NSEs CAPITAL MARKET APTITUDE TEST

SAMPLE TEST

1. Ram currently owns stock in PNG, valued at Rs. 145 per share. Thinking that PNG is
overbought and will decrease in price soon, Ram writes a call option on PNG with an
exercise price of Rs. 148 for a premium of Rs. 2.40. At expiration of the option, PNG stock
is valued at Rs. 152 per share. What is the profit or loss from Ram's covered call strategy?
[1 Mark]
(a) Gained Rs. 5.40
(b) Lost Rs. 9.60
(c) Lost Rs. 4.60
(d) Gained Rs. 9.40


2. A bond's duration is its________
[1 Mark]
(a) First derivative of value with respect to its yield.
(b) Half-price
(c) Second derivative of value with respect to its yield.
(d) Price sensitivity to yield changes


3. For listing, the company must submit to________audited balance sheets for the
past_______years.
[1 Mark]
(a) NSE;3
(b) SEBI;3
(c) CLB;2
(d) ROC;2


4. If Sachin opts for indexation benefit in respect of his listed securities. The resultant capital
gain will be taxed at_____________
[1 Mark]
(a) Maximum marginal rates
(b) Slab rates
(c) 10% plus surcharge, if any
(d) 20% plus surcharge, if any


5. Ram has invested in 200 shares of a company trading at Rs. 120 per share on a margin of
45%. The broker charges an interest rate of 10% and the commission rate of 3% on the
transactions (buy or sell). Ram holds the share for one year during which he receives a
dividend of Re.1 per share. At the end of one year, what should be the price Ram should be
willing to sell the shares if he wishes to make a return of 40%?
[1 Mark]
(a) Rs. 133.42/share
(b) Rs. 131.22/share
(c) Rs. 139.52/share
(d) Rs. 135.83/share


6. Which of the following is the regulatory body for equity markets in India?
[1 Mark]
(a) RBI
(b) SEBI
(c) SEC
(d) Equity and fixed income department of India


7. Which of the following statements about individuals' savings behavior is most accurate?
[1 Mark]
(a) Expected increases in income encourage individuals to save less
(b) Higher interest rates make individuals less willing to trade present consumption for future
consumption
(c) Individuals tend to draw down their savings when they anticipate a decline in their
incomes
(d) None of the above


8. A zero coupon bond will have zero _____ risk
[1 Mark]
(a) Reinvestment risk
(b) Interest Rate risk
(c) Default risk
(d) Inflation risk




9. Which one of the following is not a typical exit route for Private Equity Investor ?
[1 Mark]
(a) IPO
(b) NCD
(c) Buy back
(d) Strategic sale


10. Today transfer of securities in the Indian stock markets is through ______.
[1 Mark]
(a) Dematerialization
(b) Transfer deeds
(c) Real time gross settlement system
(d) Open outcry system



11.


Which of these products saw the maximum % increase in average realization during the
period ?
[1 Mark]
(a) Stove
(b) Cooker
(c) Grinder
(d) Cannot be determined


12. Ram is thinking of taking a car loan for Rs. 6,00,000 to be repaid over 3 years. The loan
offered to Ram is 8% per annum for the first year, 9% per annum for the second year and
10% per annum for the third year. Assume that the EMI is being paid at the end of each
month and the loan tenure is 3 years i.e. the entire loan is repaid in 3 years. What is the EMI
to be paid in the 2nd year?
[1 Mark]
(a) Rs. 18,991
(b) Rs. 18,801
(c) Rs. 19,092
(d) None of the above


13. The efficient frontier represents that set of portfolios that has ______________
[1 Mark]
(a)

The maximum rate of return for every given level of risk , or the maximum risk for every
level of return.
(b)

The maximum rate of return for every given level of risk , or the minimum risk for every
level of return
(c)

The minimum rate of return for every given level of risk , or the minimum risk for every
level of return.


