Security Analysis
Assignment A:
Q.1 What is meant by Fundamental Analysis? How does it differ from technical Analysis?
Q.2 Define risk & distinguish between Systematic & Unsystematic risk
Q.3 Explain the Whitebeck Kisor model?
Q.4 What is Macaulay’s Duration?
Q.5 Explain Efficient market Hypothesis?
Assignment B
Q.1 Explain bond value theorems?
Q.2 Determine the price of Rs.1, 000 zero coupon bond with yield to maturity of 18% and 10 years to maturity & determine yield to maturity of this bond if its price is Rs 220?
Q.3 Explain in detail the Dow Theory and how it is used to determine the direction of stock market?
Case study:
Mr.Jose wants to invest in bonds a sum of Rs.1,00,000. Three bonds are being examined by him with a holding period of three years. Each bond is given AAA rating by Crisil. In the economic scenario, the economic cycle is beginning to mature & inflation is expected to increase. In an effort to contain the inflation, Reserve Bank of India is moving towards credit squeeze. Mr.Jose’s tax bracket is 50%. The details of the bond are given:
|
|
Bond A |
Bond B |
Bond C |
|
Coupon rate |
0% |
10% |
10% |
|
Maturity(years) |
5 |
7 |
5 |
|
Yield to maturity |
11% |
12% |
11% |
|
Duration |
5 |
6.58 |
4.68 |
Q. If Mr.Jose has to pick up any two bonds what would be his choice.What are the reasons you cite for picking up the particular bonds?
Assignment C (40 multiple choice questions)
Q.1 Duration is the measure of
(a) Time structure of the bond
(b) Interest rate risk
(c) Time structure & market risk
(d) Time structure & the interest rate risk
Q.2 The statistical tool used to measure a company’s risk is
(a) Mean
(b) Mode
(c) Variance
(d) Co-variance
Q.3 Interest rate risk occurs when
(a) The market price of bond moves inversely to the prevailing market interest rate
(b) The variability in yield is due to the market interest rate fluctuations
(c) There is variability in the coupon interest rates
(d) All
Q.4 Uncontrollable risk of a company is
(a) Labour problem
(b) Increase in loan service charge
(c) Cut in subsidy
(d) Technological obsolescence
Q.5 Conceptual framework of valuation through P/E ratio arises from
(a) Multiple year holding model
(b) Constant growth model
(c) Two stage growth model
(d) Three stage growth model
Q.6 An investor purchases a stock in the stock market. His holding period return depends on the
(a) Purchase price of the stock
(b) Selling price of the stock
(c) Dividend paid to the stock
(d) All the above
Q.7 Inter Connected Stock exchange is to interlink
(a) The BSE, NSE & OTCEI
(b) All the stock exchanges
(c) Fifteen regional stock exchanges
(d) Fourteen regional stock exchanges
Q.8 Over the Counter Exchange of India was started after the role model of
(a) NASAQ
(b) JASAQ
(c) NASDAQ & JASDAQ
(d) NSE
Q.9 Customer’s protection fund is set up
(a) To protect the investors against price fluctuations
(b) To protect the broker in case of non payment of money by investors
(c) To provide insurance to investors incase of default by the members
(d) To protect the member & the investor
Q.10 The oldest stock exchange in India is
(a) BSE
(b) NSE
(c) Nifty
(b) ISE
Q.11 The accounting period cycle of NSE is
(a) Wednesday to next Tuesday
(b) Tuesday to next Wednesday
(c) Monday to next Friday
(d) Wednesday to next Wednesday
Q.12 Marketability risk of bond is
(a) The market risk which affects all the bonds
(b) Variation in return caused by difficulty in selling bonds
(c) The failure to pay the agreed value of the bond by the issuer
(d) Both a & b
Q.13 Default risk is lower in
(a) Treasury bills
(b) Government bonds
(c) ICICI Bonds
(d) IDBI bonds
Q.14 The value of bond depends on
(a) The coupon rate
(b) Years to maturity
(c) Expected yield to maturity
(d) All the above
Q.15 The bond yield remains constant over its life and the discount or premium amount will decrease
(a) At a decreasing rate as its life gets shorter
(b) At a decreasing rate as its life gets longer
(c) At an increasing rate as its life gets shorter
(d) At an increasing rate as its life gets longer
Q.16 Investment is the
(a) Net additions made to the national capital stocks
(b) Person’s commitment to buy a flat or a house
(c) Employment of funds on assets to earn returns
(d) Employment of funds on goods and services that are used in production process
