Objective Type Questions Fm

8/12/2019 Objective Type Questions Fm

1/20

- 1 -

Objective Questions and Answers of Financial Management

5. State whether each of the following statements is True (T or False (F!(i)Investment decisions and capital budgeting are same.(ii)Capital budgeting decisions are long term decisions.(iii)Capital budgeting decisions are reversible in nature.

(iv) Capital budgeting decisions do not afect the uture Stability o the rm.(v)There is a time element involved in capital budgeting.(vi)An epansion decision is not a capital budgeting decision(vii)In mutually eclusive decision situation! the rm can accept all easible proposals.(viii) Capital budgeting and capital rationing are alternative to each other.(i) Correct capital budgeting decisions can be ta"en by comparing the cost #ith uture benets.() $uture epected prots rom an investments are ta"en as returns rom the investment orcapital budgeting.(i) Cash %o#s are the appropriate measure o costs and benets rom an investment proposal.(ii) Sun" cost is a relevant cost in capital budgeting.(iii) The opportunity cost o an input is al#ays considered! in capital budgeting.(iv) Allocated overhead costs are not relevant or capital budgeting.(v) Cash %o#s and accounting prots are diferent.

(vi) Cash %o#s are same as prot beore ta.(vii) &et cash %o# is on ater ta basis.'Ans#ers (i) $! (ii) T! (iii) $! (iv) $! (v) T! (vi) $! (vii) $! (viii) $! (i) $! () $! (i) T! (ii) $! (iii) $! (iv)T! (v) T! (vi)$! (vii) T

". Multi#le choice $uestions. Capital *udgeting is a part o (a)Investment +ecision!(b) ,or"ing Capital -anagement!(c)-ar"eting -anagement!(d) Capital Structure.. Capital *udgeting deals #ith(a) /ong0term +ecisions!(b) Short0term +ecisions!(c) *oth (a) and(b)!(d) &either (a) nor (b).1. ,hich o the ollo#ing is not used in Capital *udgeting2(a) Time 3alue o -oney! (b) Sensitivity Analysis! (c) &et Assets -ethod!(d) Cash $lo#s.4. Capital *udgeting +ecisions are(a) 5eversible!(b) Irreversible!(c) 6nimportant!(d)All o the above.7. ,hich o the ollo#ing is not incorporated in Capital *udgeting2(a) Ta08fect!(b) Time 3alue o -oney!(c) 5e9uired 5ate o 5eturn!(d) 5ate o Cash +iscount.:. ,hich o the ollo#ing is not a capital budgeting decision2(a) 8pansion ;rogramme!(b) -erger! (c) 5eplacement o an Asset!(d) Inventory /evel.


2/20

- 2 -

. Savings in respect o a cost is treated in capital budgeting as(a) An In%o#!(b) An >ut%o#!(c) &il! (d) &one o the above.%Answers ! l(a& '(a& (c& )(b& 5(d& "(d& *(a& +(d& ,(b& -(d& --(d& -'(c& - (c&-)(c& -5(b& -"(c& -*(c& -+(b& -,(c& '(b& '-(a/

*. State whether each of the following statement is True (T or False (F!

(i) Irrespective o the issue involved in a capital budgeting anon! the basic techni9ues can be usedin all cases.(ii) Capital 5ationing as a situation #hen the Bovernment has imposed a ceiling on investment bya rm.(iii) A rm should al#ays implement a positive &;3 props irrespective o und re9uirement.(iv) -oney cash %o#s should be discounted at nominal discount rate.(v) 5eal cash %o#s should be discounted at normal discount rate.(vi) 8A- is! in a #ay! an etension o &;3 method.(vii) 8A- should be used in accept0reect decision situation.(viii) $easibility Set Approach is based on the &;3 method o capital budgeting.(i) Selection based on ;I method gives optimum decision ma"ing in case o indivisible proects.() A rm should ignore the replacement timing o an asset.(i) There is no need to deer a positive &;3 proposal.(ii) -ulti0period and -ulti0constraints are one and the same thing.(iii) In%ation afects not only the cash %o#s but also the discount rate.Answers! (i F& (ii F& (iii F& (iv T& (v T& (vi T& (vii F (viii T& (i0 F& (0 F& (0i F& (0ii F&(0iii T

+. Multi#le 1hoice Questions!. In capital budgeting! the term Capital 5ationing implies(a) That no retained earnings available!(b) That limited unds are available or investment!(c) Thatno eternal unds can be raised!(d) That no resh investment is re9uired in current year. $easibility Set Approach to Capital 5ationing can be applied in(a) Accept05eect Situations!(b) +ivisible ;roects!(c) -utually 8clusive ;roects!(d) &one o theabove1. In case o divisible proects! #hich o the ollo#ing can be used to attain maimum &;32(a) $easibility Set Approach!(b) Internal 5ate o 5eturn!(c) ;rotability Inde Approach!(d) Any othe above4. In case o the indivisible proects! #hich o the ollo#ing may not give the optimum result2(a) Internal 5ate o 5eturn!(b) ;rotability Inde!(c) $easibility Set Approach!(d) All o the above7. ;rotability Inde! #hen applied to +ivisible ;roects! impliedly assumes that(a) ;roect cannot be ta"en in parts!(b) &;3 is linearly proportionate to part o the proect ta"enup!(c) &;3 is additive in nature!(d) *oth (b) and (c):. I there is no in%ation during a period! then the -oney Cash%o# #ould be e9ual to(a) ;resent 3alue!(b) 5eal Cash%o#!(c) 5eal Cash%o# ;resent 3alue ! (d) 5eal Cash%o# 0 ;resent3alue


3/20

- 3 -

(i) A ris"y situation is one in #hich the probability or the occurrence or non0occurrence o anevent cannot be assigned.(ii) In capital budgeting proposals! ris" may arise due to diferent actors.(iii) In ris"y capital budgeting proposals! the discount rate is not "no#n #ith certainty.(iv) 5is" Adusted +iscount 5ate and Certainty 89uivalents are on based statistical measures.(v) In ;aybac" ;eriod method! the ris" o the proposal is incorporated by lessening the target

paybac" period.(vi) In Certainty 89uivalents method! both the cash%o#s and the discount rate are adusted.(vii) In Sensitivity Analysis! the &;3 o the proposal is adusted.(viii) In Sensitivity Analysis! one variable is adusted at a time to see its efect on the &;3.(i) Sensitivity Analysis helps in calculation o &;3 o the proposal.() 8pected value o cash %o#s is e9ual to the arithmetic average o the cash %o#s.(i) In case o capital budgeting! higher the standard deviation better the proect is.(ii) In case o dependent cash %o#s! the ris" is measured #ith reerence to oint probabilities.(iii) CoeKcient o variation is as good a measure o ris" as the standard deviation.(iv) +ecision Tree Approach is suitable to analyse a multistage decision situation.(v) Abandonment evaluation o a proect is ma the implementation o a capital budgetingproposal.%Answers! (i F& (ii T& (iii F& (iv F& (v T& (vi F& (vii F&(viii F& (i0 F& (0 F& (0i F& (0ii T& (0iiiF& (0iv T& (0v F/

