Section A 1 Mark Questions

1. Derived instruments are”

a. Common stock, Govt, bonds, mutual funds
b. Common stock, commercial papers, mutual funds
c. Options contract, forward & future contract
d. Options contract, forwards & future contract, Govt. bonds

2. _____________ is a process by which investment portfolios are tried to match the

performance of an index.
a. Active portfolio management
b. Passive portfolio management
c. Security revision
d. Benchmark index

3. The risk is the degree of _____________

a. Certainly about your expected return from an investment
b. Uncertainly about your expected return from an investment
c. Certainly about your total return from an investment
d. Uncertainly about your average return from an investment

4. Financial markets facilitate competition so that best price may be available to the investors.
This activity is known as:
a. Transfer price
b. Price discovery
c. Paralysis of analysis
d. Price movements

5. A ___________is one where dealers post bid rates (buy rates) and offer rates (ask rates)
which public investors can trade.
a. Dealers market
b. Auction market
c. OTC market
d. Primary market

6. Nifty is the stock market index for national stock exchange. S & P CNX nifty consist of.
a. 23 stocks
b. 30 stocks
c. 50 stocks
d. 100 stocks

7. The technical analysis focuses on:

a. Market activity – timing and volume of trade of the security
 b. Financial data of the issuer of the security
c. Future cash flows of the issuer and growth potential
d. Financial data and future cash flows

8. When a country‟s imports are more than its exports, it leads to ________
a. Current account surplus
b. Current account deficit
c. Capital account surplus
d. Capital account deficit

9. When the economy is expanding we opt for:

a. Technology. Biotech, semi-conductor stocks
b. Technology, banking, food and beverage stocks
c. Banking, FMCG stocks
d. FMCG and technology stocks

10. The assumption “The market discounts everything” denotes that at any given point of time
security‟s price incorporates.
a. Economic factors, fundamentals and market psychology
b. Economic factors and company‟s risk
c. Company‟s risk and industry life cycle
d. Market psychology and volumes

11. Inverse head and shoulder is a chart pattern that gives a single of reversal of _________.
a. Downward trend
b. Upward tend
c. Previous trend
d. Resistance level and support level

12. The study of stock price during a public announcement and after a public announcement is
known as
a. Auto correlation test
b. Filter rule
c. Event study
d. Market research

13. _________ is less volatile than ___________

a. Stock, bond
b. Bond, stock
c. Money market, bond
d. Money market, instrument stock
14. Current yield
a. Annual interest / current price
b. Annual interest / face value
c. Annual interest / Aug of current & market price
d. YTM

15 An efficient portfolio is one that offers

a. The highest expected return for a given amount of risk
b. The highest expected return for any lends or risk
c. The lowest risk for a given level of risk
d. a or c

16. If two securities have low correlation, the interactive risk will be
a. Large
b. Medium
c. Small
d. Zero

17. According to Markowitz, the trade-off facing the investor is:

a. Standard deviation and variance
b. Standard deviation and expected return
c. Variance and expected return
d. Covariance and expected return

18. Sharpe‟s single index model is based on single factor assumption. This factor is
a. Covariance
b. Correlation coefficient
c. Standard deviation
d. Market index

19. The two notions of systematic and unsystematic risk were introduced in CAPM.
Unsystematic risk is:
a. Market risk
b. Interest rate risk
c. Unique / Firm‟s specific risk
d. Total risk

20. Depository receipt is issued by a

a. Merchant banker
b. SEBI
c. Depository
d. RBI
 Section B 2 Mark Questions

1. In active management process, undervalued stocks are selected to _________

a. Sell
b. Buy
c. Hold
d. Investigate

2. In portfolio evaluation process. The security‟s performance is evaluated to determine.

a. The returns earned during a particular period by the security
b. The risk involved by holding a particular security
c. The risk-return characteristic of the security
d. The overall industry performance

3. Exon Ltd, a pharmaceutical company plans to raise Ra. 10 crore through public issue of
equity shares. It‟s initial public offer is made through:
a. Secondary market
b. Primary market
c. Derivative market
d. Primary market & secondary market

4. Financial leverage is the use of fixed cost source of financing. It includes:

a. Equity
b. Debt
c. Preference shares
d. Both debt and preferences

5. In which approach does the stock pickers firstly pick the security , then investigate the
industry and finally analysis the current economic conditions?
a. Top-down
b. Bottom-up
c. Hot-pick
d. Stock-pick

6. Under GAAP norms, the companies are allowed to use discretion with regard to revenue
recognition and treatment of extraordinary income and expenses. This aspect is usually
exploited to:
a. Stabilize the stock price by manipulating the earnings
b. Create artificial scarcity of the stocks
c. Act upon insider information
d. Trigger the stock price by manipulating the earnings.

