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Security Analysis & Portfolio MGT Practice Questions
Security Analysis & Portfolio MGT Practice Questions
Security Analysis & Portfolio MGT Practice Questions
(UNIT 1 TO 15)
A) Money
B) Funds
C) Savings
D) Capital
A) Liquidity
B) Variability
C) Savings
D) Risk
3) _____________ is the degree to which asset or security can be bought or sold in the
market without affecting the assets price.
A) Return
B) Safety
C) Liquidity
D) Risk
4) Some types of investments are eligible for tax rebates in income tax under
_________to________ of Income Tax Act, 2013 (amended)
A) True
B) False
C) Can’t Say
D) Partly True or False
SECURITY ANALYSIS & PF MGT – FINANCIAL MANAGEMENT PRACTICE QUESTIONS
(UNIT 1 TO 15)
7) _____________ is done for quick returns, usually for a shorter period of time & carries
greater degree of risk.
A) Gambling (Game of chance which may or may not give returns)
B) Investments
C) Speculation (Short period & Abnormal returns having higher risk)
D) Fixed Deposit
8) ________ facilitates trade of shares & are commonly used to invest in companies from
developing or emerging markets.
A) Global Depositary Receipts
B) Venturing Depositary Receipts
C) Investing Receipts
D) Global Investment Receipts
9) ________ refers to the periodic interest payments that are made by borrower to the
lender of the bond & usually its rate paid as the % of par value of bond.
A) Principal
B) Maturity
C) Discounting
D) Coupon
SECURITY ANALYSIS & PF MGT – FINANCIAL MANAGEMENT PRACTICE QUESTIONS
(UNIT 1 TO 15)
Derivatives is a financial instrument that is derived from other assets, value or based
on some conditions. This value derived is also called as Underlying.
Options are contracts that gives the owner the right, but not the obligation to buy or
sell an asset.
Call Option: Is a right but not an obligation to buy an asset.
Put Option: Is a right but not an obligation to sell an asset.
Price of the Underlying Asset: Expected to Increase – Buy Call Option & Sell Put
Option
Price of the Underlying Asset: Expected to Decrease – Sell Call Option & Buy Put
Option
(VERY VERY IMPORTANT)
SECURITY ANALYSIS & PF MGT – FINANCIAL MANAGEMENT PRACTICE QUESTIONS
(UNIT 1 TO 15)
Strike Price: Strike price is the price at which buyers and sellers decide to buy
or sell the underlying asset after a specified period.
Spot Price: Spot price is the current price of the underlying asset in the stock
market.
Swaps are contracts to exchange cash flows on or before a specified future date
based on the underlying value of currencies/Exchange rates.
SECURITY ANALYSIS & PF MGT – FINANCIAL MANAGEMENT PRACTICE QUESTIONS
(UNIT 1 TO 15)
11) A _________ is defined as an economic system of institutions & markets which foster
& channelize the savings for its most efficient use.
A) Financial Market
B) Financial System
C) Banking System
D) Securities Market
13) The risk which are prevalent in debt markets related to interest rate fluctuations is
known as _________.
14) __________ risk arises due to change in the capital structure of the organization.
A) Business
B) Operational
C) Financial
D) Country
SECURITY ANALYSIS & PF MGT – FINANCIAL MANAGEMENT PRACTICE QUESTIONS
(UNIT 1 TO 15)
15) Larger the variance for an expected rate of return, _________ the dispersion of
expected returns & _________ the risk or uncertainty.
A) greater, greater
B) lower, lower
C) greater, lower
D) lower, greater
16) _______________ risk relates to the variance of investment to the variance in market &
________ measures that risk of stock.
A) Systematic, Alpha
B) Unsystematic, Alpha
C) Systematic, Beta
D) Unsystematic, Beta
17) When Beta = 1, it indicates Average Risk Investment & Beta = 0 indicates No Risk
A) True
B) False
C) Can’t Say
D) Partly True or False
18) _________ is the method of raising funds from existing shareholders by offering
additional securities on a pre-emptive basis.
A) Public Offer
B) Right Issue
C) Private Placement
D) Offers for Sale
SECURITY ANALYSIS & PF MGT – FINANCIAL MANAGEMENT PRACTICE QUESTIONS
(UNIT 1 TO 15)
19) Through the _____ mechanism, the uncertainty regarding the extent of funds that can
be raised by a company is not of a concern.