14. Raj has taken an auto loan of Rs. 6,00,000 for 5 years at 14% per annum interest. What will
be his EMI?
[1 Mark]
(a) 13220
(b) 13960
(c) 15100
(d) 14820


15. Share holders in a limited company are not liable for _____________.
[1 Mark]
(a) The debt of the company if his shares are fully paid-up.
(b) The paid amount of capital in that company
(c) The assets of the limited company
(d) The goodwill of the company


16. Calculate the ROE given the following information about a company. Operating profit
margin : 16% ; Net profit margin :12% ; Asset turnover :1.2 ; Debt/Assets =0.5;
Debt/Equity = 1.
[1 Mark]
(a) 0.288
(b) 14.40%
(c) 0.384
(d) 0.072


17. A preference share ___________
[1 Mark]
(a) Pays fixed dividend
(b) is a marketable security
(c) is a debt security
(d) All of the above




18. Subash has bought a 60 call option at 4 and simultaneously sold a 70 call at 2 (lot size =
100). What is the maximum loss expected?
[1 Mark]
(a) 100
(b) 200
(c) 400
(d) 300


19. Standard Deviation is a measure of __________
[1 Mark]
(a) Neither Risk nor Return
(b) Return
(c) Both Risk and Return
(d) Risk


20. Ram is expected to receive Rs. 50 lakhs by gift from his mother-in-law. The money will be
received in a month's time. He plans to invest 50% of his gift in shares. Recent trends in the
share prices indicate that the share prices may go up. Impending elections may dampen the
spirit of investors and also if the new government decides to adopts a stringent economic
policy. Based on the information given above what should Ram do,? If he wants benefit
from the short time rally in stock prices (when the money is not in his hands)?
[1 Mark]
(a) Buy long index futures/option
(b) Buy stocks from spot market by borrowing money
(c) Short sell index futures
(d) None of the above


21. A stock which is typically traded in the market with high volumes is called as
___________
[1 Mark]
(a) Liquid stock
(b) III-Iiquid stock
(c) Value stock
(d) Growth stock





22. Domestic GOI bond holders (holding them up to Maturity) have to deal with _____ risk.
[1 Mark]
(a) Inflation
(b) Volatility
(c) Default
(d) Currency


23. At the start of a month, a retailer paid Rs. 50000 in cash for different types of apparel. He
sold apparel costing Rs. 20000 for Rs. 30000 during the month. The most likely effect of
these transactions on the retailer's accounting equation for the month is that assets will
___________
[1 Mark]
(a) Increase by 10000
(b) Be unchanged.
(c) Decrease by 20000
(d) None of the above



24
.


The proportion of free float to traded stocks is highest for (during the 4 day period between
day 1 and day 4) __________
[1 Mark]
(a) D
(b) A
(c) B
(d) C


25. Amit has heard about the rule of 72 but he is not familiar with the same. You explain citing
an example that if any investment doubles in 13 year time frame, then according to this rule
, the applicable interest rate of the investment would have been close to_____________
[1 Mark]
(a) 0.0547
(b) 0.018
(c) 0.0554
(d) 0.0425


26. When a large majority of a bank's depositors lose faith in it and attempt to withdraw their
deposits, the bank _________
[1 Mark]
(a) Will fail unless it can obtain additional reserves or government assistance
(b) Will not experience difficulties because its required reserves or its excess reserves will be
adequate to meet withdrawals
(c) Will experience difficulties but will not fail
(d) None of the above


27. You are an international merchant who is doing business with Japan. You will be acquiring
a large amount of yen in the near future and you fear that the value of the yen will decrease.
How can you hedge your position?
[1 Mark]
(a) Sell Yen futures contracts
(b) Sell dollar futures contracts
(c) Buy Yen futures contracts
(d) None of the above


28. Government Bond is best described by which one of the following statements?
[1 Mark]
(a) It has no voting privileges
(b) It receives no cash dividends
(c) It may be resold at any time
(d) All of the above


