Amity CampusUttar PradeshIndia 201303

ASSIGNMENTSPROGRAM: MFC

SEMESTER-IIISubject Name : Security Analysis

Study COUNTRY : Sudan LCPermanent Enrollment Number (PEN) : MFC001652014-2016014Roll Number : AMF 304 (T)Student Name : SOMAIA TAMBAL YOUSIF ELMALIK

INSTRUCTIONSa) Students are required to submit all three assignment sets.

ASSIGNMENT DETAILS MARKSAssignment A Five Subjective Questions 10Assignment B Three Subjective Questions + Case Study 10Assignment C Objective or one line Questions 10

b) Total weightage given to these assignments is 30%. OR 30 Marksc) All assignments are to be completed as typed in word/pdf.d) All questions are required to be attempted.e) All the three assignments are to be completed by due dates and need to be

submitted for evaluation by Amity University.f) The students have to attached a scan signature in the form.

Signature :

Date : _________________________________

( √ ) Tick mark in front of the assignments submitted

Assignment ‘A’ √ Assignment ‘B’ √ Assignment ‘C’ √

Security Analysis

Assignment A:

Q.1 What is meant by Fundamental Analysis?

How does it differ from technical Analysis?

Fundamental Analysis gives the systematic approach for estimating the present & future worth

stocks through economic-industry analysis.

Module III: Security Analysis Fundamental Analysis – Economic & Industry Analysis, Concept of Business Cycles, Indicators

of Economic Prosperity, Industry Analysis, Company Analysis, Company Valuation, Technical

Analysis

Module IV: Investment Analysis Investment Analysis: Nature and Scope, Types of Investments: Financial investments – primary

and derivative securities, tax- sheltered investments, non-financial investment: Real estate, gold

and other precious metals, Fundamental Analysis: E-I-C Framework, Technical Analysis, Market

Efficiency, Stock and Fund Market Indicators, Valuation of Fixed Income Securities, Valuation

of Variables Income Securities, Risk and Return – Types, Measurement.

Chapter 3: Topic: Security Analysis 3.1 Fundamental Analysis (E-I-C Framework) (a) Economic Analysis (b) Industry Analysis (c) Company Analysis

3.1 Fundamental Analysis The intrinsic value of an equity share depends on a multitude of factors. The earnings of the company, the growth rate and the risk exposure of the company have a direct bearing on the price of the share. These factors in turn rely on the host of other factors like economic environment in which they function, the industry they belong to, and finally companies' own performance. The fundamental school of ought appraised the intrinsic value of shares through

Economic Analysis

Industry Analysis Company Analysis Module III: Security Analysis Fundamental Analysis – Economic & Industry Analysis, Concept of Business Cycles, Indicators of Economic Prosperity, Industry Analysis, Company Analysis, Company Valuation, Technical Analysis.Module IV: Investment Analysis Investment Analysis: Nature and Scope, Types of Investments: Financial investments – primary and derivative securities, tax- sheltered investments, non-financial investment: Real estate, gold and other precious metals, Fundamental Analysis: E-I-C Framework, Technical Analysis, Market Efficiency, Stock and Fund Market Indicators, Valuation of Fixed Income Securities, Valuation of Variables Income Securities, Risk and Return – Types, Measurement.

3.2 Technical Analysis 3.3 Financial Analysis3.2 TECHNICAL ANALYSIS The share price movement is analysed broadly with two approaches, namely, fundamental approach and the technical approach. Fundamental approach analyses the share prices on the basis of economic, industry and company statistics. If the price of the share is lower than its intrinsic value, investor buys it. But, if he finds the price of the share higher than the intrinsic value he sells and gets profit. The technical analyst mainly studies the stock price movement of the security market. If there is an up trend in the price movement investor may purchase the scrip. With the onset of fall in price he may sell it and move from the scrip. Basically, technical analysts and the fundamental analysts aim at good return on investment. TECHNICAL ANALYSIS It is a process of identifying trend reversals at an earlier stage to formulate the buying and selling strategy. With the help of several indicators they analyse the relationship between price - volume and supply-demand for the overall market and the individual stock. Volume is favourable on the upswing i.e. the number of shares traded is greater than before and on the downside the number of shares traded dwindles. If it is the other way round, trend reversals can be expected.

Q.2 Define risk & distinguish between Systematic

& Unsystematic risk

The book deals with the different aspects of Security Analysis. Practical dimensions of risk

involved in the stock market investment have been discussed.

