inside information of the company Show Answer

Q198) The .....................is that part of the capital markets that deals with the issuance of new securities Show Answer

Q199) .....................market enables participants who held securities to adjust their holdings in response to changes in their assessment of risks and returns. Show Answer

Q200) Suppose one has bought a share of PQR Limited at Rs. 224 one year back. Over the last year PQR has distributed dividend of Rs. 8 per share. If the share of PQR sells at Rs. 250 today, what is the return in Rs.Rs. Show Answer

Q201) Based on the above question, what is the annual return in percentage terms Rs.. Show Answer

Q202) Based on the above question, if the share is trading at Rs. 220 today, what is the return earned Rs. Show Answer

Q203) Financial statement analysis helps in : Show Answer

Q204) The major techniques of financial statement analysis are: Show Answer

Q205) A price weighted index is an arithmetic mean of: Show Answer

Q206) Which type of market efficiency declares that current security prices totally reflect all information, equally public and private Rs. Show Answer

Q207) Equity does not include Show Answer

Q208) Dow Jones theory shows that share prices demonstrate a pattern over four to five years. Show Answer

Q209) Which of the following statement is not correct ? Show Answer

Q210) “A� buy one share of SBI at the beginning of the year for Rs. 500. He hold the stock for one year. Rs. 20 in dividends is collected at year-end, and the share is sold for Rs. 530. Calculate the return in Rs. Rs. Show Answer

Q211) Based on the above question, calculate the return in percentage terms Rs. Show Answer

Q212) .....................is the primary motivating force that drives investment Rs. Show Answer

Q213) One of the important property of a security that the investors are concerned with is the return that can be expected from holding a security. Show Answer

Q214) Which of the following statement is correct ? Show Answer

Q215) .....................is the art and science of making decision about investment mix. Show Answer

Q216) .....................is the policy matching investment to objectives, asset allocation and balancing risk against performance Show Answer

Q217) Who defined Portfolio Management as not a science, more an art and involves lots of judgment Rs. Show Answer

Q218) Tasks involved in investment process are Show Answer

Q219) Process that focuses on assessing the risk and return characteristics of the available investment alternatives Show Answer

Q220) Process that involves choosing the best possible portfolio from the set of feasible portfolios Show Answer

Q221) .....................is the combination of securities. Show Answer

Q222) .....................management thus refers to managing efficiently the investment in the securities by diversifying the investments across industry lines or market types. Show Answer

Q223) Portfolio theory was originally proposed by Show Answer

Q224) According to Markowitz, investor attitudes towards portfolio depend upon Show Answer

Q225) .....................and .....................are conceptually analogous in the sense that both of them reflect the degree of co-movements between two variables. Show Answer

Q226) The .....................the correlation of securities in the portfolio, the risky the portfolio will be. Show Answer

Q227) Portfolio risk is sensitive to Show Answer

Q228) Who developed the first modern portfolio analysis model Rs. Show Answer

Q229) A portfolio is efficient when it yields .....................return for a particular level of risk or .....................risk for a specified level of expected return. Show Answer

Q230) The Markowitz model makes the following assumptions regarding investor behaviour: Show Answer

Q231) Utility is: Show Answer

Q232) Risk penalty = Risk squared/Risk tolerance Show Answer

Q233) .....................is the variance of return of the portfolio Show Answer

Q234) The size of the risk tolerance number reflects the investor’s willingness to bear more risk for more return and Low (high) tolerance indicates low (high) willingness. Show Answer

Q235) If a portfolio’s expected return is 13 percent, variance of return (risk squared) is 225 percent, and the investor’s risk tolerance is 50, then the risk penalty is Show Answer

Q236) Based on the data of above question, calculate the utility Rs. Show Answer

Q237) Limitation of Markowitz Model include: Show Answer

Q238) The Capital Asset Pricing Model is developed by: Show Answer

Q239) Beta is the .....................risk in a portfolio Show Answer

Q240) .....................measures the relative risk associated with any individual portfolio as measured in relation to the risk of the market portfolio Show Answer