'. Multi#le 1hoice Questions. 5is" in Capital budgeting implies that the decision0ma"er "no#sLLLLLLLLLLLo the cash %o#s.(a) 3ariability!(b);robability!(c) Certainty!(d) &one o the above. In Certainty0e9uivalent approach! adusted cash %o#s are discounted at(a) Accounting 5ate o 5eturn!(b) Internal 5ate o 5eturn!(c) Murdle 5ate!(d) 5is"0ree 5ate1. 5is" in Capital budgeting is same as(a) 6ncertainty o Cash %o#s!(b) ;robability o Cash %o#s!(c) Certainty o Cash %o#s!(d) 3ariabilityo Cash %o#s4. ,hich o the ollo#ing is a ris" actor in capital budgeting2(a) Industry specic ris" actors!(b) Competition ris" actors!(c) ;roect specic ris" actors!(d) Allo the above7. In 5is"0Adusted +iscount 5ate method! the normal rate o discount is(a) Increased! (b) +ecreased!(c) 6nchanged!(d) &one o the above:. In 5is"0Adusted +iscount 5ate method! #hich one is adusted2(a) Cash %o#s!(b) /ie o the proposal!(c) 5ate o discount!(d) Salvage value


4/20

- 4 -

(i) Cost o debt is the same as the rate o interest.(ii) Cost o ;re. share capital is determined by the rate o ed dividend.(iii) Cost o 89uity share capital depends upon the mar"et price o the share.(iv)Cost o eisting share capital and resh issue o capital are same.(v) 5etained earnings have implicit cost only.(vi) ,ACC is al#ays calculated #ith reerence to boo" value o diferent sources o unds.

(vii) *oo" 3alue N -ar"et 3alue #eights are al#ays diferent.(viii) 5etained earnings have no mar"et value! so these are not included in ,ACC (based onmar"et value)%Answer ! (i T& (ii T& (iii F& (iv T& (v F& (vi F& (vii F& (viii F& (i0 F& (0 T& (0iF(0ii T& (0iiiT& (0iv F& (0v T& (0vi F&(0vii F& (0viii F/''. Multi#le 1hoice Questions. Cost o Capital reers to (a) $lotation Cost!(b) +ividend!(c) 5e9uired 5ate o 5eturn!(d) &one othe above.. ,hich o the ollo#ing sources o unds has an Implicit Cost o Capital2(a) 89uity Share Capital!(b) ;reerence Share Capital!(c) +ebentures!(d) 5etained earnings.1. ,hich o the ollo#ing has the highest cost o capital2 (a) 89uity shares!(b) /oans!(c) *onds!(d);reerence shares.4. Cost o Capital or Bovernment securities is also "no#n as (a) 5is"0ree 5ate o Interest!(b)-aimum 5ate o 5eturn!(c) 5ate o Interest on $ied +eposits!(d) &one o the above.7. Cost o Capital or *onds and +ebentures is calculated on (a) *eore Ta basis!(b) Ater Tabasis!(c) 5is"0ree 5ate o Interest basis!(d) &one o the above.:. ,eighted Average Cost o Capital is generally denoted by (a) "A! (b) "#! (c) "@! (d) "c!


5/20

- 5 -

(a) Cost o 89uity!(b) Cost o Capital!(c) $lotation Cost!(d) -arginal Cost o Capital.


6/20

- 6 -

%Answers! -. (a& '. (d& . (c& ). (a& 5. (a& ". (c& *. (a& +. (b& ,. (c& -. (c& --. (b&-'. (b& -. (b& -). (b& -5. (b& -". (c& -*. (c& -+. (d& -,. (b& '. (d& '-. (c& ''. (c&'. (b/'5. State whether each of the following statements is True (T or False (F.i. 8*IT is also "no#n as operating prots.ii. I 8*IT or t#o rms are same! then the 8;S o these rms #ould also al#ays be same.

iii. 8;S depends upon the composition o capital structure!iv. $inancial brea"even level occurs #hen 8*IT is Rero.v. At nancial brea"even level o 8*IT! 8;S #ould be Rero.vi. Indiference level o 8*IT is one at #hich 8;S is Rero.vii. Indiference level o 8*IT is one at #hich 8;S under t#o or more nancial plans #ould be same.viii. All e9uity plan and +ebt0e9uity plan have no indiference level o 8*IT.i. ;reerence dividend is not a actor o indiference level o 8*IT.. 8*IT08;S Analysis is an etension o nancial leverage analysis.i. Trading on e9uity is resorted to #ith a vie# to decrease 8;S.%Answers ! (i T& (ii F& (iii T& (iv F& (v T& (vi F& (vii T& (viii F (i0 F& (0 T& (0i F/

'". Multi#le 1hoice Questions.In order to calculate 8;S! ;rot ater Ta and ;reerence +ividend is divided by(a) -; o 89uity Shares!(b) &umber o 89uity Shares!(c) $ace 3alue o 89uity Shares! (d) &one othe above. .Trading on 89uity is (a) Al#ays benecial!(b) -ay be benecial!(c) &ever benecial!(d) &one o the above.1. *enet o PTrading on 89uityP is available only i(a) 5ate o Interest H 5ate o 5eturn!(b) 5ate o Interest G 5ate o 5eturn!(c) *oth (a) and (b)!(d)&one o (d) and (b).4. Indiference /evel o 8*IT is one at #hich(a) 8;S is Rero!(b) 8;S is -inimum!(c) 8;S is highest! (d) &one o these.7. $inancial *rea"0even level o 8*IT is one at #hich(a) 8;S is one!(b) 8;S is Rero!(c) 8;S is Innite!(d) 8;S is &egative.:. 5elationship bet#een change in Sales and d >perating ;rot is "no#n as(a) $inancial /everage!(b) >perating /everage!(c) &et ;rot 5atio!(d) Bross ;rot 5atio.


7/20

- 7 -

(a) Migher 89uity is better!(b) Migher +ebt is better!(c) +ebt 5atio is irrelevant!(d) &one o theabove.. In case o &et Income Approach! the Cost o e9uity is (a) Constant! (b) Increasing! (c)+ecreasing! (d) &one o the above.1. In case o &et Income Approach! #hen the debt proportion is increased! the cost o debt(a) Increases! (b) +ecreases! (c) Constant! (d) &one o the above.