Module II: Setting the ObjectivesP Risk and Return in the Context of Portfolio, Common Stock Valuation Models, Term Structure

of Interest Rates, Risks in Fixed Income Securities, Macaulay‟s Duration.

Module IV: Investment Analysis Investment Analysis: Nature and Scope, Types of Investments: Financial investments – primary

and derivative securities, tax- sheltered investments, non-financial investment: Real estate, gold

and other precious metals, Fundamental Analysis: E-I-C Framework, Technical Analysis, Market

Efficiency, Stock and Fund Market Indicators, Valuation of Fixed Income Securities, Valuation

of Variables Income Securities, Risk and Return – Types, Measurement.

RISK DEFINED The dictionary meaning of risk is the possibility of loss or injury; the degree or probability of such loss. In risk, the probable outcomes of all the possible events are listed. Once the events are listed subjectively, the derived probabilities can be assigned to the entire possible events. For example, the investor can analyse and find out the possible range of returns from his investments. He can assign some subjective probability to his returns, such as 50 % of the time there is a likelihood of getting Rs 2 per share as dividend and 50 % of the time the possible dividend may be Rs 3 per share. Often risk is inter changeably used with uncertainty. In uncertainty, the possible events and probabilities of their occurrence are not known. Hence, risk and uncertainty are different from each other.

Risk consists of two components, the systematic risk and unsystematic risk. The systematic risk

is caused by factors external to the particular company and uncontrollable by the company. The

systematic risk affects the market as a whole. In the case of unsystematic risk the factors are

specific, unique and related to the particular industry or company.

SYSTEMATIC RISK The systematic risk affects the entire market. Often we read in the newspaper that the stock market is in the bear hug or in the bull grip. This indicates that the entire market is moving in a particular direction either downward or upward. The economic conditions, political situations and the sociological changes affect the security market. The recession in the economy affects the profit prospect of the industry and the stock market. The 1998 recession experienced by developed and developing countries has affected the stock markets all over the world. The South East Asian crisis has affected the stock market world wide. There factors are beyond the control of the corporate and the investor. They cannot be entirely avoided by the investor. It drives home the point that the systematic risk is unavoidable. The systematic risk is further sub-divided into

Market Risk

Interest Rate Risk

Purchasing Power Risk UNSYSTEMATIC RISK As already mentioned, unsystematic risk is unique and peculiar to a firm or an industry. Unsystematic risk stems from managerial inefficiency, technological change in the production process, availability of raw material, changes in the consumer preference, and labour problems. The nature and magnitude of the above mentioned factors differ from industry to industry, and company to company. They have to be analysed separately for each industry and firm. The changes in the consumer preference affect the consumer products like television sets, washing machines, refrigerators, etc. more than they affect the iron and steel industry. Technological changes affect the information technology industry more than that of consumer product industry. Thus, it differs from industry to industry. Financial leverage of the companies that is debt-equity portion of the companies differs from each other. The nature and mode of raising finance and paying back the loans, involve a

risk element. All these factors form the unsystematic risk and contribute a portion in the total variability of the return. Broadly, unsystematic risk can be classified into: 1. Business risk 2. Financial risk Business Risk

Business risk is that portion of the unsystematic risk caused by the operating environment of the

business. Business risk arises from the inability of a firm to maintain its competitive edge and the

growth or stability of the earnings. Variation that occurs in the operating environment is reflected on

the operating income and expected dividends. The variation in the expected operating income

indicates the business risk. For example take Anu and Vinu companies. In Anu company, operating

income could grow as much as 15 per cent and as low as 7 per cent. In Vinu company, the operating

income can be either 12 per cent or 9 per cent. When both the companies are compared, Anu

company's business risk is higher because of its high variability in operating income compared to

Vinu company. Thus, business risk is concerned with the difference between revenue and earnings

before interest and tax. Business risk can be divided into external business risk and internal business

risk.

Financial Risk It refers to the variability of the income to the equity capital due to the debt capital. Financial risk in a company is associated with the capital structure of the company, Capital structure of the company consists of equity funds and borrowed funds. The presence of debt and preference capital results in a commitment of paying Interest or pre fixed rate of dividend. The residual Income alone would be available to the equity holders. The Interest payment affects the payments that are due to the equity investors. The debt financing increases the variability of the returns to the common stock holders and affects their expectations regarding the return. The use of debt with the owned funds to increase the return to the shareholders is known as financial leverage. Debt financing enables the corporate to have funds at a low cost and financial leverage to the

shareholders. As long as the earnings of a company are higher than the cost of borrowed funds,

shareholders' earnings are increased. At the same time when the earnings are low, it may lead to

bankruptcy to equity holders.

