Solution: C
6. Tata power is raising funds through a bond issuance to fund a new power
plant at Noida UP. They are issuing two year maturity, Zero coupon bond
with face value = 1000, yield = 4%. What price would you pay for this
Tata power zero coupon bond today?
a. 920
b. 924.56
c. 925.95
d. 960
Solution: B
Working: FV = 1000, N = 2, I =4%, find PV = 924.56
12. ___ is the oldest exchange in the country & also in ASIA.
a. BSE
b. NSE
c. MCX
d. CBOE
Solution: A
15. A 10% semi annual bond with YTM of 12% & 10 years to maturity has a
price equal to _______
a. 1051.65
b. 1159.88
c. 888.89
d. 885.30
Solution: D
Working: FV = 1000, N = 10 X 2, I = 12% / 2, pmt = 50, find PV = 885.30
17. Following are the closing quotes in Rs. of script in market for 10 days.
Day quote
1 145
2 143
3 148
4 150
5 151
6 152
7 155
8 154
9 153
10 149
Calculate standard deviation of the time series
a. 2.85
b. 7.05
c. 13.4
d. 3.66
Solution: D
20. The average PUT option exercise price of HLL is 370. Current share price
is Rs. 360. Premium is Rs.15/-. Intrinsic value of the PUT, ignoring
transaction cost is ___.
a. Nil
b. 5
c. 15
d. 10
Solution: D
21. Santosh has purchased 100 shares of X ltd stock at Rs.60/- with 50%
margin required & 35% maintenance margin required. If the stock drops
to Rs.40/-. How much money does he have to put up?
a. 0
b. 615
c. 400
d. 600
Solution: A
22. 100000, T bill is selling at 98000 today. It will mature in 60 days. The
annual yield is
a. 13.08
b. 13
c. 12.41
d. 13.25
Solution: C
Working I = [(fv/pv)-1] x 365/n
24. You are running a dividend yield fund for a leading Mutual Fund house.
The most recent dividend of all is fine business services common stock
was Rs. 2.35. The dividends are expected to grow at 4% indefinitely. If
you are looking at a 12% return how much will you be willing to pay for
one share of all is fine business services?
a. 24.79
b. 29.38
c. 29.79
d. 30.55
Solution: D
Working = 2.35(1.04) = 30.55
0.12 – 0.04
25. You are an owner of an apartment complex with 300 units each of which
can fetch Rs. 1000pm as rentals. The apartment complex has an average
occupancy rate of 75%. The expenses for maintaining, up keeping the
apartment comes to around 10 lacs per annum. Based on the concept of
capitalized earning approach & assuming that you require a capitalization
rate of 105 how much is the complex worth now?
a. 1.50 cr
b. 1.70 cr
c. 2 cr
d. None
Solution B
27. Exploiting price anomalies in the market to make riskless profit is know as
_________
a. Contango
b. Arbitrage
c. Hedging
d. None of the above
Solution B
29. The normal relationship between forwards & futures price and spot prices
is ______
a. Contango
b. Hedging
c. Arbitrage
d. None of the above
30. ____ Option can be exercised at expiry only but not before.
a. American option
b. European option
c. Indian option
d. None
Solution: B
34. Strategic options position of buying or selling both Calls & Puts on the
same underlying assets is _____
a. Put-Call Parity
b. Straddle
c. Protective Put
d. Naked Call
Solution: B
36. The excess of the market price of any option over its intrinsic value is
called the _______ of the option.
a. Time value
b. Intrinsic value
c. None
Solution: A
37. _______ is an option strategy that limits the values of a portfolio within
two bounds
a. Spread
b. Straddle
c. Protective put
d. Collar
Solution: D
38. ____ is an option strategy combining two or more Call options or two or
more Puts on the same stock with differing exercise prices or times to
maturity.
a. Spread
b. Straddle
c. Protective put
d. Collar
Solution: A
39. (A) Fundamental Analysis looks at matters like future earnings & dividends
to assess intrinsic value.
(B) Technical analysis involves a study of past prices & volumes to
determine the direction of price movement
a. Only A is true
b. Only B is true
c. Both A & B are true
d. Both A & B are false.