4. ,hich o the ollo#ing is true o &et Income Approach2(a) 3$ 383+! (b) 38 3$3+! (c) 3+ 3$38! (d) 3$ 38038!7. &et >perating Income Approach! #hich one o the lo#ing is constant2(a) Cost o 89uity! (b) Cost o +ebt!(c) ,ACC N "d! (d)Oeand Od:. &>I Approach advocates that the degree o debt nancing is(a) 5elevant!(b) -ay be relevant!(c) Irrelevant!(d) -ay be irrelevant.perating Income Approach!(c) Traditional Approach!(d) All o theabove.=. ,hich one is true or &et >perating Income Approach2(a) 3+ 3$ 0 38!(b) 38 3$ 3+!(c) 38 3$ 0 3+!(d) 3+ 3$ 38.?. In the Traditional Approach! #hich one o the ollo#ing remains constant2(a) Cost o 89uity!(b) Cost o +ebt!(c) ,ACC!(d) &one o the above.@. In --0-odel! irrelevance o capital structure is based on(a) Cost o +ebt and 89uity!(b) Arbitrage ;rocess!(c) +ecreasing "@! (d) All o the above..PThat there is no corporate taP is assumed by(a) &et Income Approach!(b) &et >perating Income Approach!(c) Traditional Approach!(d) All othese.. PThat personal leverage can replace corporate leverageP is assumed by(a) Traditional Approach!(b) -- -odel!(c) &et Income Approach!(d) &et >perating IncomeApproach.1. ,hich o the ollo#ing argues that the value o levered rm is higher than that o theunlevered rm2(a) &et Income Approach!(b) &et >perating Income Approach!(c) -- -odel #ith taes!(d) *oth (a)and (c).4. In Traditional Approach! #hich one is correct2(a) "erises constantly!(b) "ddecreases constantly!(c) "@decreases constantly!(d) &one o theabove.7. ,hich o the ollo#ing assumes constant "dand "e2(a) &et Income Approach!(b) &et >perating Income Approach!(c) Traditional Approach!(d) ---odel.:. ,hich o the ollo#ing is true2(a) 6nder Traditional Approach! overall cost o capital remains same!(b) 6nder &I Approach! overallcost o capital remains same!(c) 6nder &>I Approach! overall cost o capital remains same!(d)&one o the above.


8/20

- 8 -

(viii) ,alters model supports the vie# that dividend is relevant or value o the rm.(i) BordonPs model suggests that dividend payment does not afect the mar"et price o the share.() In the ,alters model! the +; ratio should depend upon the relationship bet#een r and "e(i) 5esidual theory says that dividend decision is no decision.(ii) -- model deals #ith irrelevance o dividend decision(iii) -- model is a ool proo model o dividend irrelevance.

(iv) In the arbitrage process o -- model! the dividends paid by a company are replaced by reshinvestment.(v) -- model asserts that value o the rm is not afected #hether the rm pays dividend or not.%Answer (i F& (ii F& (iii T& (iv T& (v T& (vi F& (vii T& (viii T& (i0 F& (0 T& (0i T& (0ii T& (0iiiF& (0ivT& (0v T./

. Multi#le 1hoice Questions(i) ,alterYs -odel suggests or @@F +; 5atio #hen (a) "e r! (b) "eH r! (c) "eG r! (d) "e @(ii) I a rm has "eG r the ,alterPs -odel suggests or (a) @F payout! (b) @@F ;ayout! (c) 7@F;ayout! (d)7F;ayout(iii) ,alterYs -odel suggests that a rm can al#ays increase i.e. o the share by(a) Increasing +ividend ! (b) +ecreasing +ividend! (c) Constant +ividend! (d) &one o the above4. X*ird in handP argument is given by(a) ,al"erPs -odel! (b) BordonPs -odel! (c)-- -ode! (d) 5esiduals Theory7. 5esiduals Theory argues that dividend is a (a) 5elevant +ecision ! (b) Active +ecision! (c);assive +ecision! (d) Irrelevant +ecision:. +ividend irrelevance argument o -- -odel is based on(a) Issue o +ebentures! (b) Issue o *onus Share! (c) Arbitrage ! (d) Medging


9/20

- 9 -

4. Shares o ace value o 5s. @ are =@F paid up. The company declares a dividend o [email protected] o dividendper share is (a)5s. 7!(b)5s.4!(c)5s. =@!(d) 5s. 7@7. ,hich o the ollo#ing generally not result in increase in total dividend liability 2(a)Share0split!(b)5ight Issue!(c)*onus Issue!(d)All o the above:. +ividends are paid out o (a)Accumulated ;rots!(b)Bross ;rot!(c);rot ater Ta!(d)Beneral

5eserveverdrat! (b) $loat! (c) $actoring! (d)&one o the above.

7. Concentration *an"ing helps in(a) 5educing Idle *an" *alance!(b)Increasing Collection!(c)Increasing Creditors!(d)5educing *an"Transactions.:. The Transaction -otive or holding cash is or(a) Saety Cushion!(b)+aily >perations!(c);urchase o Assets!(d);ayment o +ividends.


10/20

- 10 -

.,hich o the ollo#ing is not an obective o cash management 2(a)-aimiRation o cash balance!(b)-inimiRation o cash balance!(c)>ptimiRation o cash balance!(d)ero cash balance..,hich o the ollo#ing is not true o cash budget 2(a)Cash budget indicates timings o short0term borro#ing!(b)Cash budget is based on accrualconcept!(c)Cash budget is based on cash %o# concept!(d)5epayment o principal amount o la# is

sho#n in cash budget.1. *aumolPs -odel o Cash -anagement attempts to(a) -inimise the holding cost! (b)-inimiRation o transaction cost! (c)-inimiRation o total cost!(d)-inimiRation o cash balance4. ,hich o the ollo#ing is not considered by -iller0>rr -odel2(a)3ariability in cash re9uirement!(b)Cost o transaction!(c)Molding cost!(d)Total annualre9uirement o cash.7.*asic characteristic o short0term mar"etable[(a)Migh 5eturn!(b)Migh 5is"!(c)Migh -ar"etability!(d)Migh Saety:.-ar"etable securities are primarily(a) 89uity shares!P (b) ;reerence shares!(c)$ied deposits #ith companies!(d)Short0term debtinvestments.%Answers -. (d& '.(c& . (b& ). (b& 5. (b& ". (b&. ,. (a& -. (a& --. (c& -'. (b& -. (c&-). (d& -5. (c.& -"(d/

5. State whether each of the following statements is True (T or False (F.(i) 5eceivables management deals only #ith the collection o cash rom the debtors.(ii) 5eceivables management involves a trade of bet#een costs and benets o receivable.(iii) The obective o a credit policy is to curtail the credit period allo#ed to customers.(iv) Credit period allo#ed to customers must be e9ual to credit period allo#ed by the supplier tothe rm.(v) +elin9uency cost reers to bad debt losses to the rm.(vi) /iberaliRing the discount rate means increasing the discount rate or the same period.(vii) Credit evaluation o a customer is a cost process hence it need not be underta"en by a sellingrm(viii) In order to minimiRe the level o receivables! a rm should ollo# a strict and aggressiveshould ollo# a strict and aggressive collection procedures.(i) Ageing schedule o receivables is one #ay or monitoring the receivables.() Services o a actor are al#ays benecial.%Answers! (i F& (ii T& (iii F& (iv F& (v F& (vi T& (vii F& (viii F& (i0 T& (0 F/