A) Fixed Pricing
B) Variable Pricing
C) Book building Pricing
D) Initial Pricing
20) A return earned by a security over a period of time is known as __________ return.
A) Real
B) Historical
C) Variable
D) Expected
23) The _________ measures the fluctuations of the observations around the mean.
A) Variance
B) Median
C) Beta
D) Mode
SECURITY ANALYSIS & PF MGT – FINANCIAL MANAGEMENT PRACTICE QUESTIONS
(UNIT 1 TO 15)
24) The _______ measures the variability of observations around the mean.
A) Standard Deviation (It is square root of variance)
B) Standard Variance
C) Standard Variability
D) Standard Beta
26) Direct sale of securities through the use of Prospectus is which type of New Issue in
market?
A) Offers for Sale (Floatation of shares through Issue House)
B) Private Placement (Selling securities privately to group of Investors)
C) Public Offers
D) Right Issue (Additional securities to existing shareholders on pre-emptive basis)
27) An underwriter will subscribe to the shares of the company if at the end the
securities remain unsold of the company.
A) True
B) False
POINTS TO REMEMBER: The BSE developed Sensex in the year 1986. BSE is the first
stock exchange to be recognized by the Indian government under SCRA Act. The NSE
was set up by government of India under the recommendation of Pherwani Committee.
SECURITY ANALYSIS & PF MGT – FINANCIAL MANAGEMENT PRACTICE QUESTIONS
(UNIT 1 TO 15)
28) __________ is called the Barometer of Indian Capital Markets as it captures all the
booms & butts of the Indian equity market.
A) BSE Index
B) SP Index
C) SENSEX (Also known as BSE 30)
D) Nifty Index
30) The ______ is responsible for the registration, supervision & compliance of all market
intermediaries in respect of all segments of markets like equity, debt securities,
derivatives etc.
A) MIRSD (Market Intermediaries Regulation & Supervision Dept.)
B) MRD (Market Regulation Dept.) – (It supervises except derivatives)
C) CFD (Corporate Finance Dept.)
D) Economy Dept.
31) _________ is responsible for proceedings related to regulatory action & obtaining
redress for violations of securities laws & regulations against market participants.
A) MIRSD
B) Enforcement of Department
C) Legal Affairs Department
D) Corporate Finance Department
SECURITY ANALYSIS & PF MGT – FINANCIAL MANAGEMENT PRACTICE QUESTIONS
(UNIT 1 TO 15)
32) _________ involves analysing capital flows, interest cycle rates, currencies, indices
etc.
A) Industry Analysis
B) Market Analysis
C) Macroeconomic Analysis
D) All of the above
33) The Company Analysis & Valuation is done through tools like:
A) Ratio Analysis
B) Financial Statement Analysis
C) Annual Report
D) All of the above
35) ______ connects the closing price values with line segments.
A) Bar Chart
B) Line Chart
C) Point & Figure Chart (Ignores time entirely during its construction)
D) OHLC Chart (It plots high & low prices of trading period as a vertical line segment &
open & close prices with horizontal tick marks) – Open-high-low-close chart.
SECURITY ANALYSIS & PF MGT – FINANCIAL MANAGEMENT PRACTICE QUESTIONS
(UNIT 1 TO 15)
37) ________ is used to spot changes in the strength, direction, momentum, & duration of
a trend in a stock’s price.
A) Moving Average Convergence & Divergence (MACD)
B) Exponential Moving Average (EMA)
C) Relative Strength Index (RSI)
D) All of the above
38) A _________ is a long-term reversal pattern that shifts from a downward trend to an
upward trend for the stock prices.
A) Moving Line
B) Moving Bottom
C) Saucer Bottom
D) Relative Bottom
39) Present value of Dividends, Free Cash Flow is an example of Discounted Cash flow
techniques.
A) True
B) False
40) Price Earnings Ratio & Price Sales Ratio is an example of Relative Valuation
techniques.
A) True
B) False
SECURITY ANALYSIS & PF MGT – FINANCIAL MANAGEMENT PRACTICE QUESTIONS
(UNIT 1 TO 15)
42) WACC is the most appropriate discount rate to use when applying a _______
valuation.