Q.3 Explain the Whitebeck Kisor model?

WHITBECK KISOR MODEL The P/E ratio can be related to concerned variables by using multiple regression technique. Whitbeck Kisor has developed the following model P/E = f (growth rate of earnings g, dividend payment rate D/E, risk in the growth rate )

They took 135 stocks and estimated the relationship between P/E and the above mentioned variables. The results are given below. P/E = 8.2 + 1.5 g + 0. 067 D/E -. 2 This equation indicates the impact of all the three variables on the PIE ratio and consistent with the earlier model g-rd/e P/E All the three variables in the multiple regression are associated with the above mentioned equation. The coefficients of did equation indicate the weights of the variables on the P/E ratio. The signs show the direction of impact of the particular variable on the P/E ratio. One per cent increase in the standard deviation of growth rate would cause 0.2 unit decrease in the P/E ratio. Further, the equation indicates that 1 per cent increase in earnings' growth would cause 1.5 unit increases, in the P/E ratio. One per cent increase in payout ratio would result in 1.5 unit increase in the P/E ratio. Thus, the equation indicates higher growth, higher dividends and lower risk would lead to high P/E ratio and vice versa. With the help of the Whitheck Kisor model, the analyst can calculate the theoretical value of the P/E ratio and compare it with actual value. If, Theoretical P/E > actual P/E Sell Theoretical P/E < actual P/E Buy

The model is sample sensitive. The co-efficients of the particular period and sample may not give

correct estimation of P/E for another period.

Example- 8 Company „A‟, s stock growth rate is 15 per cent, its dividends pay out ratio is 40 per cent and its standard deviation in the growth rate is 5 per cent. The value of the P/E ratio is 22.5 per cent. On the basis of Whitbeck Kisor's model, what is your advice? Solution P/E = 8.2 + 1.5g + .067 d/e - 2 The values have to be substituted P/E = 8.2 + 1.5 (15) + .067 (40) -1 (5) = 8.2 + 22.5 + 2.68 - 1 = 33.38 - 1 = 32.38.

The actual value of die P/E ratio is below the theoretical value and the stock can be sold short. PREFERRED STOCK VALUATION Preferred stocks provide a fixed income return; hence the equation adopted to find out the value is given below rDP0 D = The dividend paid r = Required rate of return. Suppose a preferred stock's annual dividend is R9 4 and the required rate of return is 10 per cent what is it worth today? 40.10.040RsrDP If the market price is given, it is easier to find out the rate of return of the preferred stock. Suppose Rs 6 dividend paying preferred stock is selling in the market for Rs 50, the yield or return also can be found out 12.06500rrrDP Thus, with the given value of dividend and the market price, the return can be found.

Q.4 What is Macaulay’s Duration?

2.5 Macaulay’s Duration DURATION Duration measures the time structure of a bond and the bond's interest rate risk. The time structure of investment in bonds is expressed in two ways. The common way to state is how many years he has to wait until the bond matures and the principal money is paid back. This is known as asset time to maturity or its years to maturity. The other way is to measure the average time until all interest coupons and the principal is recovered. This is called Macaulay's duration. Duration is defined as the weighted average of time periods to maturity, weights being present values of the cash flow in each time period. The formula for duration is TPr)(1C...2Pr)(1CPr)(1C D01102201x This can be summarised as x tP)C(P DT1 t 0tv D = Duration C = Cash Flow r = Current yield to maturity T = Number of Years PY (C) = Present, value of the Cash flow P0 = Sum of the present values of cash flow Example Calculate the duration for bond A and Bond B with 7 per cent and 8 per cent coupons having maturity period of 4 years. The face value is Rs. 1000. Both the bonds are currently yielding 6 per cent. Solution 4Pr)(1C3Pr)(1C2Pr)(1C1Pr)(1C D04403302201 C4 includes principal repayment Bond „A‟ with 7% Coupon rate.

Year Cash Flow Ct

tr)1(1 PV x CT 0)1(PrCtt xtPrCt0)1(

1. 2. 3. 4.

70 70 70 1070

0.953 0.890 0.8396 0.7921

66.01 62.30 58.77 847.55

0.0638 0.0602 0.0568 0.8191

0.0638 0.1204 0.1704 3.2764

P0=Rs.1034.63 D = 3.6310

Bond „B‟ with 8% Coupon rate.