29. The bonds included in the family's portfolio were issued at Rs. 670 per bond. The bond also
has an inbuilt option that after 3 years the investor can ask for repayment and company shall
refund Rs. 840 on each bond. The Family wants to know the yield if they ask for repayment
after three years
[1 Mark]
(a) Yield to put is 8.34% per annum
(b) Yield to call is 7.83% per annum
(c) Yield to put is 7.83 % per annum
(d) Yield to call is 8.34% per annum


30. A company offers a rights issue of one for three for Rs. 5 each. The present share price is
Rs. 13. If the share price does not change during the time of trading, what is the price after
the rights are taken up?
[1 Mark]
(a) 11
(b) 10
(c) 10.5
(d) 12.5


31. Two vessels A and B contain spirit and water mixed in the ratio 5:2 and 7:6 respectively.
Find the ratio in which these mixture be mixed to obtain a new mixture in vessel C
containing spirit and water in the ratio 8:5.
[1 Mark]
(a) 4:03
(b) 7:09
(c) 3:04
(d) 5:06


32. Equity shares have a high expected return and a high___ while for bonds there is a low risk
but a low ____.
[1 Mark]
(a) Risk, return
(b) Return, return
(c) Risk, risk
(d) Return, risk


33. Rating a presentation as poor, fair, good, or excellent would be what level of
measurement?
[1 Mark]
(a) Ordinal
(b) Nominal
(c) Interval
(d) None of the above


34. Arijit has taken a home loan of Rs. 30,00,000 (80% of the cost of his home) at an interest of
8.25% per annum for 20 years. What will his Monthly EMI be equal to?
[1 Mark]
(a) 23890
(b) 25561
(c) 21456
(d) 24322


35. What will be the typical debt/equity of a financial service company ?
[1 Mark]
(a) 5 - 10
(b) <1
(c) 1 - 3
(d) >30


36. Typically for a NBFC, which of the following item will constitute the highest liability
component ?
[1 Mark]
(a) Bank borrowing
(b) Non convertible debenture
(c) Sovereign bonds
(d) Fixed deposit


37. Portfolio position: LONG S&P500
Portfolio purchase price: 1427.21
Option position: LONG 1 put option
Underlying asset: S&P 500 Index
Exercise price: 1225
Premium: 3
Expiration date: November
An investor owns a stock portfolio that closely follows the Standard & Poor's 500 Index
(S&P500). He purchases one S&P500 stock index put option. The investor's position is now
portfolio insurance with the given characteristics. The expiration-day price of S&P500 is ST
= 1500. The expiration-day profit/loss for the portfolio insurance is ___________
[1 Mark]
(a) 199.21
(b) 69.79
(c) 83.51
(d) 75.79


38. Which statement is false?
[1 Mark]
(a) If the supply is perfectly elastic, the supplier will pay the entire tax.
(b) Tax incidence does not depend on tax law.
(c) If the demand is perfectly inelastic, the buyer will pay the entire tax
(d) None of the above
39. Which of the following is NOT a category on the statement of cash flows? Cash flow from
__________
[1 Mark]
(a) Sales.
(b) Financing.
(c) Operations.
(d) None of the above


40. The returns on Stock A and Stock B have a correlation coefficient of -1. When the price of
Stock A appreciates by 12%, how will Stock B's price perform?
[1 Mark]
(a) Depreciate by 12%.
(b) Appreciate by 12%.
(c) Depreciate by 6.0%.
(d) Stay unchanged

41.

If a bond is selling at a premium _______.
[1 Mark]
(a) Its coupon rate is below market rate
(b) It is an attractive investment
(c) Its realized compound yield will be less than the yield to maturity
(d) Its current yield is lower than the coupon rate


42. Mr. Chandan is an IT professional who is interested in stock trading. He purchases 200
shares of company PQR Ltd. at a price of Rs. 70 per share. The margin requirement by the
broker is 30%. The price of the share shoots to Rs. 80 per share and Mr. Chandan sells the
share he purchased. What is the investment of Mr. Chandan for purchasing 200 shares of
PQR ltd. (Assume no commission)
[1 Mark]
(a) Rs. 4200
(b) Rs. 9800
(c) Rs. 14000
(d) Rs. 6800


