Security Analysis & Portfolio Management

LIST OF ATTEMPTED QUESTIONS AND ANSWERS

Select The Blank
Question
________involves a simultaneous sale and repurchase agreement.
Correct Answer
Repos
Your Answer
Repos

Multiple Choice Multiple Answer
Question
The investor in bonds receives income from :-
Correct Answer
Interest payments at coupon rates , Capital gain/loss arising out of the sale of the bond , Redemption of the bond of the issuer at a contracted value
Your Answer
Capital gain/loss arising out of the sale of the bond , Redemption of the bond of the issuer at a contracted value , Interest payments at coupon rates

Select The Blank
Question
________ ratio is estimated by dividing the market value of a firm’s assets by the replacement cost of these assets.
Correct Answer
Market value to replacement cost ratio
Your Answer
Market value to replacement cost ratio

True/False
Question
Bearish actions come from a series of declining peaks and troughs.
Correct Answer
True
Your Answer
True

Select The Blank
Question
An option is a contract which gives the buyer ________ to buy or sell shares of the underlying security at a specific price on or before a specific date.
Correct Answer
Right but not obligation
Your Answer
Right but not obligation

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

True/False
Question
When we invest in only one asset we are not exposed to any specific or market risk.
Correct Answer
False
Your Answer
False

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

Multiple Choice Single Answer
Question
The growth period in the industry life cycle is defined as :-
Correct Answer
Period of rapid market acceptance and substantial profit improvement
Your Answer
Period of rapid market acceptance and substantial profit improvement

True/False
Question
A segment is unattractive if the buyers possess strong or growing bargaining powers.
Correct Answer
True
Your Answer
True

Select The Blank
Question
________ take long or short positions only with the intention of making profits by getting out of the market when conditions favor them.
Correct Answer
Speculators
Your Answer
Speculators

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

Multiple Choice Multiple Answer
Question
To measure the movement of stocks in the market which indices were constructed by Dow?
Correct Answer
Dow Jones industrial Average , Dow Jones Transportation Average
Your Answer
Dow Jones industrial Average , Dow Jones Transportation Average

Multiple Choice Multiple Answer
Question
What are the features of Kisan Vikas Patra?
Correct Answer
Term is for 8 years seven months , Provision of premature withdrawal , Interest rate is 8.4% compounded annually
Your Answer
Term is for 8 years seven months , Provision of premature withdrawal , Interest rate is 8.4% compounded annually

Select The Blank
Question
________ absorbs the excess demand or supply generated by hedgers and assume the risk of price fluctuations.
Correct Answer
Speculators
Your Answer
Speculators

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

True/False
Question
The price earning ratio can be estimated for the firms with negative earnings per share.
Correct Answer
False
Your Answer
False

Multiple Choice Single Answer
Question
What is Gross National Product ?
Correct Answer
Gross income generated from within the country
Your Answer
Gross income generated from within the country

Multiple Choice Multiple Answer
Question
Formula for calculation of portfolio variance requires :-
Correct Answer
Expected return on portfolio , Expected return on assets , Weight of asset in the portfolio
Your Answer
Expected return on portfolio , Expected return on assets , Weight of asset in the portfolio

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

Multiple Choice Single Answer
Question
What are sector specific funds?
Correct Answer
Scheme which invest in certain sectors
Your Answer
Scheme which invest in certain sectors

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

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
What are intermediate trends?
Correct Answer
They are counter-cyclical trends within the confines of a primary trend
Your Answer
They are counter-cyclical trends within the confines of a primary trend

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

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

Select The Blank
Question
When a debenture is sold to the general public a ________ is appointed.
Correct Answer
Trustee
Your Answer
Trustee

Multiple Choice Single Answer
Question
During the 1980′s rate of savings in India has hovered around what percentage?
Correct Answer
0.21
Your Answer
0.21

True/False
Question
PPF is a good retirement planning and tax saving vehicle.
Correct Answer
True
Your Answer
True

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
Financial assets can be classified as :-
Correct Answer
Marketable and non-marketable
Your Answer
Marketable and non-marketable

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 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

True/False
Question
Policies of the government and the attitude of the government towards the industry have a considerable influence on the industry.
Correct Answer
True
Your Answer
True

