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Portfolio Management & Security Analysis

Mark 1 questions
Q-1 ---------- Is putting money at risk by betting on an uncertain outcome with the hope that you
might win money.
(a) Investment (b) Gambling
(c) Financing (d) Portfolio
ans. B
Q-2 ----------- is a method used to evaluate the worth of a security by studying the Financial data
of the issues
(a) Security nalysis (b) Fundamental analysis
(c) Performance nalysis (d) !one of bove
ns. B
Q-! IP" stands for #
(a) Internal Public "ffice (b) Initial Public "ffice
(c) Initial Public "ffer (d) Internal Police "ffice
ans. $
Q-" Primary market is one in which a borrower issues new securities in e%change for cash from an
(a) &rue (b) False
Q-# 'hich of the following are common errors in investment management.
(a)!ot (aving $learly )efined Investment Plan. (b)Investor "ften overdose
&hemselves "n Information.
(c)Both *B.
(d)!one *B.
ans. $
Q-$ 'hich of the following is the +uality of a smart investor re+uired.
(a)Smart Investor Invest $onsistency.
(b)Smart Investor re Important
(c)Smart Investors re ,motionally &ied &o &heir Investment Position.
(d)ll "f bove.
Q-% ----------- is the variability in a security-s returns resulting from fluctuations in the aggregate
(a) .arket /isk (b) Inflation risk
(c) $redit /isk (d) Intand rate risk
Q-& .oney .arket &ransactions can be e%ecuted directly or an intanmediary.
(a) &rue (b) False
Q-' "&$ stands for #
(a) "ffer &o &he $entre. (b) "ver &he counter.
(c) "ver &" $orporation. (d) !one "f bove.
Ans (
Q-1) ----------- re the short-term unsecured promissory notes issued by a company to raise short-
term cash.
(a) $) (b) $P
(c) &reasury bills (d) ll of bove
ans. B
Q-11 ----------- re financial investments that have no intrinsic value1 but drive their value from
something else.
(a) Bonds (b) $ommercial Bills
(c) )esiratives (d) Shares
ans. $
Q-12 group of security is known as #
(a) Investment (b) Portfolio
(c) Security (d) Gambling
ans (
Q-1! (ow many stocks are listed in .umbai stock e%change.
(a) 2333 (b) 4ess &han 2333
(c) .ore &han 2333 (d) 03333
ans. $
Q-1" ----------- re organi5ed markets for buying * selling securities which include stock1 bonds1
options1 futures.
(a) )esiratives (b) Sense%
(c) Stock ,%change (d) .arket
ans. $
Q-1# &he securing pattern of session * recovery is called the -----------

(a) ,%pansion (b) $ontraction $ycle
(c) Business $ycle (d) ,conomic $ycle
ans. $
Q-1$ ----------- Indicator tend to follow 7log8 economic performance
(a) $oincident (b) 4ogging
(c) 4eading (d) !one "f bove
ans. B
Q-1% ----------- nalysis is a method that is used to evaluate the worth of a security by analy5ing
the statistics that are generated by market activity1 such as past price of volume.
(a) ,conomic (b) Financial
(c) &echnical (d) !one "f bove
ans. $
Q-1& ----------- pattern is a distinct formation on a stock chart that creates a trading signal or a
sign of future price movements.
(a) Price $hart (b) $hart
(c) &echnical (d) !one "f bove
ans. B
Q-1' 9nder the weak formof ,.(1 technical analysis is useless.
(a) &rue (b) False
Q-2) ----------- is the annual rate of return that a fund holder will earn under the assumptions that
the bond is held to maturity * the invest payments are invested.
(a) :&. (b) !P;
(c) // (d)$:
Q-21 /eference shares are also called ----------- securities on they share the characteristics of bonds
and common share.
(a) (ybrid (b) Prior
(c) Primary (d) Secondary
Q-22 Po<)=/ is the formula for the calculation of present value of money in case of #
(a) >ero growth of dividend.
(b)$onstant growth of dividend
(c);aluable growth of dividend
(d)!one "f bove.
Q-2! which of the following theory analy5es how wealth can be optimally invested in portfolio-s
which are made up assets whose e%pected returns and risks are different .
(a) G.). Gordon-s approach (b).odigliani miller approach
(c) .arkowit5 .odel (d)&raditional &heory

ns. $
Q-2" which model relates return to a single factor.
(a) .akowit5 (b)Single Inde%
(c) .... pproach (d)&raditional
ns. B
Q-2# $P. stands for #
(a) $apital assets products method.
(b) capital assets pricing model.
(c) capitali5ation assets of product market.
(d)!one "f bove.
ns. B
Q-2$ $P. is a single period model is one of the advantage of $P..