43. SEBI is the regulator of capital markets in India and has statutory powers for protecting the
investors and promoting the development of securities market. Securities market in India are
also regulated by ____________.
[1 Mark]
(a) Department of Company Affairs
(b) Securities Appellate Tribunal
(c) Department of Economic affairs
(d) All of the above


44. Karan wants to withdraw Rs. 1200 at the end of each month for the next 5 years. He expects
to earn 10% interest compounded monthly on his investments. What is the amount he
should deposit now?
[1 Mark]
(a) 59119
(b) 56478
(c) 58630
(d) 56949


45. Under accrual accounting, revenues are recognized in the same period in which the
associated _________
[1 Mark]
(a) Expenses are incurred.
(b) Cash is collected.
(c) Invoices are billed.
(d) None of the above


46. Jay has entered into a covered American call option with a strike price of Rs. 75 and a
premium of Rs. 5 and this is at-the-money. He wants you to find the break even point of this
covered call option.
[1 Mark]
(a) Rs. 85
(b) Rs. 70
(c) Rs. 75
(d) Rs. 80


47. NASDAQ is _____________
[1 Mark]
(a)

The NASDAQ (acronym of National Association of Securities Dealers Automated
Quotations) is an American stock exchange.
(b)

A section of the NYSE where technology stocks are traded.
(c)

The trading symbol for a racetrack company listed on the NYSE.
(d)

None of the above


48. Risk is measured by ____.
[1 Mark]
(a) Volatility
(b) Interest rates
(c) Returns
(d) None of the above


49. If you start saving at Rs. 1,00,000 a year and the earning rate is 8% per annum, what is the
time required in years (approximately) to cross Rs. 60,00,000 of capital? ( assume that you
save the money at the end of each year)
[1 Mark]
(a) 20
(b) 16
(c) 23
(d) 15


50. Jasmine has a large paper profit in her Amalgamated Corporation shares, currently at Rs.
46. She is happy with the stock but realizes that a good thing cannot go on forever. If she is
willing to sell at 50, what strategy could you recommend to her?
[1 Mark]
(a) Buy Rs. 50 call options.
(b) Sell Rs. 50 put options
(c) Buy Rs. 50 put options.
(d) Sell Rs. 50 call options


51. Fixed cost for a cricket bat manufacturer is Rs. 10000 One cricket bat production cost is
50% of MRP A typical bat sells for 75% of MRP at Rs. 750 after hard negotiation by the
parent of the kid. How many cricket bats does the manufacturer need to sell per month in
order to break even ?
[1 Mark]
(a) 50
(b) 40
(c) 20
(d) 30

52. Assume that a firm used Rs. 45 million in labour and materials to generate Rs. 100 million
in total revenues. Other costs included Rs. 400,000 in foregone interest, economic
depreciation of Rs. 40,000, and normal profit of Rs. 130,000. The economic profit to this
firm is closest to __________
[1 Mark]
(a) Rs.53,430,000
(b) Rs. 46,680,000
(c) Rs. 55,000,000
(d) Rs. 54,430,000


53.


Which player has scored the minimum % of his runs in boundary across three years ?
[1 Mark]
(a) Dhoni
(b) Cannot be determined
(c) Raina
(d) Sachin


54.

Rs. Crores
Net Profit 500
Depreciation 20
Interest paid 70
Increase in receivables 120
Increase in loans and advances (short term) 130
Increase in Sundry creditors 100
Net Increase in long term bank borrowing 120
Net Repayment of short term loan 70
Increase in Fixed assets 150
Issue of non-convertible debenture 200
Conversion of warrants 100

Based on the information provided in the Table, Debt-equity ratio will ___________- due to
conversion of warrants
[1 Mark]
(a) Decrease
(b) Increase
(c) Does not change
(d) Cannot be determined


55.