". Multi#le 1hoice Questions. 7Cs o the credit does not include(a) Collateral!(b)Character! (c) Conditions!(d) &one o the above.. ,hich o the ollo#ing is not an element o credit policy2(a)Credit Terms!(b)Collection ;olicy!(c)Cash +iscount Terms!(d)Sales ;rice.1. Ageing schedule incorporates the relationship bet#een (a)Creditors and +ays >utstanding!(b)+ebtors and +ays >utstanding! (c)Average Age o +irectors! (d)Average Age o All 8mployees.4. *ad debt cost is not borne by actor in case o (a) ;ure $actoring! (b) ,ithout 5ecourse

$actoring! (c) ,ith 5ecourse $actoring! (d)&one o the above.7. ,hich o the ollo#ing is not a techni9ue o receivables -anagement2(a)$unds $lo# Analysis!(b)Ageing Schedule!(c)+ays sales outstanding!(d)Collection -atri.:. ,hich o the ollo#ing is not a part o credit policy2(a)Collection 8fort!(b) Cash +iscount!(c)Credit Standard! (d) ;aying ;ractices o debtors.ut o the ollo#ing! #hat is not true in respect o actoring2(a)Continuous Arrangement bet#een $actor and Seller! (b)Sale o 5eceivables to the actor!(c)$actor provides cost ree nance to seller!(d)&one o the above.

@. ;ayment to creditors is a maniestation o cash held or(a)Transactionery -otive!(b);recautionary -otive!(c)Speculative -otive!(d)All o the above.. I the closing balance o receivables is less than the opening balance or a month then #hichone is true outo (a)CollectionsGCurrent ;urchases!(b)CollectionsGCurrent Sales!(c)CollectionsHCurrent;urchases!(d) Collections H Current Sales.. I the average balance o debtors has increased! #hich o the ollo#ing might not sho# achange in general2(a)Total Sales!(b)Average ;ayables!(c)Current 5atio!(d)*ad +ebt loss.1. SecuritiRation is related to conversion o (a)5eceivables!(b)Stoc"!(c)Investments!(d)Creditors.4. =@F o sales o 5s. @!@@!@@@ o a rm are on credit. It has a 5eceivable Turnover o =. ,hat isthe Average collection period (1:@ days a year) and Average +ebtors o the rm2

(a)47 days and 5s. !@@!@@@!(b)1:@ days and 5s. !@@!@@@!(c)47 days and 5s. =!@@!@@@!(d)1:@days and 5s. !7!@@@.


11/20

- 11 -

7. In response to mar"et epectations! the credit pence r been increased rom 47 days to :@days. This #ould result in(a)+ecrease in Sales!(b)+ecrease in +ebtors!(c)Increase in *ad +ebts!(d)Increase in AverageCollection ;eriod.:. I a company sells its receivable to another party to raise unds! it is "no#n as(a)SecuritiRation!(b)$actoring!(c);ledging!(d)&one o the above.

rder \uantity!(c)Ageing schedule!(d)All o the above.%Answers -. (d& '. (d& . (b& ). (c& 5. (a& ". (d& *. (d& + (b& ,. (c& -. (a --. (b& -'.(b& -. (a& -). (a& -5. (d& -"(b& -*. (a& -+. (a& -,. (a& '. (b& '-. (c/

*. 3hether each of the following statements is True (T or False (F(i) Inventory management does not include management #or" in progress.(ii) Stoc" o nished goods should be as high as possible so that no customer is denied the sale.

(iii) There is no eplicit benet o "eeping inventory! hence no stoc" be maintained.(iv) Carrying cost o inventory includes the carriage in.(v) Carrying cost and ordering cost are opposite orces in receivable management.(vi) Cost o stoc" out occurs #henever the rm has no stoc" o a particular item.(vii) A*C analysis helps to ascertain the minimum level o stoc" o ra# material.(viii) The 8>\ model attempts to minimiRing the total cost o holding inventory.(i) 8>\ model assumes a constant usage rate or a particular item.() Average inventory in 8>\ model is Z o 8>\.%Answers (i F& (ii F& (iii F& (iv F& (v T& (vi F& (vii F& (viii T& (i0 T& (0 T/

+. Multi#le 1hoice Questions. 8>\ is the 9uantity that minimiRes(a)Total >rdering Cost!(b)Total Inventory Cost!(c)Total Interest Cost!(d)Saety Stoc" /evel.. A*C Analysis is used in(a)Inventory -anagement!(b)5eceivables -anagement!(c)Accounting ;olicies!(d)CorporateBovernance.1. I no inormation is available! the Beneral 5ule or valuation o stoc" or balance sheet is(a)5eplacement Cost!(b)5ealiRable 3alue!(c)Mistorical Cost!(d)Standard Cost.4. In A*C inventory management system! class A items may re9uire

(a)Migher Saety Stoc"!(b)$re9uent +eliveries!(c);eriodic Inventory system!(d)6pdating oinventory records.7. Inventory holding cost may include (a) -aterial ;urchase Cost!(b) ;enalty charge or deault!(c)Interest on loan! (d)&one o the above.:. 6se o saety stoc" by a rm #ould(a)Increase Inventory Cost!(b)+ecrease Inventory Cost!(c)&o efect on cost!(d)&one o the above.rder Interval is ed!(b)>rder Interval varies!(c) >rder \uantity is ed!(d) *oth (a) and (c).=. In the 8>\ -odel(a)8>\ #ill increase i order cost increases!(b)8>\ #ill decrease i holding cost decreases!J(c)8>\#ill decrease i annual usage increases!(d)&one o the above.?. 8>\ determines the order siRe #hen(a)Total >rder cost is -inimum!(b)Total &umber o order is least!(c)Total inventory costs are

minimum!(d) &one o the above.@. A*C Analysis is useul or analyRing the inventories(a)*ased on their \uality!(b)*ased on their 6sage and value!(c)*ased on ;hysical 3olume!(d) All othe above.. I A Annual 5e9uirement! > >rder Cost and C Carrying Cost per unit per annum! then8>\

(a) (A>ZC) !(b) A>ZC2 (c) AE>C! (d)A>C.

