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UNDERSTANDING INDEX

Q1. The market impact cost on a trade of Rs. 4 million of the S&P CNX Nifty works
out to be about 0.06.This means that if S&P CNX Nifty is at 4000, a sell order of that
value will go through at a price of Rs. ___________
a) 3997.6
b) 3996
c) 3999.5
d) 3995.5
Q2. Exchange traded fund (ETFs) first came into existence in the ___________
a) USA in 1993
b) UK in 1990
c) China in 1995
d) Germany in 1980
Q3. The index NIFTY, CNX NIFTY JUNIOR, MINI NIFTY 50 are owned, computed and
maintained by _____
a) India Index Services & Products Limited
b) NSEIL
c) S&P
d) CRISIL
Q4. Assume that the base value of a market capitalization weighted index were
1000 and the base market capitalization were Rs.70,000 cr. If the current market
capitalization is Rs.1,40,000 cr, the index is at Rs._________
a) 2110
b) 2350
c) 2250
d) 2000
Q5. Which of the following statement is TRUE about impact cost ?
a) The market impact cost on a trade of Rs. 3 million of the full Nifty works out
to be about 0.05%
b) Market impact cost is a measure of the volatility of the market
c) For a stock to qualify for inclusion into the Nifty, it has to have market impact
cost of 1% when doing Nifty trades of half a crore rupees.
d) Impact cost reflects the cost faced when actually trading a stock
Q6. The market impact cost on a trade of Rs. 3 million of the S&P CNX Nifty works
out to be about 0.06.This means that if S&P CNX Nifty is at 3825, a buy order of that
value will go through at a price of roughly Rs. ___________
a) 3822
b) 3830
c) 3826

d) 3828
Q7. The most popular stock index futures contract in the world is based on ________,
traded on ______
a) S&P 500 Index, Chicago Mercantile Exchange
b) Dow Jones Industrial Average, New York Stock Exchange
c) S&P 500 Index, NASDAQ
d) Dow Jones Industrial Average, Chicago Mercantile Exchange
Q8. If a portfolio has a beta of 0.80, a 10% fall in the index will cause ________ in the
value of the portfolio
a) 10% rise
b) 8% rise
c) 8% fall
d) 10% fall
Q9. Which of the following statement is true about market index ?
A. A good stock market index is one, which captures the behavior of the overall
equity market.
B. A market index is very important for its use as a barometer for market
behavior
C. A stock index number is the current relative value of a weighted average of
the prices of a pre-defined group of equities.
D. A market index acts as a benchmark portfolio performance.
(i)
B
(ii)
A&C
(iii)
A,B,C &D
(iv)
B&D
Q10. ________ provide exposure to an index or a basket of securities that trade on
the exchange like a single stock
a) Index funds
b) ETFs
c) Open ended equity funds
d) Close ended equity funds
Q11. A market index is very important for its use __________
a) In passive fund management by index funds
b) As an underlying in derivative instruments
c) As a benchmark portfolio performance
d) All of the above

Q12. Synthetic index fund is a combination of __________


a) Index futures contracts with bank deposits or treasury bills
b) Stocks comprising the index in same proportion

c) Stocks and futures


d) Index futures and call options
Q13. A good index captures only the news about the country i.e., the movement of
the stock market as a whole and tends to cancel out stock specific news. Is the
statement true ?
a) Yes
b) No
Q14. What is the formula for calculating index on free-float market capitalization
method ?
a) Free-float base market capitalization/ current free-float market capitalization
base index value
b) current free-float market capitalization/ Free-float base market capitalization
base index value
c) Free-float base market capitalization/ current free-float market capitalization
base index value
d) current free-float market capitalization/ Free-float base market capitalization
base index value
Q15. Index funds use index futures to reduce__________
a) tracking error
b) expenses
c) time to invest in the markets
d) all of the above
Q16. Which is the oldest index in India ?
a) BSE 30 Sensex
b) BSE 100
c) S&P CNX Nifty
d) BSE 200
Q17. The base value of the Nifty was set to 1000 on the start date of _________
a) Nov 15, 1991
b) Nov 15, 1993
c) Nov 03, 1995
d) Nov 03, 1992
Q18. In an Index Fund, trading in the stocks comprising the fund, is required in
response to
a) Favourable company specific news.
b) Poor company specific news
c) Mergers
d) Government policies

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Q19. Nifty consists of securities having __________ market capitalization stocks


a) Large
b) Small
c) Medium
d) Large and small
Q20. An equity index comprises of ___________
a) Basket of stocks
b) Basket of bonds and stocks
c) Basket of tradeable debentures
d) None of the above
Q21. The interest rates are usually quoted on :
a) Per annum basis
b) Per day basis
c) Per week basis
d) Per month basis
Q22. An interest rate is 15% p.a. when expressed with annual compounding. What is
the equivalent rate with continuous compounding ?
a) 0.14
b) 0.145
c) 0.1398
d) 0.1475
Q23. A good index is a trade-off between __________
a) Diversification and liquidity
b) Diversification and profitability
c) Liquidity and profitability
d) None of the above
Q24. In a market capitalization weighted index, each stock in the index affects the
index value in proportion to the __________ of all shares outstanding
a) Face value
b) Par value
c) Present value
d) Market value