1. 2. 3. 4.

80 80 80 1080

0.943 0.890 0.8396 0.7921

75.44 71.200 67.168 855.468

0.0706 0.0666 0.0628 0.8000

0.0706 0.1332 0.1884 3.2000

Example Bond ‘A’ Bond ‘B’ Face Value Rs. 1000.00 Rs. 1000.00

Coupon Rate 7% 8% Years of Maturity 4 years 4 years Macaulay‟s Duration

3.631 years 3.592 years

From the above example 10.4, it is clear that the bond with larger coupon payments has a shorter duration compared to the bond with low coupon rate. General rule 1) Larger the coupon rate, lower the duration and less volatile the bond price. 2) Longer the term to maturity, the longer the duration and more volatile the bond. 3) Higher the yield to maturity, lowers the bond duration and bond volatility, and vice versa. 4) In a zero coupon bond, the bond‟s term to maturity and duration are the same. The zero coupon

bond makes only one balloon payment to repay the principal and interest on the maturity date.

Q.5 Explain Efficient market Hypothesis?

Assignment B

Q.1 Explain bond value theorems?

BOND VALUE THEOREMS The value of the bonds depends upon three factors namely, the coupon rate, years to maturity and

the expected yield to maturity or the required rate of return. On the basis of this, bond value

theorems have been evolved.

Theorem 1 If the market price of the bond increases, the yield would decline and vice versa.

Example Bond A Bond B Par value Rs 1000 Rs 1000 Coupon rate 10% 10% Maturity period 2 years 2 years

Market price Rs 874.75 Rs. 1035.66 Yield 18% 8% Even though the bonds are of same maturity and coupon rate, the difference in the market price leads to difference in the yield. The bond with low price has high yield because with lesser amount of money more return is earned.

Theorem 2 If the bond's yield remains the same over its life, the discount or premium depends on the maturity

period.

Example Bond A Bond B Par value Rs 1000 Rs 1000 Coupon rate 10% 10% Yield 15% 15% Maturity period 2 years 3 years

Market price Rs 918.71 Rs. 885.86 Discount Rs. 81.29 Rs. 114.14 This means, the bond with a short term to maturity sells at a lower discount than the bond with a long term to maturity. Theorem 3 If a bond's yield remains constant over its life, the discount or premium amount will decrease at an

increasing rate as its life gets shorter. Consider a bond with the face value of Rs. 1000 and maturity

period of 5 years with 10% yield to maturity. The calculated values are given below:

Year of Maturity The Present of Value 5 4 4

620.9 683.0 751.3

2 1

826.4 909.1

The above example shows that the discount rate declines when the bond approaches to maturity. The

same point is given in

Fig.-1, Bond’s Price Changes during its life. Theorem 4 A raise in the bond's price for a decline in the bond's yield 16 greater than the fall in the bows price for a raise in the yield. Take a bond of 10% coupon rate, maturity period of five years with the face value of Rs 1000. If the yield declines by 2%, that is to 8% then the bond, price will be Rs 1079. 87 = Rs. 100 (PVIFA 8%, 5 yrs) + 1000 (PVIF 8%, 5 yrs) = Rs. 100 x 3.9927 + Rs. 1000 x 0.6806 = Rs. 1079.87 If, the yield increases by 2 % then, the bond price will be Rs 927.88. = Rs 100 (PVIFA 12%, 5 yrs) + 1000 (PVIF 12%, 5 yrs) = Rs 100 x 3.6048 + Rs 1000 x.0.5674 = Rs 927.88 Now the fall in yield has resulted in a raise of Rs 79.86 but the raise in the yield caused a variation of Rs 72.22 m the price. Theorem 5

The change in the price will be lesser for a percentage change in bond's yield if its coupon rate in higher. It is explained by the following example Example Bond A Bond B Coupon Rate 10% 8% Yield 8% 8% Maturity period 3 years 3 years Price Rs 105.15 Rs. 100 Face Value Rs. 100.00 Rs. 100.00 Yield Raise 1% 1% Price after yield raises

Rs 102.53 Rs. 97.47

Percentage change in price

2.4% 2.53%

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?

HISTORY OF TECHNICAL ANALYSIS The technical analysis is based on the doctrine given by Charles H. Dow in 1884, in the Wall Street Journal. He wrote a series of articles in the Wail Street Journal. A1. Nelson, a close friend of Charles Dow formalised the Dow theory for economic forecasting. The analysts used charts of individual stocks and moving averages in the early 1920's. Later on, with the aid of calculators and computers, sophisticated techniques came into vogue. TECHNICAL TOOLS Generally used technical tools are, Dow theory, volume of trading, short selling, odd lot trading, bars

and line charts, moving averages and oscillators. In this section some of the above mentioned tools

are analysed.