A) OCF
B) FCFE
C) DDM
D) All of the above
43) Mr. Arjun received dividend of Rs.3, Rs.3.15 & Rs.5 in 1st,2nd & 3rd year respectively.
He sold of the stock at Rs. 90 at the end of the 3rd year. His required rate of return is
15%. Calculate Present value of stock. Calculate using Dividend Discount Model.
A) 70.3
B) 67.5
C) 85.3
D) 90.5
44) Value of dividend received in 7th year for a company is given as Rs.42. Required rate
of return is 10% & the growth rate gets changed in 8th year from 10% to 8%. Calculate the
value of dividend stream for year 8 using the formula for Infinite Period Dividend
Discount Model.
A) Rs.2500
B) Rs.2100
C) Rs.2300
D) Rs.3200
SECURITY ANALYSIS & PF MGT – FINANCIAL MANAGEMENT PRACTICE QUESTIONS
(UNIT 1 TO 15)
A) 20.67
B) 16.67
C) 18.67
D) 15.67
46) The total assets & total liabilities for Arjun Ltd. Is Rs.25,00,000 & Rs.22,00,000
respectively. The market price of the shares of company is Rs.150 & the no. of shares
are 15000. Calculate the Book value of share & also calculate the price to book value
using Ratio Analysis.
A) Book Value = Rs.25,00,000 & Price to Book Value = Rs.7.5
B) Book Value = Rs.3,00,000 & Price to Book Value = Rs.20
C) Book Value = Rs.3,00,000 & Price to Book Value = Rs.7.5
D) Book Value = Rs.3,00,000 & Price to Book Value = Rs.20
47) You pay Rs. 900 for a bond having an annual coupon of Rs. 75. You sell the same at
Rs.1200 after 1 year. What is your rate of return?
A) 41.59%
B) 41.75%
C) 41.67%
D) 41%
SECURITY ANALYSIS & PF MGT – FINANCIAL MANAGEMENT PRACTICE QUESTIONS
(UNIT 1 TO 15)
48) Mr. Arjun purchased a bond at a price of Rs. 1000 with Rs. 100 as a coupon payment
& sold it at Rs. 1200. Calculate his Holding Period Return & Yield.
A) 1.30, 30%
B) 1.30, 35%
C) 1.45, 30%
D) 1.25, 35%
49) The rules which are correct for Bonds selling at Discount, Premium & Par Value are:
A) Coupon Rate < Current Yield < YTM for Bond selling at discount.
B) Coupon Rate > Current Yield > YTM for Bond selling at Premium
C) Coupon Rate = Current Yield = YTM for Bond selling at Par
D) All of the above
50) _______ is used by portfolio managers who deal with fixed portfolio designed to
match the current market scenario.
A) Passive Strategy
B) Active Strategy
C) Diversification Strategy
D) Security
52) _______ advises the client about good & bad decisions in an investment process but
reserves full right of client to take own decisions.
A) Non-Discretionary PMS
B) Discretionary PMS
C) Dilute PMS
D) Time PMS
53) _______ outlines how investors can construct portfolios to maximize expected return
based on the given level of market risk.
A) Modern Portfolio Theory (Harry Markowitz is the Father of Modern Portfolio Theory)
B) Traditional Theory
C) Rational Theory
D) Model Theory
55) _______ provides a conceptual framework for evaluating any investment decision
where capital is committed with a goal of producing future returns.
A) Capital Asset Cost Model
B) Capital Asset Pricing Model
C) WACC Model
D) Efficient Frontier Model
56) No rebalancing is done irrespective of what happens in the market in dynamic asset
allocation or buy & hold policy.
A) True
B) False
SECURITY ANALYSIS & PF MGT – FINANCIAL MANAGEMENT PRACTICE QUESTIONS
(UNIT 1 TO 15)
60) Calculate Sharpe Ratio for A & B to interpret the results using the below table:
63) If the portfolio has a return of 12% & beta of 1.4, & if the risk-free rate is 3%, then
what is the Treynor ratio?
A) 6.43
B) 6.34
C) 6.32
D) 6.48
65) ______ is issued at discount & repaid at a face value with no periodic interest.