. Inventory is generally valued as lo#er o(a)-ar"et ;rice and 5eplacement Cost!(b)Cost and &et 5ealiRable 3alue!(c)Cost and Sales 3alue!(d)Sales 3alue and ;rot.1. ,hich o the ollo#ing is not included in cost o inventory2(a);urchase cost!!(b)Transport in Cost!(c)Import +uty!(d)Selling Costs.4. Cost o not carrying suKcient inventory is "no#n as (a)Carrying Cost!(b)Molding Cost!(c)Total

Cost!(d) Stoc"0out Cost


12/20

- 12 -

7. ,hich o the ollo#ing is not a benet o carrying inventories(a) 5eduction in ordering cost! (b)Avoiding lost sales! (c)5educing carrying cost! (d)Avoiding;roduction Shortages.:. ,hich o the ollo#ing is not a standard method o inventory valuation2(a)$irst in $irst out!(b)Standard Cost!(c)Average ;ricing!(d)5ealiRable 3alue.ptimum order siRe.%Answers -. (a& '. (a& . (c& ). (a& 5. (d& ". (a& *& b f 6 ,. (c& -. (b& --. (b& -'. (b&-. (d& -). (d& -5. (c& -"(c& -*. (c& -+. (b& -,. (d/

,. State whether each of the following statements is True (T or False (F!(i) Same considerations are applicable to short0term sources as #ell as long0term sources ounds.(ii) As ban" overdrat is availed by business rms on a regular basis! it may be considered as along0term source o unds.(iii) $or availing unds rom short0term sources! credit rating o borro#er is generally not re9uired.(iv)Credit purchase can be a good source o short0term nance.(v)Cash discount should al#ays be availed by the purchasing rm irrespective o the rate odiscount.(vi)A rm should al#ays arrange the unds by delaying the payment to creditors and payables.(vii) In India! commercial papers can be issued or any amount and or any duration.

(viii) Commercial ;apers can be issued only i minimum credit rating is procured by the issuercompany.(i) *ill +iscounting is a good source o short term nance to all rms.() In India! all types o short0term nancing rom ban"s must be secured.(i) Short0term unsecured debentures are not popular among Indian corporates.(ii) 5eserve *an" o India constituted Tandon Committee to suggest the norms or long0termcredit acility rom ban"s to borro#ers.(iii) >ne o the obective o Tandon Committee m suggest inventory norms or diferent industries.(i) Tandon Committee has suggested diferent method or calculation o -aimum ;ermissible*an" $inance.(v) Oannan Committee suggested or ull discretion ban"s or determining borro#ing limits oborro#ers.%Answers (i F& (ii F& (iii T& (iv T& (v F& (vi F& (vii F& (viii T& (i0 F& (0 T& (0i T& (0ii F&(0iii T& (0iv T& (0v T/

).Multi#le 1hoice Questions

. The type o collateral (security) used or short0term loan is(a) 5eal estate!(b);lant N -achinery!(c)Stoc" o good! (d)89uity share capital. ,hich o the ollo#ing is a liability o a ban"2(a)Treasury *ills!(b)Commercial papers!(c)Certicate o +eposits!(d)Vun" *onds.1. Commercial paper is a type o (a)$ied coupon *ond!(b)6nsecured short0term debt!(c)89uityshare capital!(d) Bovernment *ond4.,hich o the ollo#ing is not a spontaneous source o short0term unds 2(a)Trade credit!(b)Accrued epenses!(c);rovision or dividend!(d)All o the above.7. Concept o -aimum ;ermissible *an" nance #as introduced by(a)Oannan Committee!(b)Chore Committee!(c)&aya" Committee!(d)Tandon Committee.:. In India! Commercial ;apers are issued as per the lines issued by(a) Securities and 8change *oard o India! (b)5eserve *an" o India!(c)$or#ard -ar"etCommission!(d)&one o the above.


13/20

- 13 -

(iii) Technically! the lessee becomes the o#ner o the asset or the lease period.(iv) >perating lease and Sale and lease0bac" are diferent types o transactions.(v) Sale and /ease0bac" and /everaged lease are types o nance lease.(vi) Treatment o >perating lease in AS0? is almost same as re9uired by ta la#s in India.(vii) As per AS0?! in case o $inance lease! the asset is sho#n in the balance sheet o the lessee.(viii) /ease nancing is a type o capital budgeting decision rom the point o vie# o the lessee.

(i) Ta0shield on depreciation and interest is an important variable both or the lessor and thelessee.() A lessee should evaluate the lease options as against the buying option.(i) &et benet o leasing is the &;3 o lease option rom the point o vie# o lessor.(ii) ,hile evaluating lease as a source o long0 term nance! the lessee should give moreemphasis on AS0?.(iii) /ease out%o#s should be discounted at the interest rate to nd out the present values.(iv) A $inance lease has more nancial implications mar. in >perating lease rom the point o vie#or both Jhe lessor and the lessee.%Answers (i F& (ii F& (in F& (iv T& (v T& (vi T& (viiT& (viii F& (i0 T& (0 T& (0i F& (0ii F&(0iii F& (0iv T/

)'. Multi#le 1hoice Questions. In lease system! interest is calculated on(a)Cash do#n payment!(b)Cash price outstanding!(c)Mire purchase price!(d)&one o the above. A short0term lease #hich is oten cancellable is "no#n as(a)$inance /ease!(b)&et /ease!(c)>perating /ease!(d)/everage /ease1. ,hich o the ollo#ing is not a usual type o lease arrangement2(a)Sale N leasebac"!(b)Boods on Approval!(c)/everage /ease!(d)+irect /ease4. 6nder income0ta provisions! depreciation on lease asset is allo#ed to(a) /essor!(b)/essee (c) Any o the t#o! (d)&one o the t#o7. 6nder the provisions o AS0? P/easesP! a leased asset is sho#n is the balance sheet o(a)-anuacturer!(b)/essor! (c)/essee!(d $inancing ban":. A lease #hich is generally not cancellable and covers ull economic lie o the asset is "no#n as(a) Sale and leasebac"! (b)>perating /ease!(c)$inance /ease!(d)8conomic /easene diference bet#een >perating and $inancial lease is(a)There is oten an option to buy in operating lease.(b)There is oten a call option in nanciallease.(c)An operating lease is generally cancelable by lease.(d) A nancial lease in generally cancellableby lease.?. $rom the point o vie# o the lessee! a lease is a(a),or"ing capital decision!(b)$inancing decision!(c)*uy or ma"e decision!(d)Investment decision@. $or a lessor! a lease is a(a)Investment decision!(b)$inancing decision!(c)+ividend decision!(d)&one o the above.. ,hich o the ollo#ing is not true or a ]/ease decision or the lessee2(a) Melps in proect selection (b)Melps in proect nancing (c)Melps in proect location (d)All o theabove.%Answers -. (b& '. (c& . (b& ). (a& 5. (c& ". (c& *.(d&+(c& ,(b& -. (a& --. (b/

). State whether each of the following is True (T or False (F(i) $inancial services reer to acilities relating to capital mar"et.(ii) &on0ban"ing nance companies are engaged in nancial services.(iii) &*$Cs provide nancial services to corporate sector only.(iv) All &*$Cs operating in India must be registered #ith S8*I.(v) 5egulatory rame#or" or &*$Cs is provided by 5*I.(vi)Any &*$C can borro# unds on mutually agreed terms.(vii) ;rudential norms or Assets and Investments by &*$Cs #ere ramed on the recommendationso &arasimhan Committee.(viii) Assets o &*$Cs are also classied as Standard! &on0Standard! +oubtul and /ost.(i) &*$Cs are not allo#ed to operate in Insurance sector.() A merchant ban"er helps in procuring overdrat rom a commercial ban".

