Security Analysis & Portfolio Management- 2

LIST OF ATTEMPTED QUESTIONS AND ANSWERS

Multiple Choice Single Answer
Question
A Portfolio means :-
Correct Answer
Combination of assets
Your Answer
Returns on investments

Select The Blank
Question
The margining system is future contract is based on ________ recommendations.
Correct Answer
J R verma committee
Your Answer
J R verma committee

True/False
Question
Fundamental analysis focuses on predicting the future price of a security and Technical analysis on estimating the intrinsic value of a security.
Correct Answer
False
Your Answer
True

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

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
Your Answer
The Two-Stage dividend discount

Multiple Choice Single Answer
Question
The objective of fundamental analysis for a security in a market is to identify either it is :-
Correct Answer
Under priced and over priced
Your Answer
Under priced and over priced

Multiple Choice Multiple Answer
Question
Return can be in the form of :-
Correct Answer
Dividends , Interests , Capital appreciation
Your Answer
Dividends , Interests

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

Multiple Choice Multiple Answer
Question
Which are the most popular types of orders placed through an online trading account?
Correct Answer
Limit orders , Market orders
Your Answer
Limit orders , Market orders

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 Single Answer
Question
What do you understand by the term Net asset value (NAV)?
Correct Answer
Market value of securities divided by the total units
Your Answer
Market value of securities divided by the total units

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
Your Answer
To identify trend changes at an early stage and maintain investment posture till the trend has reversed

Match The Following
Question
Correct Answer
Your Answer
Technical collaboration of Bharat Forge with SIFCO industries USA
1981
1981
Bharat Forge was incorporated at Mumbai
1961
1961
Shares of 100 each subdivided of Bharat forge
1971
1971
930000 bonus shares issued by Bharat Forge
1976
1976

Multiple Choice Multiple Answer
Question
What are the ways of measuring relative strength?
Correct Answer
Calculate the rates of return and classify securities that have earned superior historical returns , Calculating certain ratios will help in analyzing whether a security has relative strength
Your Answer
Calculate the rates of return and classify securities that have earned superior historical returns , Calculating certain ratios will help in analyzing whether a security has relative strength

Select The Blank
Question
All trades in the futures market are cash settled on a ________ basis.
Correct Answer
T+1
Your Answer
T+1

True/False
Question
The ratios between profits and investments are called rate of return measures.
Correct Answer
True
Your Answer
True

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

Multiple Choice Multiple Answer
Question
Active investment managers :-
Correct Answer
Do not believe that markets are efficient , Puts efforts to search mispriced securities in the market , Are relatively active traders in securities to acquire abnormal returns
Your Answer
Do not believe that markets are efficient , Puts efforts to search mispriced securities in the market , Are relatively active traders in securities to acquire abnormal returns

Match The Following
Question
Correct Answer
Your Answer
Turnover ratios
Help measure the efficiency of utilisation of assets
Help measure the efficiency of utilisation of assets
Debt Equity ratio
Debt / Equity
Equity / Debt
Quick assets
Highly liquid assets
Highly liquid assets
Average collection period
Similar to debtors turnover
Similar to debtors turnover

Multiple Choice Single Answer
Question
Mr.Rohan invests Rs.25,000/- today. The rate of interest is 6% compounded annually. What will be the value of his investment after 3 years?
Correct Answer
Rs. 29775/-
Your Answer
Rs. 29775/-

Multiple Choice Multiple Answer
Question
Equity analysts provides estimates of earnings and earnings growth for future, using historical data and :-
Correct Answer
Macro economic information that may impact future growth , Private information about the firm , Firm’s specific information and public information
Your Answer
Macro economic information that may impact future growth , Private information about the firm , Firm’s specific information and public information

Multiple Choice Single Answer
Question
Stock Exchanges are the part of :-
Correct Answer
Secondary market
Your Answer
Secondary market

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/-
Your Answer
Rs. 6083/-

Multiple Choice Single Answer
Question
What are the assumptions of the Dow theory?
Correct Answer
Majority of stocks follow the underlying trend of the market most of the time
Your Answer
Majority of stocks follow the underlying trend of the market most of the time

Multiple Choice Single Answer
Question
Mr. Shekhar invests Rs.50,000/- in a scheme of LIC, the rate of interest is 8% compounded annually. What will be the value of his investment after 5 years?
Correct Answer
Rs. 73466/-
Your Answer
Rs. 73466/-

Multiple Choice Single Answer
Question
In any Economy, bridge is created between savers and who need the funds by this system :-
Correct Answer
Financial
Your Answer
Financial