Q.17 Speculator is a person
(a) Who evaluates the performance of the company
(b) Who uses his own funds only
(c) Who is willing to take high risk for high return
(d) Who considers heresays & market behaviours
Q.18 To frame the investment policy the investor should have
(a) Knowledge about the company and the brokers
(b) Investible funds
(c) Knowledge about investment alternatives
(d) Knowledge about the market with funds
Q.19 The main objective of a rational investor is
(a) Maximising returns & minimizing risk
(b) Minimising return & maximizing risk
(c) short term gains
(d) safety of the principal
Q.20 Clearing & settlement operations of the NSE is carried out by
(a) National Security Depository Ltd
(b) National Security Clearing Co-operation
(c) State Bank of India
(d) By the exchange itself
Q.21 In the stock market psychology
(a) Investors forget the past
(b) History repeats itself
(c) More faith in future prediction
(d) Both a &b
Q.22 Gross domestic product is a logical factor to analyse the economy in picking up a stock because it indicates
(a) Inflation or deflation
(b) The market value of assets
(c) The status of the economy
(d) The condition of the stock market
Q.23 One of the following factors leads the activity of the stock market
(a) Money supply
(b) Per capita income
(c) Unemployment rate
(d) Manufacturing & trade
Q.24 The fall in interest rate is conducive to the stock market because
(a) Money may flow from the bond market to stock market
(b) Corporate can borrow at easy terms
(c) Brokers can do business at borrowed funds
(d) Both b & c
Q.25 The growth in book value per share shows the
(a) Rise in the share price
(b) Increase in the physical assets of the form
(c) Increase in the net worth
(d) Growth in reserves
Q.26 The price earnings ratio of a stock reflects
(a) The growth of the company
(b) The market mood for the company’s stock
(c) The earnings retained and invested in the company
(d) The dividend paid out for the company’s stock
Q.27 NBFC’s offers higher interest rate because of
(a) the best management funds
(b) the competition amongst NBFCs
(c) the risk involved
(d) the credit rating
Q.28 Open ended schemes are
(a) open for a particular period
(b) have fixed period of maturity
(c) listed in the stock exchanges
(d) open on a continuous basis
Q.29 Interval fund is
(a) Index fund
(b) open fund
(c) a closed end fund
(d) a combination of close & open end fund
Q.30 Index schemes
(a) Returns equal to index returns
(b) reflect the market
(c) are income schemes
(d) are tax saving schemes
Q.31 Stock exchange
(a) helps in the fixation of stock prices
(b) ensure safe & fair dealing
(c) induces good performance by the company
(d) All the above
Q.32 __________ was the grandfather of technical analysis.
A) Harry Markowitz
B) William Sharpe
C) Charles Dow
D) Benjamin Graham
E) none of the above
Q.33 The goal of the Dow theory is to
A) identify head and shoulder patterns.
B) identify breakaway points.
C) identify resistance levels.
D) identify support levels.
E) identify long-term trends.
Q.34 Technical indicators help
(a)To find out the present state of the stock market
(b)To estimate the growth of stock market
(c)To indicate the economic activity
(d)To show the direction of the overall market
Q.35 The market value of the scrip is determined by
(a) The dividend declared by the company
(b) The present status of the stock market
(c) The number of floating shares
(d) The interaction of demand & supply
Q.36 The negotiable financial investment is different from the non-negotiable financial investment in terms of
(a) Maturity period
(b) Interest rate
(c) Transferability
(d) Face value
Q.37 Investment made on a house property is a
(a) Financial investment
(b) Economic investment
(c) Non-negotiable financial investment
(d) Non-financial investment
Q.38 Which one of the following is not a money market security?
(a) Treasury bills
(b) National savings certificate
(c) Certificate of deposit
(d) Commercial paper
Q.39Commercial papers are
(a) Unsecured promissory notes
(b) secured promissory notes
(c) Sold at a premium
(d) issued for a period of 1-2 years
Q.40 This particular scheme helps in deferring the tax payment
(a) Public provident fund
(b) National savings scheme
(c) National savings certificate
(d) Life insurance scheme