Multiple Choice Single Answer
Question
If the price of a share at the beginning of the year was Rs.100/-, no dividend received during the year and the price at the end is Rs.115/-. What is the rate of return?
Correct Answer
0.15
Your Answer
0.15

Multiple Choice Multiple Answer
Question
Characteristics of Preference shares are :-
Correct Answer
Carry a fixed rate of dividend , Dividend payable out of profit , Redemption in 7 to 12 years
Your Answer
Carry a fixed rate of dividend , Dividend payable out of profit , Redemption in 7 to 12 years

Select The Blank
Question
The compounded annual return of Kisan Vikas patra is ________.
Correct Answer
0.084
Your Answer
0.084

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

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

Select The Blank
Question
________ of companies may open at higher or lower price than the issue price.
Correct Answer
IPO’s
Your Answer
IPO’s

Match The Following
Question
Correct Answer
Your Answer
Future value of a series of cash flows occurring at the end of each period.
Future value of annuity
Future value of annuity
Value today of a stream of cash flows that occurs in future.
Present Value
Present Value
Value at a certain future date today of a stream of cash flows that occurs over a period of time.
Future Value
Future Value
Series of equal payments or receipts occurring at regular intervals of time.
Present value of annuity
Present value of annuity

Match The Following
Question
Correct Answer
Your Answer
Development of Dow’s principles
William Peter Hamilton
William Peter Hamilton
Breadth Indicator
Advance/decline line
Advance/decline line
Momentum indicator
MACD
MACD
Trend lines
Useful tool in technical analysis
Useful tool in technical analysis

True/False
Question
Post office monthly schemes have a 10 year tenor.
Correct Answer
False
Your Answer
False

Multiple Choice Single Answer
Question
The growth rate is used to forecast future revenues and earnings and are inputs in valuing :-
Correct Answer
Stable firms
Your Answer
Stable firms



LIST OF ATTEMPTED QUESTIONS AND ANSWERS

True/False
Question
When we invest in only one asset we are not exposed to any specific or market risk.
Correct Answer
False
Your Answer
False

True/False
Question
Bonds and Debentures represent long term debt instruments.
Correct Answer
False
Your Answer
False

Select The Blank
Question
________ deal in futures to offset a pre-existing risk.
Correct Answer
Hedger
Your Answer
Hedger

True/False
Question
A rise in interest rates will push the market prises of outstanding bonds where as a fall in interest rates will depress the market prices down.
Correct Answer
False
Your Answer
False

Multiple Choice Single Answer
Question
Mr. Suhas is expecting to receive Rs.1,00,000/- at the end of 7 years. He wanted to know what is the present value of this amount, if the rate of interest is 7% p.a ?
Correct Answer
Rs. 62,275/-
Your Answer
Rs. 62,275/-

Multiple Choice Multiple Answer
Question
The Gordon growth model is best suited for firms :-
Correct Answer
Growing at a rate equal to or lower that the growth in the economy , Which have well established dividend payout ratio policy , Whose earnings are steady and perpetual
Your Answer
Growing at a rate equal to or lower that the growth in the economy , Which have well established dividend payout ratio policy , Whose earnings are steady and perpetual

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

Multiple Choice Single Answer
Question
Co variance of asset with market portfolio 85 and variance of market portfolio is 100 then beta is :-
Correct Answer
0.0085
Your Answer
0.0085

Select The Blank
Question
The Dow theory states that there are simultaneously ________ movements in the stock market.
Correct Answer
3
Your Answer
3

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
Explain what are leverage ratios ?
Correct Answer
Help in assessing the risk arising using the debt capital , Debt equity ratio and interest coverage ratio and DSCR are important leverage ratios , Debt is riskier source of finance as it entails fixed outgo of periodic payments
Your Answer
Help in assessing the risk arising using the debt capital , Debt equity ratio and interest coverage ratio and DSCR are important leverage ratios , Debt is riskier source of finance as it entails fixed outgo of periodic payments

True/False
Question
Policies of the government and the attitude of the government towards the industry have a considerable influence on the industry.
Correct Answer
True
Your Answer
True

Multiple Choice Single Answer
Question
What is Bottom-Up approach also known as?
Correct Answer
Company-industry-economy approach
Your Answer
Company and industry approach

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
Consolidation pattern

Multiple Choice Single Answer
Question
If the price of a share at the beginning of the year was Rs.100/-, no dividend received during the year and the price at the end is Rs.115/-. What is the rate of return?
Correct Answer
0.15
Your Answer
0.15