DOW THEORY

Dow developed his theory to explain the movement of the indices of Dow Jones Averages. He developed the theory on the basis of certain hypotheses. The first hypothesis is that, no single individual or buyer can influence the major trend of the market. However, an individual investor can affect the daily price movement by buying or selling huge quantum of particular scrip. The intermediate price movement also can be affected to a lesser degree by an investor. His second hypothesis is that the market discounts every thing. Even natural calamities such as earthquake, plague and fire also Set quickly discounted in the market. The Pokhran blast affected the share market for a .short while and then the market returned back to normalcy. His third hypothesis is that the theory is not infallible. It is not a tool to beat the market but provides a way to understand it better. The theory - According to Dow theory the trend is divided into primary, intermediate and short term trend. The primary trend may be the broad upward or downward movement that may last for a year or two. The intermediate trends are corrective movements, which may last for three weeks to three months. The primary trend may be interrupted by the intermediate trend. The short term trend refers to the day to day price movement. It is also known as oscillatons or fluctuations. These three types of trends are compared to tide, waves and ripples of the sea. Trend - Trend is the direction of movement. The share prices can either Increase or fall or remain flat. The three directions of the share price movements are called as rising, falling and flat trends. The point to be remembered is that share prices do not rise or fall in a straight line. Every rise or fall in price experiences a counter move. If a share price is increasing, the counter move will be a fall in price and vice-versa. The share prices move in zigzag manner. The trend lines are straight lines drawn connecting either the tops or bottoms of the share price

movement. To draw a trend line, the technical analyst should have at least two tops or bottoms. The

following figure shows the trend lines.

Trend reversal - The rise or fall in share price cannot go on forever. The share price movement may reverse its direction. Before the change of direction, certain pattern in price movement emerges. The

change in the direction of the trend is shown by violation of the trend line. Violation of the trend line means the penetration of the trend line. If a scrip price cuts the rising trend line from above, it is a violation of trend line and signals the possibility of fall in price. Like-wise if the scrip pierces the trend line from below, this signals the rise in price. PRIMARY TREND

The security price trend may be either increasing or decreasing. When the market exhibits the

increasing trend, it is called bull market. The bull market shows three clear-cut peaks. Each peak is

higher than the previous peak. The bottoms are also higher than the previous bottom. The reactions

following the peak used to halt before the previous bottoms. The phases leading to the three peaks

are revival, improvement in corporate profit and speculation. The revival period encourages Are and

more investors to buy scrips, their expectations about the future being high. In the second phase,

increased profits of corporate would result in further price rise. In the third phase, prices advance due

to inflation and speculation. The figure-2 gives the three phases of bull market.

The reverse is true with the bear market. Here, the first phase of fall starts with the abandonment

of hopes. The chances of prices moving back to the previous high level seemed to be low. This

would result in the sale of shares. In the second phase, companies are reporting lower profits and

dividends. This would lead to selling pressure. The final phase is characterised by the distress

sale of shares. During the bear phase of 1996, in the Bombay Stock Exchange more than 213 of

stocks was inactive. Most of the scrips were sold below their par values. The Ffigure -3 gives the

bear market. Here the tops and bottoms are lower than the previous ones. The bull and bear

phases of the Indian stock market are given in Figure -4.

THE SECONDARY TREND The secondary trend or the intermediate trend moves against the main trend and leads to

correction. In the bull market the secondary trend would result in the fall of about 33-66% of the

earlier rise. In the bear market, the secondary trend carries the price upward and corrects the main

trend. The correction would be 33% to 66% of the earlier fall. Intermediate trend corrects the

overbought and oversold condition. It provides the breathing space to the market. Compared to

the time taken for the primary trend, secondary trend is swift and quicker. The figure - 5 shows

the secondary movement.

MINOR TRENDS Minor trends or tertiary moves are called random wriggles. They are simply the daily price

fluctuations. Minor trend tries to correct the secondary trend movement. It is better for the investors

to concentrate on the primary or secondary trends than on the minor trends. The chartist plots the

scrip's price or the market index each day to trace the primary and secondary trend.