Solution: C
42. Spot value of Nifty is 2140; an investor buys a one month nifty 2157 call
option for a premium of Rs.7. The option is _____
a. In the money
b. At the money
c. Out of the money
d. None of the above
Solution: C
Call = S – (E +P)
= 2140 – 2164
= - 24; negative cash flow therefore out of the money.
45. a stock is currently selling at Rs. 70/-. The call option to buy the stock at
Rs. 65 is 9. What is the time value of the option?
a. 4
b. 5
c. 3
d. 2
Solution: A
P = IV + TV
TV = P – IV
= 9 – (70 – 65)
=4
46. A stock currently sells at 120, the put option to sell the stock sells at Rs.
134/- cost Rs18/-. The time value of the option is ___
a. 18
b. 4
c. 14
d. 12
Solution: B
47. Anand is bullish about the index. Spot nifty stands at 2200. He decides to
buy one 3 month nifty call option contract with a strike of 2260 at a
premium of Rs.15/- per call. Three months later, the index closes at 2295.
His payoff on the position is ____. (contract size = 100)
a. 4000
b. 9000
c. 2000
d. None of the above
Solution C
Working: Expiration price = 2295
Less Strike price = 2260
Option value = 35
Less premium = 15
20 x 100 =2000
48. Chetan is bullish about the index. Spot nifty stands at 2200. He decides to
buy one 3 months nifty call option contract with a strike of 2260 at Rs. 60
a call. 3 months later the index closes at 2240. His payoff on the position
is _____ .( contract size = 100)
a. -7000
b. -12000
c. -4000
d. -6000
Solution: D
Working: Expiration price = 2240
Less stike price = 2260
- 20
As there is a negative cash flow ie. Out of the money therefore will not exercise
and only loses the premium. = -60 X 100 = - 6000
49. _____ are new ordinary shares issued to existing shareholders in some
proportion to the number of existing shares held.
a. Preference shares
b. Rights issue
c. Bonus Issue
d. Warrants
Solution: C
50. Security X & Y in ratio of 70 :30, the expected rate of return with their
probability of occurrence is
Security X returns Probability Security y returns Probability
40% 10% 40% 40%
30% 20% 30% 30%
20% 30% 20% 20%
10% 40% 10% 10%
Calculate Average return of portfolio
a. 25
b. 23
c. 30
d. 20
Solution: B
52. Security ‘A’ has an average rate of return of 12% with standard deviation
of 3%. Return on risk free government security is 6%. Its risk adjusted
return is ___
a. 4.55
b. 4
c. 3
d. 2
Solution: D
Working = 12 – 6 = 2
3
56. The august call option exercise price of HLL is 370. The current share
price is 360. The premium is 15 rs. The intrinsic value of the call, ignoring
transaction cost is____.
a. 10
b. 5
c. Nil
d. 15
Solution: C
60. Bond of face value 1000, coupon = 10%, n = 5 years, makes half yearly
payment. The bond is priced at 1081.10. Calculate the YTM of the bond
a. 8
b. 9
c. 7
d. 10
Solution: A
61. You are a owner of a plot with 120 unit. Each fetch Rs.750pm rental.
Average occupancy rate is 80%. Expenditure for maintenance is 3lakhs
per annum. Use concept of capital earning approximately and assume that
you require a capitalization rate of 12%. How much is the complex worth.
a. 90 lakhs
b. 65 lakhs
c. 60 lakhs
d. 47 lakhs
Solution: D
Working: 120 x 750 x 12 x 0.8 = 864000 – 300000 = 564000/ 12% = 47 lakhs
62. Anil has two mortgage loans. Interest rate and other conditions remaining
same, repayment in 15 years & 30 years. Evaluate both EMI’s. Repayment
of loan in 15 years instead of 30 years will require?
a. Twice as large as 30 years loan payment
b. More than twice as large as 30 years loan repayment
c. Half the size of 30 years loan payment
d. Less than twice as large as the 30 years loan payment.
