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CFP Mock Test Investment Planning

1. Deposit Insurance and Credit Guarantee Corporation insures deposits in Banks up to the following

limit per account. A Rs. 0.5 lakh.

1

B

Rs. 1.0 lakh.

C

Rs. 1.5 lakh.

D

No insurance is available.

2.

If one is a fundamental analyst, he/she would follow which one of the following approaches? 1

A.

Passive diversified portfolio approach

B. Quantitative Analysis (searching for undervalued securities)

C.

Efficient market hypothesis-strong

D.

Efficient market hypothesis-weak

3.

Derivatives on gold related securities and government securities that are traded on the stock

exchanges are regulated by

1

A

SEBI

B

RBI

C

Department of Company Affairs

D

Company Law Board

4.

The bid-ask spread is

1) Broker's commission securities than for liquid ones.

2) Dealer's gross income from a transaction

3) Larger for illiquid

A

1

B

2

C

3

D

1, 2 & 3.

5.

Priti wants to invest in XYZ Ltd's stock, however, she must wait several months till her Fixed Deposit

matures. What type of option should she invest in to protect against the market value of the stock

increasing before her money becomes available?

A

Buy a call option

B

Buy a put option

C

Write a put option

D

Sell a call option

6.

The risk of the writer of an option is

1

A

Market price at expiry

B

Purchase price

C

Limited by the premium

D

Unlimited

7.MFs are allowed to participate in securities lending.

1

1

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A

False

B

True

C

Sometimes

D

Cannot say

8.

Reciprocal of P/E ratio, E/P ratio measures

1

A

Market price of a share

B

Growth ratio

C

Cost of debt

D

Opportunity Cost of capital

9.

If the post tax rate of return on an investment is 8% and the inflation rate is 5% the real rate of return

is

2

A

3.5%.

B

3%.

C

2.86%.

D

-3%

10.A 6% 2014 GOI Bond of Rs.100 Face Value trades at Rs.102 on 15/12/2004. There is a Call Option in

2008. The Yield to Call will be

than the Yield to Maturity.

2

A

Higher

B

Lower

C

Same

D

Cannot Say

11. A treasury bill of face value of Rs. 1,00,000/- is selling at Rs. 97,500/- today. It is slated to mature in

60 days. The annual yield is A 13.3%

B 15.59%

C

D

2

16.43%

14.27%

12. If the Buying price of a property is Rs. 20 lakh, Net income is Rs. 2 lakh and Market yield is 8%, the

value of the property is

2

A

20 lakh

B

22 lakh

C

25 lakh

D

None of the above

13. A company offers a rights issue of one for two for Rs. 7 each. The current market price is Rs. 13. The

expected ex-right market price would be

2

A

9

B

10

C

11

D

None of the above

2

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14. An MF scheme can borrow money up to

months.

2

A

30%, 3 months

B

30%, 12 months

C

10%, for any period

D

20%, 6months

% of its Asset Under Management for maximum

15. Gita sold her equity holding of X Ltd on 1st of July, 2006. The total sale value of the shares was Rs.

75,000/-. The Securities Transaction Tax that Gita is liable to pay would mandatorily be collected by

A

Stock Exchange

B

Mutual Fund

C

Income Tax Authority

D

Gita.s Broker

2

16. Security A has a standard deviation of 23% and the market has a standard deviation of 18%. The

correlation coefficient r between Security A and the market is 0.80. What is the % of the change in

Security A can be explained by changes in the market?

A

B

C

D 64%

4

80%

50%

36%

17. The Portfolio consists of two securities, X and Y in the ratio of 70:30. Given that -

i) Standard Deviation of X is 10% ii) Standard Deviation of Y is also 10% and covariance between them is 16%, what is the portfolio risk?

A 8.04%.

B 13.77%.

C NIL

D 25%.

18. Which of the following statements is/are true regarding strategic and tactical asset allocation?

1) Strategic asset allocation involves selection of the correct asset allocation based on risk tolerance of the client, economic forecasts, and expectations of selected asset classes and rebalancing once or twice per year to keep the portfolio within the parameters of the desired strategic mix. 2) Tactical asset allocation involves evaluating asset classes or industries as to their value and selling

undervalued classes and purchasing overvalued classes.

4

A

1 only is true

B

2 only is true

C

Both 1 & 2 are true

D

Neither 1 nor 2 is true

19.You are evaluating the following table for your customer:

Fund

Average Return (%)

Standard Deviation (%)

Beta

3

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A

22

24

1.3

B

14

18

0.9

C

16

17

1.1

Market

12

15

1

Assume risk-free rate is 6%.The rankings based on the Treynor Ratio (in the order of best to worst) is

A A, B, C

B A, C, B

C B, A, C

D C, B, A

4

20.

Which of the following is not a ratio to measure solvency of the client?

(1)

A)

Savings Ratio

B)

Non mortgage debt service ratio

C)

Debt service coverage ratio

D)

Debts to asset ratio

21.Deficit financing provision in the Budget will lead to the following/s.

 

(A)

Increase in money supply

(B)

Adjustment of interest rate

(C)

Rise in prices

(D)

Fall in national income.

(1)

A)

(A) only

B)

(A) & (C) only.

C)

(A), (B) & (C) only

D)

All the above

22. The matching contribution by the Government, to the Contributory Provident Fund, for its employees, is

(1)

A)

8.33%

B)

12%

C)

10%

D)

None of the above

23.

Senior Citizen.s Savings Scheme is governed by which Act?