(i) All merchant ban"ers have to be registered #ith 5*I.(ii) A lead manager has post0issue responsibilities also.(iii) -erchant ban"ers should ollo# the prescribed code or conduct.(iv) Share capital issued by a company or the rst time is "no#n as venture capital.(v) A mutual und can operate as a venture capital und.(vi) A venture capital rm deals #ith a ne#! ris"y and untested product.(vii) All venture capital unds in India have been promoted by Bovernment.(viii) ;ortolio managers are not re9uired to be registered.(i) A portolio manager has to operate as per the code o conduct prescribed by S8*I.() Credit rating is an authoritative guarantee regardingJ the credit position o a person.i) 5*I has prescribed guidelines or the operations o credit rating agencies in India.ii) Securitisation and $actoring are t#o sides o the same coin.(iii) SecuritiRation in India is regulated by 5*I.

%Answers (iF&(iiT&(iiiF&(ivF&(vT&(vi F&(vii T& (viii T& (i0 F& (0 F (0i F& (0ii T& (0iii T&(0iv F& (0v T &(0vi T& (0vii F& (0viii F& (0i0 T& (00F& (00i F& (00ii F& (00iiiT/


14/20

- 14 -

)). State whether each of the following statements is True (T or False (F(i)3aluation o bonds and o e9uity shares can be made by the same valuation model.(ii) 89uity shares cannot be valued because e9uity shares have no redemption.(iii)Intrinsic value and mar"et price o e9uity shares are al#ays e9ual.(iv)*3 o an e9uity share is the best measure o valuation.

(v)In +ividend +iscount -odel! the valuation o e9uity shares is based on epected stream odividends.(vi) &o0gro#th +ividend model! only net yearsP dividend is capitalised.(vii)&o0gro#th dividend model does not involve present value concept.(viii)BordonPs -odel and Constant Bro#th -odel are one and same.(i) In Constant Bro#th model! the value o e9uity share ii sensitive to gro#th rate.() In Constant Bro#th model! the value o e9uity share not sensitive to re9uired rate o return.(i) $or companies #hich are not epected to pay dividends e9uity shares cannot be valued.(ii) In ,alterPs -odel! the value o e9uity share depends upon the +; ratio.(iii) ; actor is a measure o value o share.(iv) CA;- helps in determining re9uired rate o return.(v) $ace 3alue! Issue ;rice and -ar"et 3alue o bond must be same.(vi) -ar"et 3alue o debt instruments depends upon the mar"et value o collateral.(vii) *asic or Current yield on a bond is calculated #ith reerence to the ace value or issue priceo a debenture.(viii)T- o a bond is the same as the I55 o the bond investment.(i) *ond valuation depends upon the discounted cash %o# techni9ue.() *ond 3aluation is sensitive to both the interest rate and the re9uired rate o return o theinvestor.(i) 5e9uired rate o return and bond valuation are inversely related.%Answers! (i F& (ii F& (iii F& (iv F& (v T& (vi T& (vii& 7&(viii T& (i0 T& (0 F& (0i F& (0ii T&(0iii F& (0iv T& (0v F& & (0vi F& (0vii F& (0viii T& (0i0 T& (00 F& (00i T/

)5. Multi#le 1hoice Questions. +eep +iscount *onds are issued at(a)$ace 3alue!(b)-aturity 3alue!(c);remium to $ace 3alue!(d)+iscount to $ace 3alue.. ;rincipal value o a bond is called the(a)-aturity 3alue!(b)Issue ;rice!(c);ar 3alue!(d)-ar"et ;rice.1. I the re9uired rate o return o a particular bond is less than coupon rate! it is "no#n as(a)+iscount *ond!(b);remium *ond!(c);ar *ond!(d)Vun" *ond.4. -ar"et interest rate and bond price have(a);ositive relationship!(b)Inverse relation!(c)&o relationship!(d)Same relationship7. I a coupon bond is selling at discount! then #hich o the ollo#ing is true2(a) ;o H ;ar and T- H coupon!(b) ;o H ;ar and T- G coupon(c);o G ;ar and T- H coupon!(d) ;o G ;ar and T- G coupon:. In the ormula "e(+Z;@) g! +Z;@reers to(a)Capital gain yield!(b)+ividend yield!(c)Interest yield!(d)&one o the above


15/20

- 15 -

(a)Intrinsic 3alue H -ar"et 3alue!(b)Intrinsic 3alue G -ar"et 3alue! (c)-ar"et 3alue H 5edemption3alue!(d)-ar"et 3alue 5edemption 3alue.@. In case the maturity period o a bond increases! the volatility(a) Increases!(b)+ecreases!(c)5emains same!(d)*oth (a) and (b).. Current -ar"et ;rice o a *ond is e9ual to its ;ar 3alue i

(a)$ace 3alue is 5s. @@@!(b)Coupon is paid hal yearly!(c)Coupon 5ate Current ield! (d) It is aBovernment *ond.. I the coupon rate and re9uired rate o return are e9ual! the value o the bond is e9ual to(a) -ar"et 3alue!(b) ;ar 3alue! (c)5edemption 3alue!(d) &one o the above.1. T- o a *ond is not afected by(a) Coupon 5ate! (b)Issue ;rice! (c)5edemption 3alue!(d) Interest Amount.4. I Coupon rate is less than 5e9uired 5ate o 5eturnJ as the maturity approaches the discounton bond(a)Increases!(b)+ecreases!(c)5emains Constant!(d) &one o the above.7. An investor buys a bond today and sells ater 1 months the rate o return realised is "no#n as(a)ield to -aturity!(b)Current yield!(c)Molding ;eriod 5eturn!(d) 5e9uired 5ate o 5eturn.%Answers -. (d& '. (c& . (c& ). (b& 5. (b& ". (b& *. (c& +. (c& ,. (a& -. (a& --. (b&-'. (b& -. (a& -). (c& -5. (c& -". (c& -*. (b& -+. (b& -,. (b& '. (a& '-. (c& ''. (c&'. (b& '). (b& '5. (c/

)". State whether each of the following statements is True (T or False (F.(i) ;rincipal obective o ma"ing investment is return! hence! ris" can be ignored by an investor.(ii) 5eturn includes only the interest or dividend received rom an investment.(iii) Molding period return includes the capital gain as #ell as revenue return.(iv) I more than one value o return is epected! then epected return can be ascertained #ith thehelp o probabilities.(v) 5is" reers to possibility o loss rom an investment.(vi) *usiness ris" arises because o competition in the mar"et.(vii) $inancial ris" o a rm depends upon composition o capital structure.(viii) Systematic ris" is diversiable.(i) Systematic ris" remains ed irrespective o number o securities in portolio.() +egree o ris" and ris" premium are positively related.(i) &o investor is ready to ta"e ris" in #hatsoever situation.(ii) Standard deviation is better than coeKcient o variation as measure o ris".(iii) Migher ris" may be assumed by an investor i the r is lo#er.(iv) 3ariation in epected return rom an investment is "no#n as ris".(v) M- -odel deals #ith evaluation o portolios.(vi) 8Kcient $rontier consists o a large number or 1 portolios.(vii) Capital -ar"et /ine sho# the -; o shares at the echanges.(viii)CA;- establishes that the return o a security 0m related to ris" o that security.(i) ^ and cannot be used interchangeably.(v) ^ is a measure o epected return o a security.(i) Security -ar"et /ine is the graphical presentation o security prices.(i) C-/ and S-/ have same shape and conveys same ideas.(iii)CA;- can be used or ris"0return relationship o any type o asset.