(a) &rue (b) False
ans. B
Q-2% ----------- /isk can be measured by be using data.
(a) Specific (b) &echnical
(c) Systematic (d) Financial
ans. $
Q-2& ----------- Bonds give the bondholders an option to e%change each bond for a specified no. of
shares of common stock of the team.
(a) Preference (b) Irredeemable
(c) redeemable (d) $onvertible
ans. )

Q-2' ----------- /isk is the possibility that borrower repay debt ahead of schedule.
(a) 4I+uidity (b) Inflation
(c) Pre-Payment (d) Investment
ans. $
Q-!) &he regulatory agency which overseas the functioning of stock markets1 which is located in
.umbai is #
(a) !S, (b) BS,
(c) S,BI (d) "&$,I
ans. $
Q-!1 'hich of the following is not a common risk factor#
(a) .arket /isk (b) Promotional /isk
(c) Interest /ate /isk (d) Inflation /isk
ans. B
Q-!2 (ow .any stock are listed in "&$,I.
(a) @3 (b) A3
(c) B3 (d) @A
ans. B
Q-!! 'hich of the following chart gives more details than a regular line chart .
(a) 4ine (b) (istogram
(c) Pie (d) Bar
ans. )
Q-!" ----------- gives the no. of shares for which each bond may be e%change.
(a) .arket $onversion ;alue (b) $onversion /atio
(c) P=; /atio (d) B.,.P. /atio
ans. B
Q-!# &he Canuary effect studies documented evidence of higher mean return in Canuary as compared
to other month.
(a) &rue (b) False
ans A
Q-!$ &he issues promises to repay to the -------- principal at maturity date plus coupan interest over
some specified period of are
(a) Investor (b) &ender
(c) Both a * b (d) Borrower
ans. $
Q-!% ----------- is the e%cess of the bond over its conversion value .
(a) .arket $onversion (b) $onversion Premium
(c) $onversion )iscount (d) conversion /atio
ans. B
Q-!& 5ero coupan bond-s oration is different from its maturity .
(a) &rue (b) False
ans. B
Q-!' D!ot putting all your eggs in one baskedE means.
(a) Investment (b) Financing
(c) )iversification (d) !one of the above
ans. $
Q-") ----------- /epresents the trade off between risk * e%pected return faced by an investor when
forming this portfolio.
(a) ,fficient Set (b) ttainable Set
(c) ,fficient Frontier (d) /isk )iversification
ans. $
MA*k 2 questions
Q-"1 'hich of the following are assumptions of $P. #
(1) ssets are infinitely divisible
(2) &a%es * &ransactions costs are isselevant
(!) Information is freely * instantly available to all investors.
(") ll investors are assumed to follow the mean variance approach.
(a) 0161? . (b) 61?1@.
(c) 0161?1@ . (d) "nly 0.
ns. $
Q-"2 ----------- .anagement is the process of managing investment portfolios by attempting to
time the market while ------ management is the process of managing investment portfolios by trying
to match the performance of an inde%.
(a) ctive1Passive (b) Passive1positive
(c) Passive1ctive (d) )irect1Indirect
Q-"! In portfolio construction 1--------- 1----------* ---------- issues are addressed
(a) Selectivity1 ;ariability1 ,valuation.
(b) &iming1 Selectivity1)iversification.
(c) )iversification 1 Information1 Investment.
(d) Selectivity1 )iversification1 ,valuation.
ns. B
Q-"" ---------- re markets for short term 1 while -------- market are markets for long * high team
(a) Primary 1 Secondary.
(b) .oney 1 $apital.
(c) )irect 1 Indirect.
(d) "rgani5ed 1 9norgani5ed.
ns. B
(1) n investor who is saving for his teen-aged daughter-s college education would be less
likely to take large risk because #
(2) (e has a short time hori5on.
(a) Both statement and session.
(b) "nly 1 is true.
(c) "nly 2 is true.
(d) !either is correct.
Q-"$ Financial market can be divided into -------- and --------- market.
(a) Primary 1 Secondary.
(b) .oney 1 $apital.
(c) "rgani5ed 1"&$.
(d) !one "f bove.
ns. $
Q-"% --------.arket is one in which investor trade directly with each other while --------market is
one where dealers post bid rates * offer rates at which public investor can trade.
(a) Buy rates1 Sale rates.
(b) uction 1 )ealer.
(c) Primary 1 Secondary.
(d) .oney 1 $apital.
ns. B
Q-"& .atch the following#
Set A
71) It is a contract that gives the owner the right but not obligation to buy the underlying aisle
by a specified date at a specified price.
(2) It is a contract that gives the owner the right but not obligation to sell the assets at a specified
Set (
(1) $all option.
(2) Put option.