An analyst gathers the following information about a company (Rs. Crores) 2012 2011
Sales 300 200
Year end inventory (LIFO Inventory method) 80 70
LIFO reserve 20 10
Cost of goods sold (LIFO) 200 150

Based on the information provided in the Table, If the company uses the FIFO inventory
method instead of LIFO, the company's 2012 ending inventory will be equal to
__________
[1 Mark]
(a) 60
(b) 90
(c) 70
(d) 50


56.
BALANCE SHEET

ASSETS Rs. Crores
Cash 30
Sundry debtors 750
Fixed assets 1200
Loans and advances (<90 days) 100
Inventory 300
TOTAL 2380
LIABILITIES Rs. Crores
Long term debt 1200
Short term debt 300
Sundry creditors 300
Provision for tax 100
Other short term provisions 50
TOTAL 1950

Based on the information provided in the table, Current ratio of the company is closest to
_________
[1 Mark]
(a)

0.8
(b)

1.6
(c)

1.4
(d)

0.625


57.

Interest-rate risk is defined by which of the following statements?
[1 Mark]
(a) Fluctuations in the coupon interest rates from one bond issue to the next
(b) Fluctuations in the market prices of bonds as their prices move inversely to the prevailing
market interest rates
(c) The variability of returns as a result of fluctuations in market interest rates
(d) All

58. Market capitalization of ABC Ltd is Rs. 1000 cr.
Cash in books - Rs. 50 cr
Short term debt - Rs. 30 cr
Long term debt - Rs. 50 cr
What is the Enterprise value of the company?
[1 Mark]
(a) 1130
(b) 1030
(c) 870
(d) 1000

59
.


The total value traded arranged in ascending order would be _____________
[1 Mark]
(a) Day 3, 2 , 1, 4
(b) Day 4,3,2,1
(c) Day 1,2,3,4
(d) Day 1, 3, 2, 4


60. The risk that arises due to sudden change in weather that affects the operations of a
company is classified as _________ .
[1 Mark]
(a) Foreign exchange risk
(b) Nature risk
(c) Political risk
(d) Interest rate risk


61. Mr. A's stock market portfolio consistently outperformed the BSE Sensex based on tips he
received from a friend working in a corporate finance department. Which of the following is
his success a violation of?
[1 Mark]
(a) Total market efficiency
(b) Strong form of market efficiency
(c) Semi-strong form of market efficiency
(d) Weak form of market efficiency


62. Assuming a market downtrend situation, stocks of companies in which of the following
industry will get hammered heavily ?
[1 Mark]
(a) Pharma
(b) Technology
(c) Infrastructure
(d) Consumer


63. Ms. Niyati purchased 5000 shares of Ms BlackRock Ltd, at Rs. 200 per share on 5th July
2010. On 4th September 2010, BlackRock Ltd declares a dividend of Rs. 10 per share.
Niyati sells all the shares on 5th November 2010. What will be the income/loss if the shares
are sold at a price of Rs. 192 per share? (All the shares are traded in the recognized stock
exchange).
[1 Mark]
(a) Dividend of Rs. 50,000 tax free and Short Term loss of Rs. 40,000 which will be set of
again the dividend income
(b) Capital Loss of Rs. 40,000 shall be allowed to be carried forward
(c) Capital Loss of Rs. 40,000 shall not be allowed to be carried forward
(d) Capital Gain of Rs. 10,000 and no tax to be paid on this


64. What should be the type of order placed by a trader who wishes to purchase shares of
company ABC Ltd. if its share price trades at or below Rs.55? The current market price if
Rs.60.
[1 Mark]
(a) Limit Order
(b) Market Order
(c) Short Sale
(d) Either Limit order or Market Order


65. Flipstart is making a turnover of Rs. 1500 crores, but making huge losses. Investors would
value Flipstart based on __________ ratio
[1 Mark]
(a) EV/EBITDA
(b) EBITDA/Debt
(c) P/S
(d) P/E


66. Kanchan has a margin account and she has deposited Rs.60000 in the account. The margin
requirement for taking a position in trade is 45%. She wants to purchase the share of
company ZZZ Ltd. which is trading currently at Rs.25/share. What would be the profit/loss
if the share price dips to Rs 20/share? (Assume no commission)
[1 Mark]
(a) -Rs. 21330000
(b) -Rs. 45000
(c) -Rs. 90000
(d) -Rs. 60000