%Answers (i F& (ii F& (iii T& (iv T& (v F& (vi T& (vii T& (viii F& (i0 T& (0 T& (0i F& (0ii F&(0iii F& (0iv T& (0v F&(0vi T& (0vii F& (0viii T& (0i0 T& (00 F& (00i F& (00ii F &(00iiiT/

)*. Multi#le 1hoice Questions. *eta! ^! o ris"0ree investment is (a)ero!(b)! (c)0! (d)&one o these.. 5eturn o a portolio is(a)Total 5eturn o all elements!(b)Average 5eturn o all elements!(c)Mighest 5eturn (d) /o#est5eturn1. ,hich o the ollo#ing is diversiable ris"2(a)In%ation 5is"!(b)Interest 5ate 5is"!(c)Seasonal 5is"! (d)All o the above.4. ,hich o the ollo#ing is not a non0diversication(a)Industrial recession!(b)/oc"0out in a company!(c);olitical Instability!(d)*oth (a) and (c).7. ,hich o the ollo#ing is true2 (a)5is" can never be reduced to Rero!(b)+iversication al#ays

reduces ris" to Rero!(c)+iversication does not afect ris"!(c)&one o the above.:. Standard deviation can be used to measure(a)5is" o an investment!(b)5eturn o an investment! (c)*oth(a)N(b) and (d) &one o (a) and (b).ptimiRation o 5is"

. *asic obective o diversication is(a) Increasing 5eturn! (b) -aimising 5eturn! (c) +ecreasing 5is"! () -aimiRing 5is".


16/20

- 16 -

. 5is"0aversion o an investor can be measured by(a) -ar"et 5ate o 5eturn!(b) 5is"0ree 5ate o 5eturn! (c) ;ortolio 5eturn! (d) &one o the above.1.5is" o a portolio depends on(a) 5is" o elements! (b) Correlation o return J (c) ;roportion o elements! (d) All o the above.4. ,hich o the ollo#ing #ill increase the re9uired rate o return2(a)Increase in Interest 5ates! (b) Increase in 5is"0ree 5ate! (c)Increase in +egree o 5is"0Aversion

(d) All o the above.


17/20

- 17 -

%Answers (i F& (ii F& (iii T& (iv F& (v F& (vi T& (vii T& (viii T& (i0 T& (0 F& (0i F& (0ii F& (0iiiF& (0iv F& (0v T& (0vi F& (0vii T& (0viii T& (0i0 T& (00 T& (00i F& (00ii F& (00iii T& (00iv '/

),.Multi#le 1hoice Questions. A $utures contract is standardiRed version o a(a);ut option!(b)Call option!(c)Call ;ut!(d)$or#ard contract

. -argins are imposed on options sellers to saeguard the interest o(a)8change!(b)*ro"ers! (c)*uyers!(d) d) All o the above1. In $utures trading! the margin in payable to the bro"er by(a)*uyer o $utures!(b)Sellers o $utures!(c)&one o (a) and (b)!(d)*oth o (a) and (b)4. A contract #hich gives the holder a right to buy a particular asset at a particular rate on orbeore a specied date is "no#n as (a) 8uropean >ption! (b) Straddle!(c) American >ption! (d)Strangle7. In India! derivatives in interest rates are regulated by (a) Securities and 8change *oard oIndia!(b) $or#ard -ar"et Commission!(c) 5eserve *an" o India!(d) -inistry o $inance:. The maimum loss o a call option holder is e9ual to(a) Stri"e0Spot ;rice!(b) Spot ;rice!(c) ;remium!(d)So ;remium


18/20

- 18 -

5-.Multi#le choice $uestions. A rm can ac9uire target rm by (a) ;urchasing assets o Target! (b) ;urchasing shares oTarget! (c);urchasing Assets or Shares(d)&one o the above. A*C /td ac9uires substantial number o e9uity shares in U /td. It is a case o(a)-erger!(b)Ac9uisition!(c)Amalgamation!(d)Absorption

1. ;\5 /td. is a prot ma"ing company. It is absorbed into another group company U /td. #hichis a loss company. This is a case o (a)Mostile ta"eover bid!(b)MoriRontal -erger!(c)5everse -erger!(d)Ta"eover4. 6nder AS 4! and amalgamation in the nature o merger is a case #hereLLLLLLLLo shareholderso transerorcompany have agreed to become shareholders o transeree company.(a) -ore than 7@F! !(b) @@F!(c) At least ?@F!(d) 7F or more7. -erger o t#o companies under *I$5 supervision is "no#n as (a) 5everse -erger! (b)&egotiated -erger! (c) >fer or Sale! (d) Arranged -erger:. ,hich o the ollo#ing is not a usual method o calculation o Share S#ap 5atio2(a);rot beore Ta!(b)-ar"et Turnover!(c)8conomic 3alue Added!(d)All o the above


19/20

- 19 -

1. &o. o units o domestic currency re9uired to buy one unit o a oreign currency is "no#n as(a)Indirect 5oute!(b)Cross05ate! (c)+irect 5oute!(d)Spot 5ate4. &ormally! direct as" price isLLLLLLLLL than the direct bid price.(a)e9ual!(b)greater!(c)lesser!(d)&one o the above7. I the spot rate o ` in -umbai is 5s. 47.7@ and month or#ard rate is 2 47.:7! then #hich iscorrect or or#ard mar"et2 (a)That ` is at premium!(b)That ` is at discount!(c)5upee is at