(a) 0-01 6-6. (b) 0-6 1 6-0
(c) 0-0 1 6-0. (d) 0-6 1 6-6.
Ans A
Q-"' &he two type of data analysis techni+ues that are available to assist investors to make better
investment decision are #
(a) Fundamental1 &echnical analysis.
(b) Financial 1 Fundamental analysis.
(c) ,conomic 1 Financial analysis.
(d) ,conomic 1 Fundamental analysis.
Q-#) --------------- account deficit occur when a country imports more goods * services than it
e%ports. -------- account deficit occurs when the investment made in the country by foreign is less
than the investment is foreign countries made by local players .
(a) $urrent 1 $apital.
(b) $apital 1 $urrent.
(c) B"P 1 )eficit.
(d) B"P1 G)P.
Q-#1 'hich of the following is correct#
(1) )efensive industries are those that sell goods that people consume irrespective of the state of
the economy1 such as good
(2) &he profitability of defensive industries is closely tied to a particular economic cycle
a. Both 0 * 6 are correct
b. "nly 0 is correct
c. "nly 6 is correct
d. Both are wrong
Ans (
Q-#2 'hich of the following is the short in the .arko'it5 portfolio selection.
a. &he problem of computational comple%ity
b. It is assumed that all the risk * return characteristics return with the return of other securities
c. Both a * b
d. !either a or b
ns. $
A?. &he value of shares may be calculates by#
a. )) model1 5ero growth1 constant growth model
b. Porter model1 bow model1 .. model
c. Both a * b
d. )ividend model1 investment model
ns .
A@. &he risks that a bondholder faces when investing in bonds are#
a. Interest rate1 default rate1 li+uidity risk
b. $urrent yield1 :&. risk
c. Both a * b are correct
d. !either is correct
AA. Portfolio management strategy can be dividend into HHHHHHHH * HHHHHH.
a. Positive1 negative
b. )irect1 incorrect
c. ctive1 passive
d. Single1 double
ns. $
A2. 'hich of the following are the 6 type of indicator of price I
a. 4eading * lagging
b. $up * handle
c. &echnical * fundamental
d. (ead * shoulder
0. ,.( presumes that all investors have to informed1 skilled * able to constantly analy5e the flow
of new information
6. &he maJority of common investors are not framed financial e%perts
a. Both are correct
b. "nly 0 is correct
c. "nly 6 is correct
d. !either is correct
0. &he Journey effect studies documented evidence of higher mean return in Canuary as compared to
other month
6. &he weekend effect study the holiday of the month effect that been well documented over tree
a. Both are correct
b. "nly 0 is correct
c. "nly 6 is correct
d. !either is correct
ns. B
AB. lthough it is a cornerstone of modern financial theory1 the ,.( is highly HHHHHHH * often
a. $omplicated1 easy
b. )isputed1 controversial
c. ,asy1 complicated
d. $onpoversial1 disputed
ns. )
0. .any people belive that the price of every stock has an optimum trading range.
6. !eglected firms seem to offer superior returns with surprisly regulated
a. Both are incorrect
b. "nly 0 is correct
c. "nly 6 is correct
d. Both are correct
ns. )
20. rrange the following steps involved in the investment process in a se+uential order.
0. Performing security analysis
6. Setting investment policy
?. Portfolio construction
@. Portfolio performance evaluation
A. Portfolio revision
a. 01 61 ?1 @1 A
b. 01 61 @1 A1 ?
c. 61 01 ?1 A1 @
d. 61 01 ?1 A1 @
ans. $
26. .atch the following I
Set A
0. Inflation risk
6. Interest rate risk
?. .arket risk
Set (
1 &he chance that the purchasing power of the invested rupees will decline
2 It is the variability in a security-s resulting from fluctuations in the aggregate market
! &he variability in a security-s return resulting from change in the level of interest rate
a. 0-01 6-61 ?-?
b. 0-61 6-?1 ?-0
c. 0-61 6-01 ?-?
d. 0-01 6-?1 ?-6
ans. )
2?. 'hich of the following abbreviation are correct#
0. !S, stands for national stock e%change
6. BS, stands for Bombay stock e%change
?. "&$,I stands for over the counter e%change of India
@. $) stands for commercial of deposits
a. "nly 01 61 @
b. ll are correct
c. ? is correct
d. neither is correct
ans. B
a. HHHHHHHHH indicator tend to precede the upward * downward movement of the business
cycle * can be used to predict the near term activity of the economy
b. HHHHHHHH indicator usually mirror the movements of the business cycle.
c. HHHHHHHH indicator are economic that change after the economy has already begun to follow
a particular pattern.
a. a-01 b-61 c-?
b. a-?1 b-61 c-0
c. a-61 b-01 c-?