A) Zero Coupon Bond
B) Convertible Bond
C) Non-Convertible Bond
D) Government Bond
SECURITY ANALYSIS & PF MGT – FINANCIAL MANAGEMENT PRACTICE QUESTIONS
(UNIT 1 TO 15)
66) ULIP stands for ________, which was launched in 1971 by UTI.
A) Unit Linked Insurance Plan
B) Unit Liked Insurance Plan
C) Unit Life Insurance Plan
D) Unit Lifestyle Insurance Plan
68) The ______ is more or less the hybrid of both strategic & tactical allocations.
A) Core-Bundle Asset Allocation
B) Core-Rocket Asset Allocation
C) Core-Satellite Asset Allocation
D) Core-Science Asset Allocation
71) Tax avoidance is done within the law by exploiting the laws to one’s advantage but
Tax Evasion is Illegal.
A) True
B) False
72) _________ are investments that allow & purport to allow a reduction in one’s income
tax liability.
A) Tax Avoidance
B) Tax Shelters
C) Tax Evasion
D) Tax Mechanism
75) _______ has the only-tax saving tool that has a stock market exposure.
A) ELSS
B) SCSS
C) ULIP
D) EPF
78) The _______ customers represent the upper segment in the retail business.
A) Influent
B) Affluent
C) Rich
D) Standard
81) The UTI was sole player in Mutual Fund Industry from 1963-1987, after that public
sector banks & financial institutions joined the year 1987.
A) True
B) False
SECURITY ANALYSIS & PF MGT – FINANCIAL MANAGEMENT PRACTICE QUESTIONS
(UNIT 1 TO 15)
83) Commercial Paper is a money market instrument issued normally for the period of
90 days.
A) True
B) False
84) A chart is a graphical representation of a series of prices over a set time frame.
A) True
B) False
The Capital Asset Pricing Model (CAPM) is a widely used financial model that
helps investors and analysts determine the expected return on an investment.
This case study explores the application of the CAPM model in the context of a
fictional investment scenario.
Imagine you are an investment analyst working for a financial firm. Your client is
considering investing in a new technology company, Arjun Tech Inc. The client
wants to assess the expected return on this investment using the CAPM model.
Risk-Free Rate (Rf): The current yield on a 10-year government bond is 3%.
Beta (β): After thorough analysis, Arjun Tech Inc. has been assigned a beta of 1.2.
Expected Market Return (Rm): Historical data suggests that the average return on
the market is around 8%.
2) If Arjun Tech Inc. has a beta as mentioned in the paragraph, what does this
indicate about the stock's volatility compared to the market?
3) Calculate the expected market risk premium & expected market return?
A) 5%
B) 8%
C) 2%
D) 10%
SECURITY ANALYSIS & PF MGT – FINANCIAL MANAGEMENT PRACTICE QUESTIONS
(UNIT 1 TO 15)
4) Calculate the expected return for Arjun Tech Inc. & current yield rate on 10-year
govt bond?
A) 10%
B) 9%
C) 15%
D) 3%
5) If the actual return on Arjun Tech Inc. turns out to be 12%, what does this imply
about the investment?
A) Overperformed
B) Because Actual return is 12% which is higher as compared to the Expected
return
C) Underperformed
D) Because Actual return is 12% which is lower as compared to the Expected
return
SECURITY ANALYSIS & PF MGT – FINANCIAL MANAGEMENT PRACTICE QUESTIONS
(UNIT 1 TO 15)
You are a financial analyst evaluating the equity stock of Arjun Corporation, a technology
company. You have collected relevant information to assess the company's valuation.
Let's explore this case and answer questions related to equity stock valuation. Price
Earnings Ratio is an equity valuation defined by the market share divided by annual
earnings per share. It is also known as a model named Earnings Multiplier. Also, it is
important to note that the pattern of time & the returns must be greater in order to
determine the present value of cash flows.
1) Calculate the dividend per share (DPS) for Arjun Corporation & also state the
dividend growth rate.
A) 5%
B) Rs.3.675
C) Rs.3.6755
D) 8%
2) Determine the required rate of return (discount rate) for Arjun Corporation using
the Capital Asset Pricing Model (CAPM) & also find the beta.