Select The Blank
Question
An investor with a higher tolerance of risk should tilt his portfolio in favour of ________.
Correct Answer
Stocks
Your Answer
Stocks

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

Multiple Choice Single Answer
Question
An agreement to buy or sell a specified quantity of an asset at a certain future date or a certain price is know as :-
Correct Answer
Forward contract
Your Answer
Forward contract

Multiple Choice Single Answer
Question
What is a resistance level?
Correct Answer
A point where there is opposition to further price rise
Your Answer
A point where there is opposition to further price rise

Multiple Choice Single Answer
Question
When a firm can grow net profits by issuing equity, the expected growth rate in net profits is determined by :-
Correct Answer
Equity reinvestment rate X return on equity
Your Answer
Equity reinvestment rate X return on equity

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

Select The Blank
Question
________ is affected by the leverage decisions of the firm.
Correct Answer
Return on equity
Your Answer
Return on equity

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
________ ratio indicates the margin available after meeting the manufacturing expenses.
Correct Answer
Gross Profit margin
Your Answer
Gross Profit margin

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

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

True/False
Question
Following a decline, heavy volume with little price change is indicative of accumulation and is normally a bearish factor.
Correct Answer
False
Your Answer
False

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

Match The Following
Question
Correct Answer
Your Answer
Future value of a series of cash flows occurring at the end of each period.
Future value of annuity
Future value of annuity
Value today of a stream of cash flows that occurs in future.
Present Value
Present Value
Value at a certain future date today of a stream of cash flows that occurs over a period of time.
Future Value
Future Value
Series of equal payments or receipts occurring at regular intervals of time.
Present value of annuity
Present value of annuity

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 Single Answer
Question
As per the exhibit 18-1 for individual stock futures on NSE, the price steps in respect of all futures contract admitted to the dealings of the exchange shall be :-
Correct Answer
0.05
Your Answer
0.05

Multiple Choice Single Answer
Question
A security analysis is done :-
Correct Answer
For decision making for investments
Your Answer
For decision making for investments

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

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

Select The Blank
Question
S&P NSE 50 index is known as ________.
Correct Answer
NIFTY
Your Answer
NIFTY

Multiple Choice Multiple Answer
Question
What are the features of Kisan Vikas Patra?
Correct Answer
Term is for 8 years seven months , Provision of premature withdrawal , Interest rate is 8.4% compounded annually
Your Answer
Term is for 8 years seven months , Provision of premature withdrawal , Interest rate is 8.4% compounded annually

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
False

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
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/-

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

Multiple Choice Multiple Answer
Question
The computation of return on a bond involves considering :-
Correct Answer
The entire sequence of cash flows , The timing of cash flows , Calculating the internal rate of return
Your Answer
The entire sequence of cash flows , The timing of cash flows , Calculating the internal rate of return

Multiple Choice Single Answer
Question
What is the goal of the Dow theory?
Correct Answer
To determine changes in the primary or major movement in the market
Your Answer
To determine changes in the primary or major movement in the market

Multiple Choice Multiple Answer
Question
What are the features of Retail government securities (G-secs) ?
Correct Answer
Safest investment option available , Demat account is required for investment , Choice of tenure varies from less than 1 year to 30 years
Your Answer
Safest investment option available , Demat account is required for investment , Choice of tenure varies from less than 1 year to 30 years

Multiple Choice Single Answer
Question
A pledge of real assets as insurance against the non-payment of default by the buyer represents
Correct Answer
Collateral
Your Answer
Collateral

Multiple Choice Multiple Answer
Question
The investor in bonds receives income from :-
Correct Answer
Interest payments at coupon rates , Capital gain/loss arising out of the sale of the bond , Redemption of the bond of the issuer at a contracted value
Your Answer
Interest payments at coupon rates , Capital gain/loss arising out of the sale of the bond , Redemption of the bond of the issuer at a contracted value

Multiple Choice Multiple Answer
Question
What are the features of bank deposits?
Correct Answer
Interest is presently around 6% , Benefits under section 80 L , Banks offer cheque facility for investors making it convenient to withdraw
Your Answer
Interest is presently around 6% , Benefits under section 80 L , Banks offer cheque facility for investors making it convenient to withdraw



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