d. a-61 b-?1 c-0
ans. B
2A. .atch the following I
0. )uring this stage rapid growth in demand occurs
6. )uring this stage the survivors from the pioneering stage are identifiable
?. )uring this stage1 growth begin to be modulate
0. .aturity
6. ,%pansion
?. Pioneering
a. 0-01 6-61 ?-?
b. 0-61 6-?1 ?-0
c. 0-01 6-?1 ?-0
d. 0-?1 6-61 ?-0
ans. )
22. State whether the statements are true or false#
0. &he moving average is a lagging indicator which is easy to construct * most widely used
6. (ead * Shoulder is a reversal chart pattern that to formed signals1 that the security is likely
to formed against the previous trends
?. &he market portfolio consists of all assets available to investors * each asset is held in
proportion to its market values
@. For an individual risky asset1 the relevant risk measure is the co-variance of its return on the
market portfolio
a. 01 61 ?
b. 01 ?1 @
c. 61 ?1 @
d. 61 ?1 @
ans. $
2F. .atch the following I
0. &he HHHHHHH of any asset is estimated by regression analysis
6. &he HHHHHHH can be estimated by the difference between the return on market inde% and the
return on treasury bills
?. &he HHHHHHH can be estimated by the current yield on risk-free assets such as &B
0. /isk free rate
6. .arket price of risk
?. Beta
a. 0-01 6-61 ?-?
b. 0-61 6-01 ?-?
c. 0-?1 6-01 ?-6
d. 0-?1 6-01 ?-6
ans. )
2G. I! a single factor model1 if the factor sensitivities of two securities are ? and A respectively1 and
if the various of the factor is 3.333A. 'hat is the co-variance between the two securitiesK
a. 3.33A
b. 3.33FA
c. 3.33F
d. 3.33GB
ans. B
2B. 'hich of the following abbreviation is not correct.
0. )/ stands for merican depository receipt
6. S,$ stands for stock e%change of commission
?. P& stands for average pricing theory
@. G!P stands gross net product
a. ll are correct
b. "nly are incorrect
c. "nly 0 * 6
d. "nly ? * @
ns. )
F3. 'hich of the following statement is true#
0. )/ are investment vehicles designed to allow 9S investors to invent in companies that are
not based in the "S
6. P& model is similar with $P. in that it is for less restrictive in its assumption
?. S.4 allows us to represent the risk and return characteristics of every asset in the market
@. callable initial time during which the bunch are not callable
a. 01 61 ?1 @
b. 01 ?1 @
c. 01 61 ?
d. 61 ?1 @
ans. B
F0. 'hat is the price of a 03L coupon1 63 year maturity bond with par value of /s.0333 paying
semi-annual coupon payments if the interest rate GL annuallyK
a. /s.0333
b. /s.00BF
c. /s.0BBB
d. /s.63BF
ns. B
F6. .atch the following#
0. .oney market
6. $apital market
?. Secondary market
@. Primary market
0. 'hen the original investors sell their security
6. It is one in which a borrower issues new securities in e%change for cash from an
?. It provide investor a place for parking surplus fund for short period of time
@. &hese are market in e+uity * long term debt
a. 0-01 6-?1 ?-61 @-@
b. 0-?1 6-@1 ?-61 @-@
c. 0-61 6-?1 ?-@1 @-0
d. 0-01 6-61 ?-@1 @-?
ans. B
F?. State which of statement is not correct.
0. Financial market can be divided as organi5ed market * "&$
6. .oney market are market for short-term high +uality debt securities
?. &he fall form of impose in initial public offer
@. &he no. of listed $o. in !S, are A3
a 01 61 ?
b 01 61 ?1 @
c !either
d 61 ?1 @
ans ,
F@. .atch the following I
0. !ikkei
6. $$ @3
?. F&S,-033
@. )"4"C"!,S
0. &he main inde% for the Paris stock market
6. &he main stock inde% of &okyo stock market
?. &he most widely used in 9S inde%
@. n inde% of 033 listed companies
a. 0-61 6-?1 ?-@1 @-0
b. 0-01 6-61 ?-?1 @-@
c. 0-?1 6-01 ?-@1 @-?
d. 0-01 6-?1 ?-61 @-@
ns. B
FA. 'hich of the following statement is correct in respect of risks in debt securities.
0. Price risk is the risk that bond prices crises that bond -ill decrease with an increase in
interest rate .
6. /einvestment risk is the uncertainty about future or target date portfolio value that
result from the need to reinvest bond coupon
?. )efault risk refers to the possibility of having the issue defaulting on the payment of
the bond
a. ll are correct
b. "nly 0 * ? are correct
c. "nly 6 is correct
d. ll are incorrect