Q241) Beta is arrived by
Beta = Non-diversifiable risk of asset or portfolio /Risk of market portfolio
Show Answer

Q242) If Beta is more than 1, then: Show Answer

Q243) if Beta is less than one, then: Show Answer

Q244) A .....................describes the expected return for all assets and portfolios of assets, efficient or not. Show Answer

Q245) As per Security Market Line, difference between the expected return on any two assets can be related simply to their difference in ..................... Show Answer

Q246) The higher beta is for any security, the lower must be its expected return. Show Answer

Q247) The relationship between beta and expected return is linear. Show Answer

Q248) Beta is an index of ..................... Show Answer

Q249) CAPM is based on various assumptions except: Show Answer

Q250) In the CAPM, the expected rate of return is equal to the required rate of return because the market is in ..................... Show Answer

Q251) The risk premium can be calculated as : Show Answer

Q252) The risk premium can be calculated as Show Answer

Q253) The capital asset pricing model (CAPM) asserts that only a single number i.e. a security’s beta against the market is required to measure risk Show Answer

Q254) The major assumption of Sharpe's single-index model is that all the covariation of security returns can be explained by a Show Answer

Q255) . Below formula is as per:
R1 = a1 b1 Rm + e1
Where R1 = Expected return on a security
a1 = Alpha Coefficient
b1 = Beta Coefficient
Rm = Expected Return in market (an Index)
e = Error term with a mean of zero and a constant standard
deviation.
Show Answer

Q256) Single Index Model assumes that stocks move together only because of a common co-movement with the market. Show Answer

Q257) A multi-index model augments the single index model by incorporating these extra market factors as additional independent variables Show Answer

Q258) The .....................is a risk-adjusted measure of return that is often used to evaluate the performance of a portfolio. Show Answer

Q259) Economic Value Added (EVA) is a measurement tool that provides a clear picture of whether a business is creating or destroying shareholder wealth. Show Answer

Q260) .....................measures the firm’s ability to earn more than the true cost of capital. Show Answer

Q261) If a firm’s earnings exceed the true cost of capital it is creating wealth for its shareholders. Show Answer

Q262) Investor made a Rs. 20,000 capital investment in company. Company’s operating profit, after taxes, is Rs. 10,000. The opportunity cost of that investment is 10%. Calculate EVA. Show Answer

Q263) Dhanpat, an investor, is seeking the price to pay for a security, wh&se standard deviation is 5%. The correlation coefficient for the security with the market is 0.75 and the market standard deviation is 4%. The return from risk-free securities is 6% and from the market portfolio is 11 %. Dhanpat knows that only by calculating the required rate of return, he can determine the price to pay for the security. What is the required rate of return on the security Rs. Show Answer

Q264) The market portfolio has a historically based expected return of 0.10 and a standard deviation of 0.04 during a period when risk-free assets yielded 0.03. The 0.07 risk premium is thought to be constant through time. Riskless investments may now be purchased to yield 0.09. A security has a standard deviation of 0.08 and a co-efficient of correlation with the market portfolio is 0.85. The market portfolio is now expected to have a standard deviation of 0.04. You are required to find market's return-risk trade-off. Show Answer

Q265) Calculate security beta based on the above data Rs. Show Answer

Q266) Calculate equilibrium required expected return of the security based on the above dataRs Show Answer

Q267) The security market line(SML) graphs the expected relationship between: Show Answer

Q268) Modern portfolio theory assumes that most investors are: Show Answer

Q269) An individual who selects the investment that offers greater certainty when everything else is the same is known as a risk averse investor. Show Answer

Q270) Although derivatives can be used as speculative instruments, businesses most often use them to: Show Answer

Q271) Which of the following statements regarding risk averse investors are true Rs. Show Answer