67. Anil's Maths test had 75 problems i.e. 10 arithmetic , 30 algebra and 35 geometry problems.
Although he answered 70% of arithmetic , 40% of the algebra and 60% of geometry
problems correctly, he did not pass the test because he got less than 60% of the problems
right. How many more questions he would have needed to answer correctly to earn a 60%
passing grade ?
[1 Mark]
(a) 5
(b) 2
(c) 10
(d) 12


68. If you increase the prepaid expense on the balance sheet from last year to this year , what is
the effect of cash on this year ?
[1 Mark]
(a) Cash increases
(b) Cash may increase or decrease
(c) Cash is not affected
(d) Cash decreases


69. Mr. Kumar won Rs. 5,00,00,000 from Kaun Banega Crorepati. If he deposits Rs.
2,50,00,000 in an account giving 10% interest per annum, how much can he continue to
withdraw every year for the next 20 years? (Assume that the withdrawals happen at the
beginning of each year)
[1 Mark]
(a) Rs. 203395.45
(b) Rs. 2936490.62
(c) Rs. 203370.76
(d) Rs. 2669536.93


70. Which of the following would NOT require an explanatory paragraph added to the auditors'
report?
[1 Mark]
(a) Uncertainty due to litigation.
(b) The Going Concern Assumption & any uncertainties due to litigation
(c) Doubt regarding the "going concern" assumption.
(d) Statements that the financial information was prepared according to GAAP


71. What does VIX above 40 indicate?
[1 Mark]
(a) Neutral Valuations
(b) Over-Bought Valuations
(c) Attractive Valuations
(d) It does not mean anything based on the available information


72. Kanchan has a margin account and she has deposited Rs. 60000 in the account. The margin
requirement for taking a position in trade is 45%. She wants to purchase the share of
company ZZZ Ltd. which is trading currently at Rs. 25 per share. What would be the
profit/loss if the share price rises to Rs. 30 per share? (Assume no commission)
[1 Mark]
(a) Rs. 60000
(b) Rs. 30000
(c) Rs. 90000
(d) Rs. 75000


73. If the simple interest on a sum of money is 5% per annum for 3 years is Rs. 1200, What is
the compound interest on the same sum for the same period at the same rate ?
[1 Mark]
(a) 1261
(b) 2701
(c) 3300
(d) None of the above


74. Rajesh wants to be actively involved in derivative trading soon after taking retirement. He
has no knowledge about this field and has approached you for guidance. Intrinsic value is
____________
[1 Mark]
(a) Difference between strike and current share price
(b) Difference between original and current share price
(c) Difference between original and strike price
(d) None of above


75. A model that describes the relationship between risk and expected return and that is used in
the pricing of risky securities is better known as _________
[1 Mark]
(a) Beta Model
(b) Efficient Market hypothesis
(c) Security Market Line
(d) CAPM


76. You have invested Rs. 50,000 each on 14th April 2011 ,27th June 2011 and 18th Sept 2011
and Rs. 1,40,000 on 8th January 2013 in the money market mutual funds scheme. The
current value of the same is Rs. 3,25,000 ( Assume today is 1st November 2013). What is
the annualized return on this investment?
[1 Mark]
(a) 2.49%
(b) 7.21%
(c) 5.65%
(d) 5.39%


77. A man wants to sell his bike. There are two offers. One at Rs. 12000 cash and the other at
Rs. 12880 to be paid after 8 months. Assuming the prevailing interest rates in the market to
be 18% per annum , which is the better offer ?
[1 Mark]
(a) Rs. 12000 in cash
(b) Rs. 12880 credit
(c) Both are equally good


78. The Management Discussion and Analysis (MD&A) portion of the financial disclosure is
likely required to discuss which of the below:
1) Unusual or Infrequent items.
2) Capital resources and liquidity.
3) Results of operations
[1 Mark]
(a) 1 and 2
(b) 1and 3
(c) 2 and 3
(d) 1, 2 & 3