premium!(d)&one o the above:. I the Spot 5ate o ` in -umbai is 5s. 4:.ptions -ar"et!(b)$utures -ar"et!(c)-oney -ar"et!(d) All o the above=. An Indian eporter has despatched goods #orth ` !@@!@@@ receivable in months time. Me canhedge echange rate ris" by(a)*uying a ` Call >ption!(b)Selling a ` Call >ption!(c)*uying a ` ;ut >ption!(d)Selling a ` ;ut>ption?. -r. U has to pay ` 7!@@!@@@ in three months time or the imports made by him. Correct hedgingpolicy or him#ould be to (a)*uy a ` Call >ption!(b)Sell a ` Call >ption!(c)*uy a ` ;ut >ption!(d) Sell a ` ;ut>ption@. 5elationship bet#een Spot and $or#ard 8change 5ate s is reerred to as(a)Interest 5ate ;arity!.(b);urchasing ;o#er ;arity!(c)8change ;o#er ;arity!(d)>ne0price rule. Adustment in 8change 5ates due to diferent in%ation rates in t#o countries is "no#n as(a)>n ;rice 5ate!(b)Interest 5ate ;arity!(c);urchasing ;o#er ;arity!(d)8change ;o#er ;arity. Annual nominal Interest rates in country U and country are :F and F respectively. Currentechange rate is 7 units o U per unit o . 1 months or#ard rate #ould be (a)4.5). State whether each of the following statement is True (T or s(F(i) Capital mar"et includes money mar"et and oreign echange mar"et.(ii) Stoc" echanges are a part o primary mar"et segment.(iii) Securities are issued in the secondary mar"et segment.(iv)S8*I is an association o stoc" echanges in India.(v) ;rimary obectives o S8*I include InvestorsP ;rotection and 5egulation o capital mar"et inIndia.(vi) *adla system is prevailing in India.(vii) *oo"0building system cannot be used or issue o shares.(viii) >perations o stoc" echanges are directly controlled by Bovernment.

(i) &ational Stoc" 8change has been established by S8*I.() >TC8I is a subsidiary o &ational Stoc" 8change.(i) At the Stoc" 8change! -umbai (*S8 /td.) the trading in shares is made through out0crysystem.(ii) The term Pbought outP deal is related to >TC8I.(iii) The eKciency #ith #hich the inormation is re%ected in the mar"et prices o securities! isdenoted as the strength o the mar"et.(iv) S8*I regulates the operations in both the primary and the secondary mar"et.(v) &e# Issue -ar"et is an element o primary mar"et.(vi) Individual investors can deal #ith only in secondary mar"et.(vii) &ational Stoc" 8change o India is a ;ublic Sector >rganisation.(viii) In the on0line trading system at the &ational Stoc" 8change! the badla system has beenormalised.

%Ans. (i F& (ii F& (8i F& (iv F& (v T& (vi F& (vii F& (viii F& (i0 F& (0 F& (0i F&(0ii T& (0iii F&(0iv T& (0v T& (0vi F& (0vii F& (0viii F

55. State whether each of the following statement is True (T or False (F(i) S8*I has been constituted under the Securities (Contracts and 5egulation) Act! ?7:.(ii) S8*I is constituted rom amongst the directors o various stoc" echange.(iii) The purpose o issuing diferent types o 5ules and 5egulation by S8*I is to bring monetarygains to the investors.(iv) Bovernment need not bother about the protection o the investors.(v) S8*I has issued various guidelines to educate investors.(vi) -utual $und is a pool o money belonging to various investors.(vii) -oney -ar"et -utual $unds are also traded at Stoc" 8change.(viii) 8very -utual $und has to calculate the &A3 as per the procedure given in the S8*I

Buidelines.(i) >ptions and $utures Contracts in India are settled on calendar month basis.


20/20

- 20 -

() In Breen Shoe >ption! the investors are allotted as many shares as applied.(i) +emutualisation reers to separation o trading and o#nership right o stoc" echange.(ii) BS> is available only in case o issue o shares by boo" building process.(iii) In +epository system! a shareholder is a benecial o#ner.(iv) +epository participant is an agent o an investor.(v) In boo"0building process! the price o the security is announced by the company.

(vi) 5olling Settlement is a system o settlement o accounts o bro"ers.(vii) Sense is an inde number o 7@ shares.(viii) &S8 and *S8 are the only stoc" echanges in India.(i) The oldest stoc" echange in India is &S8.() $utures and >ptions in shares are traded only at *S8 and &S8.%Answer (i F& (ii F& (iii F& (iv F& (v F& (vi T& (vii T& (viii T& (i0 T& (0 F& (0i T& (0ii T&(0iiiT& (0iv F& (0v F& (0vi F& (0vii F& (0viii F& (0i0 F& (00 T/

5".Multi#le 1hoice Questions Assets -anagement company is ormed(a) To manage ban"Ps assets!(b)) To manage mutual unds investments!(c)) To constructinrastructure proects(d) To run a stoc" echange. ;rime duty o a merchant ban"er is(a) -aintaining records o clients! (b) Biving loans to clients!(c) ,or"ing as a Capital -ar"etIntermediary(d)&one o the above1. *asic obective o a money mar"et mutual und is(a) Buaranteed rate o return!(b) Investment in short0term securities!(c)*oth (a) and (b)!(d) &oneo (a) and (b)4. Short selling reers to(a) *uying shares and then selling them on the same day!(b) Selling shares #ithout o#ning them!(c) Selling some shares out o a large holding!(d) Continuously selling shares in lots.7. ,hich o the ollo#ing is not regulated by S8*I2(a) $oreign Institutional Investors!(b) $oreign +irect Investment!(c) -utual $unds!(d) +epositories:. ,hich o the ollo#ing is true or mutual unds in India2 (a)8it load is not allo#ed!(b)8ntry loadis allo#ed!(c)8ntry load is not allo#ed!(d)8it load allo#ed is some casesptions!(b)Inde $utures!(c)Commodity >ptions!(d)Commodity $utures=. ,hich o the ollo#ing is the benet o +epositories2 a) 5eduction in the share transer time tothe buyer!(b) 5educed 5is" o stolen! a"e! orged shares! (c) &o Stamp duty on transer o shares indematerialiRed orm(d) All o the above?. Credit 5ating o a debt security is (a)Buarantee o 5epayment!(b)-erely opinion!(c);ositivesuggestion !(d)&one o the above@. The rst computerised online stoc" echange in India #as(a)&S8!(b)>TC8I!(c)*S8!(d)-CU. ,hich o the ollo#ing is #or"ing as demutualiRed stoc" echange since rom beginning2(a)&S8!(b)*S8!(c)+S8!(d)All o the above

. ,hich o the ollo#ing derivative is not traded on Indian Stoc" -ar"et2(a)Inde >ptions!(b)Stoc" $utures!(c)Inde $utures!(d)$or#ard 5ate Agreements1. Mo# many depositories are there in India2 (a)!(b)1!(c)@!(d) 4. The amount in unpaid dividend accounts o companies shall be transerred to the(a)+ividend 89ualisation 5eserve o the company!(b)Investor 8ducation and ;rotection und!(c)Investor ;rotection $und!(d) Beneral 5evenue Account o the Central Bovernment7. Secondary -ar"et in India is regulated by(a)5eserve *an" o India!(b)Securities and 8change *oard o India!(c)-inistry o $inance!(d)$or#ard -ar"et Commission:. ..unds do not have a ed date o redemption.(a) >pen ended unds!(b)Close ended unds!(c)+iversied unds!(d) *oth A and *.

Documents

Objective Type Questions Fm