Qt) What is true about the characteristics of Bond? (mart: 1) 2) Long-term bonds are almost always more volatile in terms of price than short-term bonds for a given change in interest rates b) Short term bonds are less vulnerable to interest rates fluctuation than long term bonds: ©) Both (a) and (b) are true [This isthe Right Answer]22) Which of the following need to compulsorily register as investment adviser with SEBI? (Mart: 1) a) Mutual fund distributor b) Insurance adviser ©) Lawyer 4d) An IFA who charges advisory fees to investors [Your answor is correct]‘Q3) What does the Covariance between two securities measure? stark: 1) a) It measures relative risks of the two securities. b) - It measures the relationship between the returns of the two securities [Your answer is correct ©) It measures volatility of the two securities 4d) _ It measures the correlation between the variance of the two securities ous e1as7'b) - Itmeasures the relationship between the returns of the two securities (Your answors corect ) It measures volatility of the two securities d)__ It measures the correlation between the variance of the two securities Covariance measures how two securities move together in relation to their returns. A positive covariance indicates that the two securities tend to move in the same direction, while a negative covariance means they move in opposite directions.3 years time. What would be an appropriate investment option ‘Q4) A conservative investor wants to accumulate Rs.20 lakhs for him ? ark: 1) a) Shares of selected growth companies b) Bank deposits and good quality bonds [This s the Right Answer] ) Gold fundsQ5) Salman invested Rs 1,00,000 in a financial product and earned a return of 9%, 11% and 13% in the years 1, 2 and 3 respectively. Calculate the Compounded Annual Growth Rate (CAGR) earned by Salman on this investment. ark: 1) a) 11.75% 0) 14.02% ) 10.98% [Tiss the Right Answer]a) 10.876 [This isthe Right Answer] ‘otal Investment Value after three years = 100000*(1.00)(4.14)(1.13) CAGR formula : (Final Value / Beginning Value) "tlyears ~ 4 (136718140000)%(1/3)— 4 (1.36718 4 0.3333) —4 {On Scientific Calculator of your computer, type 1.36748, then x*y and then 0.9393 = 1.1098 4.4098 - 1 = 1098 x 100 (to convert into %) = 10.98% 96,718but the income is taxable in the hands of the investor. The investors marginal ‘Q6) An investment earns a return of 11% tax rato is 30%. What is his after tax rate of return? ark 1) a) 8.00% b) 7.70% (This isthe Right Answer] ©) 7.50% 4) 8.20%ne ) 7.50% d) 8.20% 41% X07 (Since 30% of profitis given as tax only 70% remains. Hence We are multiplying by 0.7) Answer is 7.7%Q7) In India, _day count convention is followed in Money Market. ark: 1] a) 30/Actual b) Actual’360 ¢)Actual/365 [Tis isthe Right Answer ) 30/360Q8) Which of the following is the minimum stipulated investor contribution in an AIF scheme ? (Mark: 1) a) Rs. 20 crore 1b) Rs. crore [Miss the Right Answer] ©) Rs. 10 crore d) Rs. 2crore Explanation]1b) RS. 1 crore [Tiss the Right Answer] ©) Rs. 10 crore: d) Rs. 2crore is Alaris epertpent ered eral pet eevee Setven reser ar ieentcar oor oe fan att cere acted dat rere Teper aNGATe ee UTR Ser oineIe n steroved Tle aay see vee recge a ne investment hall be Re 25 ahQ8) Risk free return of a scheme is 5%, with Beta of 1.2 earned a return of 8%, Treynor ratio of the scheme is. mark: 1) a) 5.20 b) 3.50 ©) 2.50 [hiss the Right Answer d) Data not sufficient e410b) 350 ©) 2.50 [miss the Right Answer, 4) Data not sufficient ‘Teynor Ratio = (Scheme return - Risk Free Return) / Beta Treynor ratio= 334/1.2=2.5Q10) Which portfolio is the appropriate benchmark for comparison in the ‘Peer Group’ analysis method of performance evaluation ? (wart: 1) a) Mean values of portfolios 'b) Support percentile portfolio ¢) Median portfolio [Tis the Right Answer] ) Average percentile portfoliob) Support percentie portoto ©) Median portfolio (miss the Right Answer] d) Average percentile portfolio Explanation] ‘Managers’ universe analysis or peer group analysis is also a very popular way of conducting performance evaluation. The median portfolio or the universe of investments with similar investment approach and strategies can be taken as the yardstick to evaluate the performance of the portfoio.Q11) Anita is a conservative investor and puts her money only in Fixed Deposits which she rolls over every year. Ina falling interest rate sconario,which risk can be of most concern to hor? ark) a) Reinvestment Risk [This sth Right Answer] b) Default Risk ©) Inflation Risk 4) Taxation Risk12) The buyer of an option cannot lose more than the option premium paid. ark: 17 a) True only for European options b)_ True for all options rms the Right Answer} ©) True only for American options d) False for all optionsQ13) The number alloted in NPS is. ark: 11 a) b) 2 a) Personal Pension Account Number Personal Retirement Account Number Permanent Retirement Account Number [This isthe Right Answer] Permanent Pension Account Numberad) is the market where issuers raise capital by issuing securities to investors for the first time. ark: 1] a) Secondary Market b) Primary Market [This is the Right Answer] ©) Money Market d) Forward Marketet allocation for an investor done by an investment advisor is based on.