79. Mr. X buys 50 TISCO October Rs. 350 call options for Rs. 15. The current share price is
Rs. 345. The break-even share price, ignoring transaction costs is Rs.________
[1 Mark]
(a) 365
(b) 350
(c) 360
(d) None of the above

80. Consider a portfolio of two investments viz. A & B. The sum total of volatility of A and B
respectively, represented by standard deviation of the two investments, will be equal to the
volatility of the portfolio as a whole if _________.
[1 Mark]
(a)

A and B have a correlation of 1
(b)

The portfolio is equally divided between A and B
(c)

The return on the portfolio is equal to the sum of returns of A and B
(d)

A and B have a correlation of Zero

81.


The player with highest runs/Man of match ratio in 2011 is ____________
[1 Mark]
(a) Raina
(b) Dhoni
(c) Cannot be determined
(d) Sachin

82. The Nifty has doubled since the last time you advised your client to reduce his equity
exposure. The client is annoyed. What might be the most appropriate action to take
immediately?
[1 Mark]
(a) Rebalance his asset allocation by reducing equity investments
(b) Change his asset allocation by increasing his equity exposure
(c) Apologize for wrongly forecasting the market
(d) Help the client understand the logic of his asset allocation


83. Document submitted by a company (issuer) as part of a public offering of securities is called
__________
[1 Mark]
(a) Lead banker document
(b) Red herring prospectus
(c) SEBI document
(d) IPO document

84. The rate at which commercial banks and other lending facilities can borrow short-term
funds from the central bank is called the ________
[1 Mark]
(a) Repurchase Rate
(b) Prime Lending Rate
(c) Reverse Repurchase Rate
(d) Discount rate

85. Mr. Satish buys 300 convertible debentures of ABB at Rs. 300 each. 50% of the value of
these debentures is converted into one share of Rs .80 each after 5 years. Mr. Satish
exercises his options after 5 yrs and receives 120 shares. Compute cost of acquisition of
each share.
[1 Mark]
(a) 375
(b) 360
(c) 380
(d) 350


86. In a period of rising prices, when compared to a company that uses weighted average cost
for inventory, a company using FIFO will most likely report higher values for its
_______________
[1 Mark]
(a) Inventory turnover.
(b) Asset Turnover
(c) Return on sales.
(d) Debt-to-equity ratio.




87.

Rs. Crores
Net Profit 500
Depreciation 20
Interest paid 70
Increase in receivables 120
Increase in loans and advances (short term) 130
Increase in Sundry creditors 100
Net Increase in long term bank borrowing 120
Net Repayment of short term loan 70
Increase in Fixed assets 150
Issue of non-convertible debenture 200
Conversion of warrants 100

Based on the information provided in the Table, Cash flow from investment activities is
equal to _______________
[1 Mark]
(a) -200
(b) -270
(c) -70
(d) -250

88. At the Chicago Board of Trade, futures on foreign currencies have a contract size fixed in
_______________
[1 Mark]
(a) Foreign currency units and are priced in dollars per foreign currency unit.
(b) Dollars and are priced in dollars per foreign currency unit
(c) Foreign currency units and are priced in dollars per foreign currency unit
(d) None of the above

89. Assume, today is 1st February, 2004, you have just concluded a business deal and received
an advance of 10 lakhs. You would require the money for the commencement of operations
and other payments by 1st April 2004. You are told that the funds can be parked in
commercial paper (CP) which would give a better return compared to deposit in banks.
Which of the following is not the feature of the Commercial Paper?
[1 Mark]
(a) CPs are not bought back
(b) CPs are liquid instruments
(c) CPs are unsecured instruments
(d) CPs are credit rated

90. If GST is implemented, petrol and diesel completely deregulated , CAD under control ,
Fiscal deficit under 4% , inflation under 4% , stable new government is elected. Expected
market reaction for the above macro economic situation is __________
[1 Mark]
(a) 2-5% movement
(b) >10% upside
(c) >10% downside
(d) Flat movement



91.