Case study:Mr. Jose wan t s t o i nves t i n bonds a sum o f Rs .1 ,00 ,000 . Th ree bonds a r e

be ing examined by h im wi th a ho ld ing pe r i od o f t h r ee yea r s . Each bond

i s g iven AAA ra t i ng by Cr i s i l . I n t he e conomic s cena r io , t he e conomic

cyc l e i s beg inn ing t o ma tu re & in f l a t i on i s expec t ed t o i nc r ea se . I n an

e f fo r t t o con t a in t he i n f l a t i on , Rese rve Bank o f I nd i a i s mov ing

t owards c r ed i t squeeze . Mr . Jo se ’ s t ax b r acke t i s 50%. The de t a i l s o f

t he bond a r e g iven :

Bond A Bond B Bond C

Coupon r a t e 0% 10% 10%

Matu r i t y (yea r s ) 5 7 5

Yie ld t o ma tu r i t y 11% 12% 11%

Dura t i on 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 mul t ip l e cho i ce ques t i ons )

Q.1 Dura t i on i s t he measu re o f

( a ) T ime s t ruc tu r e o f t he bond

(b ) In t e r e s t r a t e r i sk

( c ) T ime s t ruc tu r e & marke t r i sk

(d ) T ime s t ruc tu r e & the i n t e r e s t r a t e r i sk

Q .2 The s t a t i s t i c a l t oo l u sed t o measu re a company’ s r i sk i s

( a ) Mean

(b ) Mode

(c ) Va r i ance

(d ) Co-va r i ance

Q.3 In t e r e s t r a t e r i sk occu r s when

(a ) The marke t p r i c e o f bond moves i nve r se ly t o t he p r eva i l i ng

marke t i n t e r e s t r a t e

(b ) The va r i ab i l i t y i n y i e ld i s due t o t he ma rke t i n t e r e s t r a t e

f l uc tua t i ons

( c ) The re i s va r i ab i l i t y i n t he coupon i n t e r e s t r a t e s

(d ) A l l

Q .4 Uncon t ro l l ab l e r i sk o f a company i s

( a ) Labour p rob l em

(b ) Inc r ea se i n l oan s e rv i ce cha rge

(c ) Cu t i n subs idy

(d ) Techno log i ca l obso l e scence

Q.5 Concep tua l f r amework o f va lua t i on t h rough P /E r a t i o a r i s e s

f rom

(a ) Mul t i p l e yea r ho ld ing mode l

(b ) Cons t an t g rowth mode l

( c ) Two s t age g rowth mode l

(d ) Th ree s t age g rowth mode l

Q .6 An i nves to r pu rchase s a s t ock i n t he s t ock marke t . H i s ho ld ing

pe r i od r e tu rn depends on t he

( a ) Pu rchase p r i c e o f t he s t ock

(b ) Se l l i ng p r i c e o f t he s t ock

(c ) D iv idend pa id t o t he s t ock

(d ) A l l t he above

Q.7 In t e r Connec t ed S tock exchange i s t o i n t e r l i nk

(a ) The BSE , NSE & OTCEI

(b ) A l l t he s t ock exchanges

( c ) F i f t e en r eg iona l s t ock exchanges

(d ) Fou r t een r eg iona l s t ock exchanges

Q .8 Ove r t he Coun t e r Exchange o f I nd i a was s t a r t ed a f t e r t he ro l e

mode l o f

( a ) NASAQ

(b) JASAQ

(c ) NASDAQ & JASDAQ

(d) NSE

Q.9 Cus tomer ’ s p ro t ec t i on fund i s s e t up

( a ) To p ro t ec t t he i nves to r s aga in s t p r i c e f l uc tua t i ons

(b ) To p ro t ec t t he b roke r i n c a se o f non paymen t o f money by

i nves to r s

( c ) To p rov ide i n su rance t o i nves to r s i nca se o f de f au l t by t he

member s

(d ) To p ro t ec t t he member & the i nves to r

Q .10 The o lde s t s t ock exchange i n Ind i a i s

( a ) BSE

(b ) NSE

(c ) N i f t y

(b ) ISE

Q .11 The accoun t i ng pe r i od cyc l e o f NSE i s

( a ) Wednesday t o nex t Tuesday

(b ) Tuesday t o nex t Wednesday

(c ) Monday t o nex t F r i day

(d ) Wednesday t o nex t Wednesday

Q.12 Marke t ab i l i t y r i sk o f bond i s

( a ) The marke t r i sk wh ich a f f ec t s a l l t he bonds

(b ) Va r i a t i on i n r e t u rn caused by d i f f i cu l t y i n s e l l i ng bonds