Q272) Olivia is a risk-averse investor. Alex is a less risk-averse investor than Olivia. Therefore, Show Answer

Q273) This type of risk is avoidable through proper diversification: Show Answer

Q274) A statistical measure of the degree to which two variables (e.g., securities' returns) move together: Show Answer

Q275) An ''aggressive'1 common stock would have a "beta": Show Answer

Q276) The risk-free security has a beta equal to ....................., while the market portfolio's beta is equal to ..................... Show Answer

Q277) ............is a measure of "risk per unit of expected return." Show Answer

Q278) The greater the beta, the ................of the security involved Show Answer

Q279) Plaid Pants, Inc. common stock has a beta of 0.90. The expected return on the market is 10 percent, and the risk-free rate is 6 percent. According to the capital-asset pricing model (CAPM) and making use of the information above, the required return on Plaid Pants' common stock should be: Show Answer

Q280) Acme Dynamite Company common stock has a beta of 1.80. The expected return on the market is 10 percent, and the risk-free rate is 6 percent. According to the capital-asset pricing model (CAPM) and making use of the information above, the required return on common stock should be: Show Answer

Q281) The beta of the market portfolio is: Show Answer

Q282) The market risk premium is 15% and the risk-free rate is 5%. The beta of Asset D is 0.2. What is Asset D’s expected return under the CAPMRs. Show Answer

Q283) The beta of the risk-free asset is: Show Answer

Q284) Two alternative expected returns are compared with help of: Show Answer

Q285) Dollar return is divided by amount invested is used to calculate: Show Answer

Q286) Yield on bond is 7% and market required return is 14% then market risk premium is: Show Answer

Q287) Yield on bond is 10% and market required return is 18% then market risk premium is: Show Answer

Q288) Risk which affects firms with factors such as war, recessions, inflation and high interest rates is classified as: Show Answer

Q289) You invest 55% of your money in security A with a beta of 1.4 and the rest of your money in security B with a beta of 0.9. The beta of the resulting portfolio is: Show Answer

Q290) You invest 60% of your money in security A with a beta of 1.2 and the rest of your money in security B with a beta of 0.8. The beta of the resulting portfolio is: Show Answer

Q291) The risk-free rate is 4 percent. The expected market rate of return is 11 percent. If you expect CAT with a beta of 1.0 to offer a rate of return of 13 percent, you should Show Answer

Q292) The risk-free rate is 4 percent. The expected market rate of return is 11 percent. If you expect CAT with a beta of 1.0 to offer a rate of return of 10 percent, you should Show Answer

Q293) You invest $600 in a security with a beta of 1.2 and $400 in another security with a beta of 0.90. The beta of the resulting portfolio is Show Answer

Q294) In a well diversified portfolio Show Answer

Q295) The risk-free rate and the expected market rate of return are 5.6% and 12.5%, respectively. According to the capital asset pricing model (CAPM), the expected rate of return on a security with a beta of 1.25 is equal to Show Answer

Q296) The risk-free rate and the expected market rate of return are 6% and 12%, respectively. According to the capital asset pricing model (CAPM), the expected rate of return on security X with a beta of 1.2 is equal to: Show Answer

Q297) Assume that a Security is fairly priced and has an expected rate of return of 0.17. The market expected rate of return is 0.11 and the risk-free rate is 0.04. The beta of the stock is: Show Answer

Q298) You invest 50% of your money in security A with a beta of 1.6 and the rest of your money in security B with a beta of 0.7. The beta of the resulting portfolio is: Show Answer

Q299) You invest $200 in security A with a beta of 1.4 and $800 in security B with a beta of 0.3. The beta of the resulting portfolio is: Show Answer

Q300) You invest $200 in security A with a beta of 1.4 and $800 in security B with a beta of 0.3. The beta of the resulting portfolio is: Show Answer

Q301) In the context of the Capital Asset Pricing Model (CAPM) the relevant measure of risk is: Show Answer