The overall sales increase in grinder is primarily driven by ___________
[1 Mark]
(a) Increase in production
(b) Cannot be determined
(c) Volume increase
(d) Average realization increase

92. Earnings of a sugar company are typically_________ in nature
[1 Mark]
(a) Profitable
(b) Cyclical
(c) Healthy
(d) Non-cyclical

93. Which of the following statement is true ?
[1 Mark]
(a) IRR> hurdle rate, reject the project
(b) NPV < 0, accept the project
(c) IRR > hurdle rate, accept the project
(d) NPV > 0, reject the project

94. Drag along is a typical terminology associated with sale of shares of ______________
[1 Mark]
(a) Investors
(b) Promoters
(c) Regulators
(d) Lenders

95. If ABS's price is Rs. 40 per share and its current dividend of Rs. 3.85 per share, which is
growing at a 7 percent rate per year, determine its required return?
[1 Mark]
(a) 17.3 percent
(b) 16.6 percent
(c) 16.2 percent
(d) 15.1 percent






96. If RBI hikes interest rates, what is the expected impact on Inflation ?
[1 Mark]
(a) Decreases
(b) No Impact
(c) Increases


97. _________ is / are governed by SEBI.
[1 Mark]
(a) Mutual Funds
(b) Stock Brokers
(c) Portfolio Managers
(d) All of the above

98.

Based on the information provided in the table, what is the percentage change in portfolio
value assuming equal weighted index and Rs.2000 invested in each of the above stock?
[1 Mark]
(a) 8.10%
(b) 6.34%
(c) 7.22%
(d) 5.32%

99. If RBI hikes interest rates, what is the expected impact of growth of the economy ?
[1 Mark]
(a)

Decreases
(b)

No Impact
(c)

Increases


100. An analyst is forecasting the movement of NIFTY. According to him, the major
contributing factor for the movement of the NIFTY is the investment by FII's. His
expectation for the probability that NIFTY will rise if FII investment rises is 75%; if the FII
investment stays constant, he believes that there is a 35% chance of NIFTY moving
upwards; if FII investment falls, he believes that there is a 4% chance of NIFTY moving
upwards. He thinks that the likelihood of FII investment increasing is 65%; of staying the
same is 25%; of dropping is 10%. What is the unconditional probability of NIFTY rising?
[1 Mark]
(a) 0.579
(b) 0.523
(c) 0.486
(d) 0.544


Correct Answers:
1 (a) 36 (a) 71 (d)
2 (d) 37 (b) 72 (b)
3 (c) 38 (a) 73 (a)
4 (d) 39 (a) 74 (a)
5 (a) 40 (a) 75 (d)
6 (b) 41 (d) 76 (b)
7 (a) 42 (a) 77 (a)
8 (a) 43 (d) 78 (c)
9 (b) 44 (b) 79 (a)
10 (a) 45 (a) 80 (a)
11 (a) 46 (b) 81 (a)
12 (a) 47 (a) 82 (d)
13 (b) 48 (a) 83 (b)
14 (b) 49 (c) 84 (a)
15 (a) 50 (d) 85 (a)
16 (a) 51 (b) 86 (c)
17 (d) 52 (d) 87 (c)
18 (b) 53 (c) 88 (a)
19 (d) 54 (a) 89 (a)
20 (a) 55 (b) 90 (b)
21 (a) 56 (c) 91 (d)
22 (a) 57 (d) 92 (b)
23 (a) 58 (b) 93 (c)
24 (a) 59 (b) 94 (b)
25 (c) 60 (b) 95 (a)
26 (a) 61 (a) 96 (a)
27 (a) 62 (c) 97 (d)
28 (d) 63 (c) 98 (c)
29 (c) 64 (a) 99 (a)
30 (a) 65 (c) 100 (a)
31 (b) 66 (a)
32 (a) 67 (a)
33 (a) 68 (d)
34 (b) 69 (d)
35 (a) 70 (d)