(c ) The f a i l u r e t o pay t he ag reed va lue o f t he bond by t he i s sue r

(d ) Bo th a & b

Q .13 De fau l t r i sk i s l ower i n

( a ) T rea su ry b i l l s

(b ) Gove rnmen t bonds

(c ) IC ICI Bonds

(d ) IDBI bonds

Q.14 The va lue o f bond depends on

(a ) The coupon r a t e

(b ) Yea r s t o ma tu r i t y

( c ) Expec t ed y i e ld t o ma tu r i t y

(d ) A l l t he above

Q.15 The bond y i e ld r ema ins cons t an t ove r i t s l i f e and t he d i s coun t

o r p r emium amoun t w i l l dec r ea se

( a ) A t a dec r ea s ing r a t e a s i t s l i f e ge t s sho r t e r

(b ) A t a dec rea s ing r a t e a s i t s l i f e ge t s l onge r

( c ) A t an i nc r ea s ing r a t e a s i t s l i f e ge t s sho r t e r

(d ) A t an i nc r ea s ing r a t e a s i t s l i f e ge t s l onge r

Q .16 Inves tmen t i s t he

( a ) Ne t add i t i ons made t o t he na t i ona l c ap i t a l s t ocks

(b ) Pe r son ’ s commi tmen t t o buy a f l a t o r a house

(c ) Employmen t o f f unds on a s se t s t o e a rn r e tu rn s

(d ) Employmen t o f f unds on goods and s e rv i ce s t ha t a r e u sed i n

p roduc t i on p roce s s

Q .17 Specu l a to r i s a pe r son

( a ) Who eva lua t e s t he pe r fo rmance o f t he company

(b ) Who use s h i s own funds on ly

(c ) Who i s w i l l i ng t o t ake h igh r i sk fo r h igh r e tu rn

(d ) Who cons ide r s he r e says & marke t behav iou r s

Q .18 To f r ame t he i nves tmen t po l i cy t he i nves to r shou ld have

(a ) Knowledge abou t t he company and t he b roke r s

(b ) I nves t i b l e funds

( c ) Knowledge abou t i nves tmen t a l t e rna t i ve s

(d ) Knowledge abou t t he ma rke t w i th funds

Q.19 The ma in ob j ec t i ve o f a r a t i ona l i nves to r i s

( a ) Max imi s ing r e tu rn s & min imiz ing r i sk

(b ) Min imi s ing r e tu rn & max imiz ing r i sk

( c ) sho r t t e rm ga in s

(d ) s a f e ty o f t he p r i nc ipa l

Q .20 C lea r i ng & se t t l emen t ope ra t i ons o f t he NSE i s c a r r i ed ou t by

(a ) Na t i ona l Secu r i t y Depos i t o ry L td

(b ) Na t i ona l Secu r i t y C l ea r i ng Co-ope ra t i on

(c ) S t a t e Bank o f I nd i a

(d ) By t he exchange i t s e l f

Q .21 In t he s t ock marke t p sycho logy

( a ) I nves to r s f o rge t t he pa s t

(b ) H i s to ry r epea t s i t s e l f

( c ) More f a i t h i n fu tu r e p r ed i c t i on

(d ) Bo th a &b

Q.22 Gros s domes t i c p roduc t i s a l og i ca l f a c to r t o ana ly se t he

e conomy in p i ck ing up a s t ock because i t i nd i ca t e s

( a ) I n f l a t i on o r de f l a t i on

(b ) The marke t va lue o f a s se t s

( c ) The s t a t u s o f t he e conomy

(d ) The cond i t i on o f t he s t ock marke t

Q .23 One o f t he fo l l owing f ac to r s l e ads t he a c t i v i t y o f t he s t ock

marke t

( a ) Money supp ly

(b ) Pe r c ap i t a i ncome

(c ) Unemploymen t r a t e

(d ) Manufac tu r i ng & t r ade

Q.24 The f a l l i n i n t e r e s t r a t e i s conduc ive t o t he s t ock marke t