(1)

A)

Banking Regulation Act, 1949

B)

Government Savings Bank Act, 1873

C)

Small Savings & Misc. Savings Act, 1902

D)

Companies Act, 1956

24. Reciprocal of P/E ratio, E/P ratio measures

A)

market price of a share

B)

growth ratio

C)

cost of debt

D)

opportunity cost of capital

(1)

4

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25.

If the current share price is S and the set exercise price is X, the intrinsic value of the Call Option

is

(1)

A)

Max ( 0, S-X ).

B)

Max ( 0, X-S ).

C)

Min ( 0, S-X ).

D)

Min ( 0, X-S ).

26.

Bond prices are sensitive to the coupon rate of the bond and the maturity term of the bond. Bond

prices are less sensitive to changes in interest rates when the bonds have

A)

small coupons and short maturity

B)

large coupons and long maturity

C)

large coupons and short maturity

D)

small coupons and long maturity

(1)

27. Among the given four bonds, each having a 20 years maturity, which one of them is the most volatile

A)

Zero Coupon.

B)

Treasury.

C)

Municipal.

D)

BB-rated corporate.

28.

A PPF account was opened on 10th July 1990. It will mature on

(1)

A)

11/07/2005

B)

10/07/2005

C)

09/07/2005

D)

01/04/2006

29.Convertible debentures are valued on the basis of Market Value.

(1)

A)

This statement is false.

B)

This statement is true.

C)

Cannot say.

D)

Sometimes.

30.

T-bills pay interest to their investors by

(1)

A)

T-bills pay no interest.

B)

Coupon interest.

C)

Possible price appreciation above their discounted price.

D)

Difference between Issue price and face value.

31.

The bid-ask spread is

(A)

Broker.s commission

(B)

Dealer.s gross income from a transaction

(C)

Larger for illiquid securities than for liquid ones.

(1)

A)

(A) only

B)

(B) only

5

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C)

(C) only

D)

(A), (B) & (C)

32.

Consider a portfolio of two investments viz. A & B. The sum total of volatility of A and B respectively,

represented by standard deviation of the two investments, will be equal to the volatility of the portfolio

as a whole if

(2)

A)

A and B have a correlation of 1

B)

the portfolio is equally divided between A and B

C)

A and B have a correlation of Zero

D)

the return on the portfolio is equal to the sum of returns of A and B

33. Risk free rate of return is 8%, expected market premium is 15% and Beta of security is 0.80. What is

the expected rate of return of the security?

(2)

A)

13.6%

B)

15.00%

C)

12.00%

D)

20.00%

34.

If a Corporation declares and pays dividend, this transaction will

(2)

A)

reduce stockholders equity

B)

increase liabilities

C)

decrease net income

D)

not affect total assets

35.

Which of the following technical indicators measure the strength of the market by comparing the

num ber of stocks that advance or decline in a particular trading day?

(2)

A)

Support level.

B)

Breadth of the market.

C)

Short interest.

D)

Call-Put ratio.

36.Dividend received by the writer of a Call during the life span of an Option

(2)

A)

can be pocketed by the writer

B)

has to be given to the buyer of the option, only if he eventually exercises the option

C)

increases the premium value by an equivalent amount

D)

decreases the strike price

37. The NAV of a debt oriented Mutual Fund is 22.25 cum dividend. It has declared a dividend of 6%,

record date being 25th June 2007. Calculate the dividend receivable by an individual investor post tax if

he holds 10,000 units.

(2)

A)

Rs. 5,250.

B)

Rs. 6,000.

C)

Rs. 5,150

D)

Rs. 4,653.

38.

Data available for Arvind and Neha is:

6

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Assets: Cash = Rs. 50,000, Savings A/C = Rs. 50,000, MMMF (Money market mutual funds) = Rs. 2,00,000, Bonds = Rs. 2,50,000, Fixed Deposit = Rs. 1,50,000, Marketable Stocks = Rs. 5,00,000, Equity based Mutual Funds = Rs. 30,000, Real Estate Vacant Plot = Rs. 5,00,000, Yearly Expenses = Rs. 3,60,000,

Yearly Income Net Of Taxes = Rs. 6,00,000.Liabilities: Car loan = Rs. 2,50,000, House Loan = Rs. 8,00,000. Yearly Expenses include EMI for car and House Loan. Find Basic Liquidity Ratio of the Couple? (4)

A)

3.33

B)

10

C)

26.67

D)

15.5

39.

Which of the following financial transactions / events would affect net worth of your client?

(A)

Repayment of a loan using fund from a savings account.

(B)

Purchase of car which is 75% financed with 25% down payment.

(C)

The Nifty is appreciating, and the client is holding Nifty Indexed Mutual Fund.

(D)

Interest rate increases and the client holds substantial bond portfolio.

(4)

A)

(C) & (D)

B)

(B) & (C)

C)

(A), (C) & (D)

D)

All of the above

40. Girish received an inheritance of Rs. 2 Lakh. He wants to withdraw equal periodic payments at the

beginning of each month for 10 years starting after 10 years. He expects to earn 12% annual interest,

compounded monthly on his investments. How much can he receive each month?

(4)

A)

Rs. 9,470

B)

Rs. 9,376

C)

Rs. 8,912

D)

Rs. 8,824

B) Rs. 9,376 C) Rs. 8,912 D) Rs. 8,824 7 Roots Institute of Financial Markets RIFM

7

Roots Institute of Financial Markets RIFM 1197, NHBC Mahavir Dal Road, Panipat 132103, Haryana Ph No. 99961-55000, 99964-55055, Web: www.rifmindia.com, email: info@rifmindia.com