7. If the closing price is higher than the opening price, the candlestick chart is shaded with:
 a. Red colour
b. Blue / Green colour
c. White colour
d. Black colour

8.Technical analsis develop „ buy and sell‟ signal based on: choose the odd answer.
a. Trends
b. Support and resistance level
c. Charts
d. Company rations

9. Head and shoulder is a _____________chart pattern that signals that the security is likely to
move against the previous trend.
a. Continuation
b. Reversal
c. Technical indicator
d. Sentiment indicator

10. Stock market investors shuns declining firm‟s security but welcome promising firm‟s
securities. It is known as
a. operational efficiency
b. Allocational efficiency
c. Informational efficiency
d. Random walk theory

11. If measure the tendency of its price to move up and down from its average
a. Standard deviation
b. Moving average
c. Covariance
d. Co-efficient of correlation
 Section C 4 Mark Questions

1 Match the following

1.Dow Theory a. Opening price > closing price
2. Red colour in candle stick b. Technical Indicator
3. Trend lasting for 1 day -3week c. Primary, Secondary & Minor
4. Series of data points d. Minor
1. 1a, 2c,3b,4d
2. 1c,2a,3d,4b
3. 1c, 2b,3a, 4d
4. 1a,2d, 3b, 4c
2 Match the following
1. Strong form of market efficient a. Reflect past price,volume
2. Weak form of market efficient b. Price reflect all available information
3. Semi strong form of market c. Public, private
efficiency
4. Zero NPV d. Stock price behave randomly
e. All public available information

a. 1b, 2a, 3e, 4c

b. 1c, 2a, 3e, 4b
c. 1c, 2e, 3a, 4d
d. 1a, 2b, 3e, 4d
3 Mr. Anupam plan to buy 13% 5 year bond that sell for Rs. 1036, which
represents 12% YTM. If interest is paid annually. What is the bond's
duration.
a. 3.89 years
b. 3.90 years
c. 3.99 years
d. 4.05 years
4 The returns of securities 1 and 2 under five possible states of nature are given
below:
State of nature Probability Return on security1 Return on security
2
1 0.10 -10% 5%
2 0.30 15% 12%
3 0.30 18% 19%
4 0.20 22% 15%
5 0.10 27% 12%
a. 22
b. 23
c. 25
 d. 26
5 a. Consider 3 securities X , Y , and Z with the following betas and standard
deviation of random error term.
X : β = 1.25 σϵ = 5.05%
Y : β = 0.90 σϵ = 4.95%
Z : β = 1.00 σϵ = 5.25%
The standard deviation of market return is 9 %
What is the total risk of X
a. .015202
b. .015206
c. .015306
d. .015302

b. Consider 3 securities X , Y , and Z with the following betas and standard

deviation of random error term.
X : β = 1.25 σϵ = 5.05%
Y : β = 0.90 σϵ = 4.95%
Z : β = 1.00 σϵ = 5.25%
The standard deviation of market return is 9 %
what is the total risk of Y
a. .01001
b. .00901
c. .00909
d. .01009

c. Consider 3 securities X , Y , and Z with the following betas and standard

deviation of random error term.
X : β = 1.25 σϵ = 5.05%
Y : β = 0.90 σϵ = 4.95%
Z : β = 1.00 σϵ = 5.25%
The standard deviation of market return is 9 %
what is the total risk of Z
a. .01086
b. .01068
c. .0101
d. .0090

d. Consider 3 securities X , Y , and Z with the following betas and standard

deviation of random error term.
X : β = 1.25 σϵ = 5.05%
 Y : β = 0.90 σϵ = 4.95%
Z : β = 1.00 σϵ = 5.25%
The standard deviation of market return is 9 %
What is the total unique risk ofX,Y,Z
a. .002550
b. .002450
c. .002750
d. .007750
6 Match the following
1. CAPM a. σi2 = bi2 σ2F + σϵi
2. APT b. ri = ai + bi F + ϵi
3.Single Factor Model c. Is far less restrictive in its
assumptions
4. Two Factor Model d.It considers only one factor(stock's
beta)
e. ri = ai +bi1F1+bi2F2
a. 1c,2d,3a,4b
b. 1d,2b,3a,4e
c. 1d,2c,3b,4e
d. 1c,2b,3d,4e
7 Match the following:
1. The CAPM a. Depository Receipt
2. Systematic Risk b. Risk Management Tool
3. Diversification c. Risk of an asset consist of systematic
and -- unsystematic risk
4. GDRs d. is due to market wide influence.
a. 1d, 2c, 3a,4b
b. 1c,2d,3b,4a
c. 1d, 2c,3b, 4a
d. 1c, 2d, 3a,4b
 Section A 1 Mark Questions

1-d 2-b 3-b 4-b 5-a 6-c 7-a 8-a 9-a 10-a
11-a 12-c 13-b 14-a 15-d 16-c 17-b 18-d 19-c 20-c

Section B 2 Mark Questions

1-b 2-c 3-a 4-d 5-b 6-a 7-b 8-d 9-b 10-b
11-a

Section C 4 Mark Questions

.1-2 2-b 3-c 4-d 5a-b, 6-c 7-b

5b-b
5c-a
5d-d