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 Multiple Answer
Question
The Two-Stage dividend discount model is based on the assumption of :-
Correct Answer
An initial phase where the growth is not a stable growth rate , A subsequent steady state of growth rate being stable and lasts n years , A stable growth phase lasts forever
Your Answer
An initial phase where the growth is not a stable growth rate , A subsequent steady state of growth rate being stable and lasts n years , A stable growth phase lasts forever

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
Bullish market

Select The Blank
Question
A security is said to be ________ if its current market price is over its intrinsic value.
Correct Answer
Over priced
Your Answer
Over priced

True/False
Question
European style options are more expensive than American style because they offer greater flexibility to the buyer.
Correct Answer
False
Your Answer
False

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

True/False
Question
If a rupee weakens against the dollars it has favourable impact for the exporters.
Correct Answer
True
Your Answer
True

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
________ ratio is the ratio of net profit to the sales.
Correct Answer
Net Profit Margin
Your Answer
Net Profit Margin

Multiple Choice Multiple Answer
Question
The growth rate in the initial phase is not constant but declines linearly over time to reach the stable growth rate in steady state is a phenomena of :-
Correct Answer
H- Model for valuing growth , H-Two stage model for growth , H-Model unlike the classic two stage model
Your Answer
H-Two stage model for growth , H-Model unlike the classic two stage model

True/False
Question
The Asset management company of the mutual fund must have 50% independent directors.
Correct Answer
True
Your Answer
True

True/False
Question
Prices of stocks usually move in trends.
Correct Answer
True
Your Answer
True

Select The Blank
Question
Debentures rated ________ are judged to offer sufficient safety of timely payment of interest and repayment of principal.
Correct Answer
“BBB”
Your Answer
“BBB”

True/False
Question
A segment is more attractive when there are actual or potential substitutes for the product.
Correct Answer
True
Your Answer
True

True/False
Question
The sideways trend is essentially a transitional one which separates the two major market movements.
Correct Answer
True
Your Answer
True

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
Your 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

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

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

Multiple Choice Single Answer
Question
In a perfectly efficient market all securities are correctly priced means there are no :-
Correct Answer
Under priced and over priced securities
Your Answer
High priced and low priced securities