Solution: D
63. August Put option exercise price 370, current share price 360, premium
15. Calculate intrinsic value ignoring transaction cost.
a. Nil
b. 5
c. 10
d. 15
Solution: C
65. Shankar comes to you for advice. He has a large short term gains in ABC
ltd. He has heard rumours that they make the stock price tumble and is
concerned about losing his gains. Now due to his tax situation he does not
want to realize a taxable gain. Assume no transaction cost. What would
you advise?
a. Buy a Put option
b. Buy a call option
c. Sell a Put option
d. Sell a call option
Solution: A
67. Mrs. Patel works for post office. She deposits 1000 every birthday. Paid
interest 8% from age 20 until she retired. If she had 237941.22 at the
retirement age. Compute her retirement age?
a. 55
b. 58
c. 57
d. 59
Solution: B
Working: I = 8%, pmt = 1000, FV = 237941.22,. mode = begin, n = ? = 58
68. A bond has face value 1000, coupon rate of 7.5%, the market rate comes
down to 6%. If the bond is perpetual the value of the bond is ____?
a. 1200
b. 800
c. 1250
d. 1000
Solution: C
Working: 75/6% = 1250
69. 100000 T bill is selling at 98000 today. It will mature in 60 days. The
annual yield is__?
a. 13%
b. 13.08%
c. 13.25%
d. 12.41%
Solution: D
73. Ignore tax & transaction cost. Each contract is equal to 100 shares.
79. An NRI holds units in a mutual fund. What should he do with his holding if
he takes up a foreign citizenship?
a. He redeems
b. He continues
c. He transfers the units to his mother, who resides in India.
d. None of the above.
Solution: A
80. a close end equity fund has average weekly net assets of Rs. 200 crores.
As per SEBI Regulations, the AMC can charge the fund with investment
and advisory fees up to____.
a. Rs. 2.25 crores
b. Rs. 2 crores
c. Rs. 2.5 crores
d. Rs. 3 crores
Solution: A
Working: 1.25% of 1st 100 crores, & then 1% of the balance.
81. The current market price of a 9% coupon bond, when other bonds of
similar maturities pay 11%, will be:
a. Above par
b. Below par
c. At par
d. Will be unrelated to other bonds
Solution: B
84. What type of portfolio asset mix would you recommend to your 55 year
old client who plans to retire at age 58? Choose a portfolio that is the
closest match to the investor’s needs.
a. 40% in Equity Schemes & 60% in Balanced funds
b. 40% in Equity Schemes & 60% in Debt funds.
c. 20% in equity schemes, 20% in liquid funds & 60% in Debt funds.
d. 100% in Monthly Income Schemes.
Solution: C
85. Rajiv buys a growth – oriented non dividend paying share for Rs. 200 and
4 years later you sell it for Rs. 350. The CAGR is____
a. 10.3%
b. 18.8%
c. 75%
d. 15%
Solution: D
Working ((350/200)^(1/4)) -1 x100 = 15%
86. Hitesh has a portfolio with 23 different equities. The portfolio increased by
20%, beta of 1.50. utilizing the Capital Asset pricing Model compute by
what % did the market change?
a. 14%
b. 15%
c. 17%
d. 16.5%
Solution: B
Working: 20 = 5 + (Rm -5) 1.5
20 – 5 = 1.5 Rm – 7.5
15 + 7.5 = 1.5 Rm
Rm = 22.5/ 1.5
= 15%
87. Pritesh owns a let out house property the net annual value of which is Rs.
200000/- The standard deduction under Sec.24 that is available tp Pritesh
in respect of the above income would work out to ___
a. 20000
b. Nil
c. 40000
d. 60000
Solution: D
Std deduction 30% of Net annual value = 30% x 200000 = 60000/-
88. Any possible occurrence which may have a negative implication can be
plotted on a graph with X axis measuring the frequency (low – high) and
Y axis measuring the financial impact (low – high). It would not be
practical to purchase insurance for events which fall in the high frequency,
high impact quadrant because______
a. Such a risk cover would be very expensive
b. The best way to cover such a risk would be to alter the functioning
of the business
c. Usually this is a business risk, which is rewarded by profit motive
d. Such occurrences are so few that no insurer would be offering a
risk cover.
Solution: A
89. Can an NRI extend his old PPF account for 5 years after its maturity?
a. Yes
b. No
c. Not specified
d. Can’t say
Solution: B
90. The statement “Members shall ensure their conduct does not bring
discredit to the Financial Planning Profession’, relates to the FPSB code of
Ethics of ___
a. Compliance
b. Professionalism
c. Fairness
d. Integrity
Solution B