Q25. The methodology of computing S&P CNX Nifty shifted from __________ method
to ____________ method with effect from June 26, 2009.
a) Price weighted, market capitalization weighted
b) Market capitalization weighted, free float market capitalization
c) Price weighted, free float market capitalization

d) Market capitalization weighted, Price weighted


Q26. Major indices in the world like the S&P 500 and the FTSE-100 follow___________
index method
a) Free float market capitalization
b) Market capitalization weighted
c) Price weighted index
d) Simple average
Q27. Which of the following statement is false about market index ?
a) A good stock market index captures the behavior of the overall equity market
b) A well diversified index is more representative of the market/ economy
c) Liquidity of a stock is not an important criteria for becoming a part of a good
index
d) A good index is a trade-off between diversification and liquidity
Q28. Which of the following statement is TRUE ?
a) Beta of a stock, measures the sensitivity of the stocks responsiveness to
market factors.
b) Beta of a portfolio, measure the portfolios responsiveness to market
movements.
c) Beta is a measure of the systematic risk or market risk of a portfolio
d) All of the above
Q29. Trading is required for index funds :
a) In response to index fluctuations
b) In response to issuance of shares, mergers etc
c) In response to price fluctuations
d) In response to change in fund amount
Q30. Which of the following is not an ETF ?
a) TRAHK
b) SPDRs
c) NIFTY BeES
d) MIDCAP 50
Q31. 1 is the beta of _________
a) All stocks traded at NSE
b) Nifty 50
c) All stocks which are part of Nifty 50
d) None of the above
Q32. The first ETF in India was listed on NSE on __________
a) November 1,2000
b) June 15, 2001
c) July 10, 2005
d) January 8, 2002

Q33. __________ is an ETF based on S&P 500 index


a) iSHARES
b) SPDRs
c) QQQs
d) TRAHK
Q34. If a portfolio has a beta of 0.90, a _______ in the index will cause 12.60% fall in
the value of the portfolio.
a) 12.6% fall
b) 18% rise
c) 14% fall
d) 11% rise
Q35. The Indian Company which provides professional index management services
is __________
a) IISL
b) NSCCL
c) S&P
d) CRISIL
Q36. The most commonly followed stock market indexes is /are :
a) Market capitalization weighted index
b) Price weighted index
c) Both of the above
d) None of the above
Q37. _________ is an ETF based on the Hang Seng index
a) SPDRs
b) QQQs
c) TRAHK
d) Ishares
Q38. The desirable attribute of an index is/are :
a) capturing behavior of portfolios
b) including liquid stocks
c) maintaining professionally
d) all of the above
Q39. In a ________ index, each stock in the index affects the index value in
proportion to the market value of all shares outstanding.
a) Price weighted
b) Market capitalization weighted
c) Free float market capitalization
d) Base market capitalization
Q40. Which of the following statement is TRUE about ETF ?

a) ETFs provide exposure to an index or a basket of securities that trade on the


exchange like a single stock.
b) ETFs trades at substantial premium or more frequently at discounts to NAV
c) ETFs does not have all the characteristics of an index fund
d) ETFs cannot be bought and sold on an intraday basis
Q41. Impact cost measure the ___________
a) Volatility of the stock
b) Liquidity of the stock
c) Return on a stock
d) None of the above
Q42. For a stock to qualify for possible inclusion into the Nifty, it has to have market
impact cost of below________ when doing Nifty trades of 2cr rupees.
a) 0.0025
b) 0.0075
c) 0.0050
d) 0.010
Q43. Index funds are _________ managed
a) Actively
b) Passively
c) Family
d) None of the above
Q44. A stock index number is the current relative value of a weighted average of
the prices of a pre-defined group of equities. Is the statement correct ?
a) Yes
b) No
Q45.the first ETF in India, Nifty BeEs based on S&P CNX Nifty, was launched in
________
a) 37196
b) Nov 2000
c) 36861
d) Dec 2001
Q46. A good index is a trade-off between diversification and liquidity. Is the
statement TRUE ?
a) Yes
b) No
Q47. NIFTY is owned , computed and maintained by __________
a) India Index Services Limited (IISL)
b) Indian Index Securities & Products Limited (IISL)
c) India Index Services & Products Limited (IISL)

d) India Index specialized Products Limited (IISL)


Q48. A good stock market index is one which captures the behavior of the _________
a) Individual script
b) Specified scripts
c) Overall equity market
d) None of the above
Q49. Nifty includes the ________ most liquid stocks that trade on NSE
a) 30
b) 50
c) 100
d) 500