because

(a ) Money may f l ow f rom the bond marke t t o s t ock marke t

(b ) Corpo ra t e c an bo r row a t e a sy t e rms

(c ) B roke r s c an do bus ine s s a t bo r rowed funds

(d ) Bo th b & c

Q .25 The g rowth i n book va lue pe r sha re shows t he

( a ) R i se i n t he sha re p r i c e

(b ) I nc r ea se i n t he phys i ca l a s se t s o f t he fo rm

(c ) Inc r ea se i n t he ne t wor th

(d ) Growth i n r e se rve s

Q .26 The p r i c e e a rn ings r a t i o o f a s t ock r e f l e c t s

( a ) The g rowth o f t he company

(b ) The marke t mood fo r t he company’ s s t ock

(c ) The ea rn ings r e t a i ned and i nves t ed i n t he company

(d ) The d iv idend pa id ou t f o r t he company’ s s t ock

Q.27 NBFC’s o f f e r s h ighe r i n t e r e s t r a t e because o f

( a ) t he be s t managemen t funds

(b ) t he compe t i t i on amongs t NBFCs

(c ) t he r i sk i nvo lved

(d ) t he c r ed i t r a t i ng

Q.28 Open ended s chemes a r e

( a ) open fo r a pa r t i cu l a r pe r i od

(b ) have f i xed pe r i od o f ma tu r i t y

( c ) l i s t ed i n t he s t ock exchanges

(d ) open on a con t i nuous ba s i s

Q .29 In t e rva l f und i s

( a ) I ndex fund

(b ) open fund

(c ) a c l o sed end fund

(d ) a combina t i on o f c l o se & open end fund

Q.30 Index s chemes

( a ) Re tu rns equa l t o i ndex r e tu rns

(b ) r e f l e c t t he ma rke t

( c ) a r e i ncome schemes

(d ) a r e t ax s av ing s chemes

Q.31 S tock exchange

( a ) he lp s i n t he f i xa t i on o f s t ock p r i c e s

(b ) ensu re s a f e & f a i r dea l i ng

(c ) i nduces good pe r fo rmance by t he company

(d ) A l l t he above

Q.32 __________ was t he g r and fa the r o f t e chn i ca l ana ly s i s .

A) Har ry Markowi t z

B ) Wi l l i am Sha rpe

C) Cha r l e s Dow

D) Ben j amin Graham

E) none o f t he above

Q .33 The goa l o f t he Dow theo ry i s t o

A) iden t i fy head and shou lde r pa t t e rn s .

B ) iden t i fy b r eakaway po in t s .

C ) iden t i fy r e s i s t ance l eve l s .

D) iden t i fy suppo r t l eve l s .

E) iden t i fy l ong - t e rm t r ends .

Q .34 Techn i ca l i nd i ca to r s he lp

( a )To f i nd ou t t he p r e sen t s t a t e o f t he s t ock marke t

(b )To e s t ima t e t he g rowth o f s t ock marke t

( c )To i nd i ca t e t he e conomic ac t i v i t y

(d )To show the d i r ec t i on o f t he ove ra l l ma rke t

Q .35 The marke t va lue o f t he s c r i p i s de t e rmined by

(a ) The d iv idend dec l a r ed by t he company

(b ) The p r e sen t s t a t u s o f t he s t ock marke t

( c ) The number o f f l oa t i ng sha re s

(d ) The i n t e r ac t i on o f demand & supp ly

Q.36 The nego t i ab l e f i nanc i a l i nves tmen t i s d i f f e r en t f r om the non -

nego t i ab l e f i nanc i a l i nves tmen t i n t e rms o f

( a ) Ma tu r i t y pe r i od

(b ) I n t e r e s t r a t e

( c ) T rans f e r ab i l i t y

(d ) Face va lue

Q.37 Inves tmen t made on a house p rope r ty i s a

( a ) F inanc i a l i nves tmen t

(b ) Economic i nves tmen t

( c ) Non-nego t i ab l e f i nanc i a l i nves tmen t

(d ) Non- f i nanc i a l i nves tmen t

Q.38 Which one o f t he fo l l owing i s no t a money marke t s ecu r i t y?

( a ) T rea su ry b i l l s

(b ) Na t i ona l s av ings ce r t i f i c a t e

( c ) Ce r t i f i c a t e o f depos i t

( d ) Commerc i a l pape r

Q .39Commerc i a l pape r s a r e

( a ) Unsecu red p romi s so ry no t e s

(b ) s ecu red p romi s so ry no t e s

( c ) So ld a t a p r emium

(d ) i s sued fo r a pe r i od o f 1 -2 yea r s

Q .40 Th i s pa r t i cu l a r s cheme he lp s i n de f e r r i ng t he t ax paymen t

( a ) Pub l i c p rov iden t f und

(b ) Na t i ona l s av ings s cheme

(c ) Na t i ona l s av ings ce r t i f i c a t e

(d ) L i f e i n su rance s cheme