Q302) No matter how large the number of stocks in the portfolio is, the risk that cannot be diversified away is the: Show Answer

Q303) CAPM stands for: Show Answer

Q304) A portfolio comprises two securities and the expected return on them is 12% and 16% respectively. Determine return of portfolio if first security constitutes 40% of total portfolioRs. Show Answer

Q305) Security A has a higher standard deviation of returns than Security B. We would expect that ......................
I. Security A would have a higher risk premium thain Security B
II. The likely range of returns for Security A in any given year would be higher than the likely range of returns for Security B
III. The Sharpe measure of A will be higher than the Sharpe measure of B.
Show Answer

Q306) Other things equal, diversification is most effective when Show Answer

Q307) Assume that CAPM is true and alive and the expected market return is 15% and the expected return on a stock with a beta of 2 is 22%. What is the risk-free rate Rs. Show Answer

Q308) Which of the following sayings illustrates the concept of diversification Rs. Show Answer

Q309) Consider the CAPM. The risk-free rate is 5% and the expected return on the market is 15%. What is the beta on a stock with an expected return of 17%Rs. Show Answer

Q310) You have a $50,000 portfolio consisting of Intel, GE and Con Edison. You put $20,000 in Intel, $12,000 in GE and the rest in Con Edison. Intel, GE and Con Edison have betas of 1.3, 1.0 and 0.8 respectively. What is your portfolio beta Rs. Show Answer

Q311) Security X has an expected rate of return of 13% and a beta of 1.15. The risk-free rate is 5% and the market expected rate of return is 15%. According to the capital asset pricing model, security X is ...................... Show Answer

Q312) Security X has an expected rate of return of 18% and a beta of 1.15. The risk-free rate is 5% and the market expected rate of return is 15%. According to the capital asset pricing model, security X is ...................... Show Answer

Q313) In the CAPM, the expected rate of return is equal to the required rate of return because the market is in equilibrium. Show Answer

Q314) Financial leverage may increase a corporation's risk because : Show Answer

Q315) Which of the following is an example of a depreciable asset Show Answer

Q316) ___ is an activity in which a person assumes high risks, often without regard for the safety of his invested principal, to achieve large capital gains. Show Answer

Q317) Speculation involves a higher level of risk and a more uncertain expectation of return Show Answer

Q318) Investment are risk free. Show Answer

Q319) ___ is the chance of loss due to variability of returns on an investment Show Answer

Q320) Which of the following is not a financial investment ? Show Answer

Q321) Performance of a company is intimately related to the overall economic environment of the country because demand for products and services of the company would under normal circumstances be directly related to growth of the country's economy. Show Answer

Q322) If the GDP growth rate slackens, inflation is out of control and investment activity is stagnant or declining, the investor or the analysis will expect the performance of industries to ___. Show Answer

Q323) An investor is holding 1000 shares of Right Choice Ltd. The current rate of dividend paid by the company is Rs 5 per share. The long-term growth rate is expected to be 10% and the expected rate of return is 19.62%. The current market price of the share Show Answer

Q324) A Ltd had just declared a dividend of Rs 10 per share. (Dividend ratio 100%) The ROE of the company is 20%, while EPS has been Rs 40 per share. If the investor required rate of return is 20%, then what should be the price per share ? Show Answer

Q325) The analysts are of view that company YZ Ltd equity share will give a return of 20% if the economy grows at a faster pace. If the economy stays at the same rate of growth as in present times, then the equity share is expected to give the return of 10% only. If the economic growth rate goes down the expected return of the share is only 5%. The analysts further estimate that the probability of good, status quo and recession of economy are : 50%, 30% & 20%. What is the average return of YZ Ltd equity share ? Show Answer

Q326) Risk return trade off implies ___. Show Answer

Q327) ___ is a specific risk factor. Show Answer

Q328) ___ is not a diversifiable or specific risk factor. Show Answer

Q329) The most important and common form of dividend is ___. Show Answer

Q330) ___ form of market efficiency status that current security prices fully reflect all information, both public and private. Show Answer