©) _ Risk Aversion Risk Management Risk Profiling: Itis mandatory for an Investment adviser to undertake the process of risk profiling ofthe investor. This gives an idea about the position of the investor and the kind of risk that they are able to take. Risk profiling becomes the basis forthe selection of various investment options for the investor. This is a requirement that the investment adviser should never miss out on and it should be made a part ‘of the overall process.Q16) Portfolio Risk Calculation for two securities Correlation coofficiont betwoon the retuns of Security A and B Expected Return on Security A, ‘Standard Deviation of return of Socurity A Expected Return on Security B ‘Standard Deviation of return of Security B©) 0.0433 (Tis isthe Right Answer} d) 0.00433 is 04542 Elo_port®2) = (0.50* x 0.05%) + (0.50* x 0.05%) + (2x 0.50 x 0.50 x 0.5 x 0.05 x 0.05) E{o_port"2) = 0.001875 Efe portl = 0.0433Q17) Which type of equity can be offered to investors in the Accumulation Phase? ark: 1) a) Zero Beta Equity b) Low Beta Equity ©) High Beta Equity (Tis s the Right Answer] ) Equity with Beta = 1 soresgy EuiTy Winn Beta ssi acre! na peat ex aa teeny sage bones sed pene peresgiens eoear soe cr noes ‘more high-return, high-risk capital gain-oriented investments. Therefore the investor can invest in high beta equity. Beta relates the return of a stock or a portfolio to the return on market index. I reflects the sensitivity ofthe fund's return to fluctuations in the ‘market index. Abeta that is greater than one means that the portfolio or stock is more volatile than the benchmark index, while a beta of less than one means thatthe security is less volatile than the index.Q18) Total risks comprises of: rk: 1) a) b) °) d) ‘Market risk ‘Systematic risk +unsystematic risk [This the Right Answer] Poltical risk Inflation risk19) Sell side analysts generate investment recommendlations for their internal consumption. ark: 11 a) TRUE b) FALSE (mis sine Right Answer(220) What does Financial Planning recommend? (werk: 1) a) Financial Planning recommends the asset allocation that is best suited to reduce the risk forthe investor ) Financial Planning recommends the asset allocation that can generate the best returns forthe investor ‘) Financial Planning recommends the asset allocation best suited for investor's needs [Mis isthe Right Answer 4d) Financial Planning recommends the esset allocation that will help the investor meet goals in the shortest periodc) Financial Planning recommends the asset allocation best suited for investor's needs [Tis e the Right Answer] d) Financial Planning recommends the asset allocation that will help the investor meet goals in the shortest period Financial planning is a process that enables better management ofthe personal financial situation of a household or individual. It works primarily through the identification of key goals and putting in place an action plan to realign the finances to meet those goals. ‘The plan includes asset allocation which decides on how to distribute an investor's wealth into different asset classes for investment purposes and according to his needs.Q21)__is defined as simultaneous purchase and sale of an asset to take advantage of difference markets. (ar: 1) a) Mortgage b) Speculation ©) Hedging d)_ Arbitrage [mists the Right Answer) in prices in different(22) Corporate Bond Fund is an open-ended debt scheme predominantly investing in A+ and above rated corporate bonds. The minimum investment in such corporate bonds shall be__percent of total assets,) 80% [This isthe Right Answer] ©) 65% d) 95% os 1876 Corporate Bond Fund: An open-ended debt scheme predominantly investing in AA and above rated corporate bonds. The minimum investment in corporate bonds shall be 80 percent of total assets (only in A+ and above rated corporate bonds)..Q23) The risk free retum of Security A is 8%. In addition to it, you expect that the return on market would be 14%. The Required rate of return of Security A with beta of 0.70 is = (Marks) a) 12.2% (This iste Right Answer, b) 184% ©) 17.8% 4) 182%by 1ba% ©) 178% d) 182% 01058 Required return = RY + B (Rm - Rf) Required return = 8% + 0.7 (14%-8%)(24) Which mutual fund schemes have to be mandatory listed on the stock exchange a) All Equity schemes b) AllDebt schemes ©) Open Ended schemes d) Closed Ended schemes (ris ste Right Answer per SEBI regulations? ark: 1)©) Open Ended schemes d) Closed Ended schemes [mis isthe Right Answer] Exp ‘A closed-end scheme is fora fixed period or tenor. It offers units to investors only during the new fund offer (NFO). The scheme is closed for transactions with investors after ths. Inthe interim, if investors want to exit their investment they can do so by selling the units to other investors on a stock exchange where they are mandatorily listed, tion]225) Risk free return of the scheme is 5%, and standard deviation is 0.5. Return Mork: 1) a) 40 b) 4 (mis isthe Right Answer, ) 26 4) 351b) 4 [This isthe Right Answer] 025 d) 35 Es ‘Sharpe Ratio = (Scheme Return -Risk Free Return) / Standard Deviation Sharpe Ratio = 210.5 =