A) 5.6%
B) 1.2
C) 9.2%
D) 1.5
SECURITY ANALYSIS & PF MGT – FINANCIAL MANAGEMENT PRACTICE QUESTIONS
(UNIT 1 TO 15)
3) If the market price of Arjun Corporation's stock is Rs.50, calculate the Price-to-
Earnings (P/E) ratio & current EPS?
A) 14.29
B) Rs. 3.675
C) Rs. 3.50
D) 16.67
A) Equity Valuation
B) Debt Valuation
C) Known as Earnings Multiplier Model
D) Known as Debt Multiplier Model
5) As per the text, to determine the present value of cash flows we require:
A) Time Horizon
B) Greater Returns
C) Discounted Cash Flows
D) Value Horizon
SECURITY ANALYSIS & PF MGT – FINANCIAL MANAGEMENT PRACTICE QUESTIONS
(UNIT 1 TO 15)
You are a senior financial analyst at a global investment firm, and your team is
considering a strategic investment in the technology sector. The firm is particularly
interested in two companies, Usman Inc. and Warner. The goal is to assess the financial
health, growth potential, and risk factors associated with each company before making
an investment decision.
Usman Inc.:
Warner:
1) Calculate the Price-to-Earnings (P/E) ratio for Usman Inc. and Warner
2) Assess the risk associated with each company based on their beta values. How
might these beta values influence the investment decision?
A) Lower beta indicates lower risk; higher beta indicates higher risk.
B) Investors seeking stability may prefer Usman Inc.
C) Higher beta indicates higher risk; lower beta indicates lower risk.
D) Investors seeking stability may prefer Warner.
3) Evaluate the dividend-paying capability of each company. How might the dividend
yield influence the investment decision?
4) Considering all factors, which company would you recommend for investment
and why?
A) Usman Inc. due to its lower beta and consistent growth rate.
B) Warner due to its high beta & super yield dividend.
C) Both companies are equally attractive
D) It depends on the investor's risk tolerance and investment goals.
A) EPS
B) Beta
C) Current Market Price
D) Dividend Yield
SECURITY ANALYSIS & PF MGT – FINANCIAL MANAGEMENT PRACTICE QUESTIONS
(UNIT 1 TO 15)
Stock exchange is a place for buying and selling of shares in a secondary market.
Stock exchanges constitute a market for trading in the existing listed securities
and they also facilitate listing of new securities for trading. They also provide a
reasonable degree of safety and fair dealings to the investors. Stock exchanges
are perhaps the most crucial agents and facilitators of entrepreneurial progress.
After the industrial revolution, as the size of business enterprises grew, it was no
longer possible for proprietors or partnerships to raise colossal amount of money
required for undertaking large entrepreneurial ventures. Such huge requirement of
capital could only be met by the participation of a very large number of investors;
their numbers running in to hundreds, thousands and even millions, depending on
the size of business venture. A share represents the smallest recognized fraction
of ownership in a publicly held business. Each such fraction of ownership is
represented in the form of a certificate known as a share certificate. The breaking
up of total ownership of a business into small fragments, each fragment
represented by a share certificate, enables them to be easily bought and sold.
Some stock exchanges in India are voluntary non-profit making associations,
while some others are joint stock companies limited by shares. The government
is now moving towards demutualization of all the stock exchanges.
Demutualization would mean that the ownership and Management of the stock
exchanges would be separated. It is decided that the stock exchanges will now
be joint stock companies. In NSE, this has already been done and BSE is
expected to follow suit shortly. The BSE is likely to make ownership public by
issue of shares, which can be listed and traded.
1) Stock exchange is a place for ______ and _______ of shares in a secondary market.
A) Buying
B) Selling
C) Marketing
D) Advertising
A) Safety
B) Profit
C) Fair
D) Balance
SECURITY ANALYSIS & PF MGT – FINANCIAL MANAGEMENT PRACTICE QUESTIONS
(UNIT 1 TO 15)
3) Stock exchanges are perhaps the most crucial ________ and ___________of
entrepreneurial progress.
A) Seller
B) Mediator
C) Agents
D) Facilitators
A) Profit
B) Non-Profit
C) Joint Stock
D) Profit Sharing
A) Bank
B) Non-Banking Financial Institution
C) Demutualization
D) Stock Exchanges
THANKING-YOU