Q331) Which form of market efficiency states that current prices fully reflected the historical sequence of prices ? Show Answer

Q332) ___ form of market efficiency states that current prices fully reflect all publicly available information. Show Answer

Q333) Which form of market efficiency states that current security prices fully reflect all information, both public and private ? Show Answer

Q334) 'The market discounts everything'. This is a principle of ___. Show Answer

Q335) In ___ opening price, closing price, highest price and lowest price are shown. Show Answer

Q336) The ___ is the lower price level at which demand for shares gains momentum. Show Answer

Q337) The ___ is the upper price level at which supply for the shares gains momentum. Show Answer

Q338) ___ reflects resistance and support level in a downward moving market. Show Answer

Q339) ___ is identified as a narrow movement of the market either after an uptrend or a down trend. Show Answer

Q340) ___ theory has involved into a primarily technical approach to the stock market. Show Answer

Q341) The Elliott wave theory states that major moves take place in ___ successive steps. Show Answer

Q342) ___ analysis is done for investment purpose. Show Answer

Q343) Technical analysis is based on the principle, 'the prices move in ___.' Show Answer

Q344) Double tops and bottoms chart pattern is popular pattern signalling ___ of trend. Show Answer

Q345) The market is always considered as having ___ movements as per Dow Theory. Show Answer

Q346) One of the assumptions of Random Walk Theory is that, 'stock prices ___ all information quickly.' Show Answer

Q347) Random Walk Theory is also referred to as the, Show Answer

Q348) Which of the following is NOT an advantage of Portfolio Management ? Show Answer

Q349) A deposit of Rs 80000 in a bank on march 2020 will be worth Rs 88000 exactly after a year. What will be the realized return ? Show Answer

Q350) If purchase price of the share is Rs 120; dividend paid at the end of the year is Rs 12 and the market price at the end of the year is Rs 150. Calculate the realize returns. Show Answer

Q351) The probability of having the returns of 50%, -10% and 20% is 0.30, 0.30 and 0.40 respectively. Calculate the expected rate of return. Show Answer

Q352) Calculate the expected return of security A and security B from the below given information.
The probability of the occurrence of boom, normal and recession in the economy is 0.50, 0.30 and 0.20 respectively. The return from security A in boom, normal and recession is 40%, 15% and 10% and from Security B in boom, normal and recession are 30%, 20% and 15%. Show Answer

Q353) ___ of the return is the positive square root of the variance. Show Answer

Q354) Formula to calculate the systematic risk of any security is ___. Show Answer

Q355) The Modern Portfolio theory of Markowiz is NOT based on the following assumption : Show Answer

Q356) According to the CAPM, a security's expected (required) return is equal to the risk-free rate plus a premium : Show Answer

Q357) ___ is the last stage of portfolio management. Show Answer

Q358) If average return for portfolio X = 12%, Standard deviation =0.30, Risk-free rate of return = 8% and Beta = 1.25. Calculate sharp index. Show Answer

Q359) Theaverage return, standard deviation and beta of Stock K is 12%, 0.25 and 0.80 respectively. The average return, standard deviation and beta of stock M is 15%, 0.30 and 1.20 respectively. And the average return, standard deviation and beta stock P is 10%, 0.20 and 1.40 respectively. Rank these portfolio according to Sharpe's measure if the risk-free rate of return is 8%. Show Answer

Q360) According to ___ measure, it is the total risk of the fund that the investors are concerned about. So, the evaluates funds on the basis of reward per unit of total risk. Show Answer

Q361) ___ developed single index model. Show Answer

Q362) If standard deviation of a security = 0.025, standard deviation of market is 0.02 and correlation of coefficient is 0.9 then calculate the beta coefficient. Show Answer

Q363) ___ model is also called Mean variance model. Show Answer

Q364) ___ is an alternative to single index model. Show Answer