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

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/-
Your Answer
Rs.14.693/-







LIST OF ATTEMPTED QUESTIONS AND ANSWERS
Select The Blank
Question Measures of ________ tells us what we can expect a typical or middle data
point of a distribution to be.
Correct Answer Central tendency
Your Answer Variance
Multiple Choice Single Answer
Question Capital expenditure -depreciation +change in working capital -(new debt
issued – debt repaid) =
Correct Answer Equity reinvested in business
Your Answer Equity reinvested in business
Multiple Choice Multiple Answer
Question What were the objectives for 2002-03 the chairman of Bharat forge had
emphasised on in the annual report for 2001 – 02
Correct Answer Maintain aggressive exports thrust , Increase shares of value added
products , Continue reducing costs
Your Answer Maintain aggressive exports thrust , Increase shares of value added
products , Continue reducing costs
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
Your Answer Highest sales
Multiple Choice Single Answer
Question In India futures on individual securities have been introduced by :-
Correct Answer BSE & NSE
Your Answer NSE
Multiple Choice Multiple Answer
Question The features of bond are :-
Correct Answer Collateral , Call provision , Sinking fund and protective covenants
Your Answer Collateral , Call provision , Sinking fund and protective covenants
Select The Blank
Question The compounded annual return of Kisan Vikas patra is ________.
Correct Answer 0.084
Your Answer 0.084
Select The Blank
Question ________ measures the profitability of operations without considering the
influence of financial structure and tax rate.
Correct Answer Earnings power
Your Answer Net profit margin
Select The Blank
Question The 6.________% tax saving bonds of government of India have a tenure of
5 years.
Correct Answer 5
Your Answer 5
Select The Blank
Question The govt allowed public sector banks and institutions in mutual funds in
________.
Correct Answer Early 90′s
Your Answer Early 90′s
Multiple Choice Multiple Answer
Question Which ratios are commonly used?
Correct Answer Interest coverage ratios , Debt service coverage ratios , Debt equity
ratio
Your Answer Debt equity ratio , Interest coverage ratios , Debt service coverage ratios
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/-
Your Answer Rs. 6083/-
Select The Blank
Question The ________ phase is characterized by resistance area and support level.
Correct Answer Transition
Your Answer Horizontal
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
Your Answer Default risk
Multiple Choice Single Answer
Question What do you understand by the term redemption price?
Correct Answer Price or NAV at which a scheme purchases its units
Your Answer Price or NAV at which a scheme purchases its units
True/False
Question Investment decisions can be viewed as an integrated process to which
security analysis makes its unique contribution.
Correct Answer True
Your Answer True
Select The Blank
Question Secondary reactions occurs because of ________ which arise in the market as
a result of over optimism and over pessimism.
Correct Answer Technical distortions
Your Answer Fundamental distortions
True/False
Question Five paisa.com is an example of on line trading portal.
Correct Answer True
Your Answer True
Multiple Choice Single Answer
Question What is the percentage of variation the market and industry influence account
for?
Correct Answer 2/3rd
Your Answer 75%
Match The Following
Question Correct Answer Your Answer
Price pattern Resistance level Secondary reaction
Primary trend Last between 1-2 years Last between 1-2 years
Intermediate trend Last between 3 weeks to as long as 6 months Last between 3 weeks to
as long as 6 months
Short term trend Last 1 to 3-4 weeks Last 1 to 3-4 weeks
Multiple Choice Multiple Answer
Question What are the features of short-term trends?
Correct Answer They last from 1 to 3 or 4 weeks , They interrupt the course of the
intermediate cycle , They are usually influenced by random news events
Your Answer They last from 1 to 3 or 4 weeks , They interrupt the course of the
intermediate cycle , They are usually influenced by random news events
True/False
Question With the use of diversification you can reduce the risk.
Correct Answer True
Your Answer True
True/False
Question Post office monthly schemes have a 10 year tenor.
Correct Answer False
Your Answer False
Multiple Choice Single Answer
Question Till 1990′s secular Indian economy’s inflation rate has been of what
percentage?
Correct Answer 0.07
Your Answer 0.07
Multiple Choice Single Answer
Question Mr.Rohan invests Rs.25,000/- today. The rate of interest is 6% compounded
annually. What will be the value of his investment after 3 years?
Correct Answer Rs. 29775/-
Your Answer Rs. 29775/-
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 Calling in a certain number of bonds by lot , Buying bonds in the open
market
True/False
Question A mutual fund is required to dispatch the dividend warrants to the unit
holders within thirty days of the declaration of dividend.
Correct Answer True
Your Answer True
True/False
Question Fixed assets turnover ratio measures the efficiency of utilisation of total
assets, fixed as well as current.
Correct Answer True
Your Answer True
Select The Blank
Question A pattern which does not result in reversal of a trend but reaffirmation of the
underlying trend is called ________.
Correct Answer Consolidation pattern
Your Answer Distribution pattern
True/False
Question The risk associated to get the required rate of return on the stock is measure
by market beta.
Correct Answer True
Your Answer False
Select The Blank
Question Acid test ratio is more stringent measure of liquidity compared to the
________.
Correct Answer Current ratio
Your Answer Current ratio
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
Your 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
True/False
Question Default is normally evaluated and indicated by the rating assigned to the debt
instruments by independent credit ratings agencies.
Correct Answer True
Your Answer True
True/False
Question In case of fixed income securities like debentures, you get the return in the
form of dividend.
Correct Answer False
Your Answer False
Multiple Choice Single Answer
Question What are the assumptions of the Dow theory?
Correct Answer Majority of stocks follow the underlying trend of the market most of
the time
Your Answer Majority of stocks follow the underlying trend of the market most of the
time
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
Your Answer Am forge industries , Kalyani Forge , EL Forge
Multiple Choice Single Answer
Question We can compare the price earning ratio of a market to its historical average
to make judgements about, whether market is :-
Correct Answer Under valued or over valued
Your Answer Under valued or over valued
Multiple Choice Single Answer
Question What is the rate of interest on the tax free bonds issue by the government?
Correct Answer 6.5%
Your Answer 6.5%
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
Your 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 , Displays the
correlation between the high and low prices
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
Your Answer 15 year instrument , Rate of interest is 8% , Partial withdrawal is
available from 7th year
Multiple Choice Single Answer
Question Investments could be made in retail government securities through :-
Correct Answer Primary dealers
Your Answer Primary dealers
Multiple Choice Multiple Answer
Question What were the Chairman’s comments during the speech in the Annual report
of the FY 2002-03?
Correct Answer Best year in the history of the company , 146% growth in exports ,
Highest pre and post tax profits
Your Answer Best year in the history of the company , 146% growth in exports ,
Highest pre and post tax profits
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
Your 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
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/-
Your Answer Rs.14.693/-
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
Your Answer Secured second largest customer in China , Appointed a Company
Secretary to act as compliance officer , New contracts won in passenger car components
Match The Following
Question Correct Answer Your Answer
Weak form model is also termed as Random walk model Efficient market hypothesis
Investors are rational Efficient market hypothesis Random walk model
Securities current prices fully reflect all historical information Weak form EMH Weak
form EMH
Framework on efficient capital markets, a review of theory and empirical work Fama
Strong form
True/False
Question Quick assets consist of current assets less inventories.
Correct Answer True
Your Answer True