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CAPITAL MARKET ANALYSIS OBJECTIVE QUESTIONS

1. The Price at which a companys shares are offered initially in the primary market?
a) Issue Price
b) Listing Price
c) Market Price
2. The Market value of a quoted company, which is calculated by multiplying its current
market price by the number of outstanding shares, is referred as ____________
a) Price rigging
b) Market Capitalization
c) Stock Invest
3. Shares normally held by promoters and directors of the company_______
a) Preference Shares
b) Deferred Shares
c) Convertible Bonds

4. Issue of shares to its employees or directors at discount or for consideration other

than cash for providing know-how or making available rights in the nature of intellectual
property rights or value addition.
a) Sweat Equity
b) Green Shoe Option
c) Seasoned Equity
5. A__________which contains all information of the company contents but does not
have information on price of securities offered and number of securities (quantum)
offered through such document to the Public.
a) Offer for sale
b) Bought out Deal
c) Red-Herring Prospectus
6. _____________ is an unsecured promissory note privately placed with investors,
freely negotiable by endorsement at a discount rate to face value determined by market
forces.
a) Certificate of Deposit
b) Commercial Paper
c) Treasury Bill
7. A company allots shares in full or in lots to a sponsor at a price negotiated between
the company and the sponsor(s).
a) Bought Out Deal
b) Buy Back of Shares
c) Irredeemable Preference shares
8. An option allowing the Issuing Company to issue additional shares when the demand
is high for the shares when the flotation is on.

a) Follow on Offer
b) Green Shoe Option
c) Call Option
9. The investors who tend to purchase a companys stock usually based on relationships
between the current market price of the company and certain business fundamentals.
a) Growth Investing
b) Value Investing
c) Stock Invest
10. A Custodian is basically an organization, which helps register and safeguard the
securities of its clients.
a) Depository
b) Trustee
c) Stock exchange
11. A ________can be seen as a method for company to invest in itself by buying shares
from other investors in the market.
a) Initial Public Offer
b) Rights Issue
c) Buy back
12. A__________ is like a bank wherein the deposits are securities (viz. shares,
debentures, bonds, government securities, Units etc.) in electronic form.
a) Depository
b) Safety Net

c) EIPO
13 ______________is the process by which physical certificates of an investor are
converted to an equivalent number of securities in electronic form and credited to the
investors account with his Depository Participant (DP).
a) Demutualisation
b) Dematerialization
c) Rematerialisation
14. The responsibility for regulating the securities market is shared by ___________.
a) Department of Economic Affairs(DEA)
b) Ministry of Company Affairs (MCA)
c) Reserve Bank of India (RBI)
d) Securities and Exchange Board of India (SEBI)
e) the above (b) & (d )
15. The Securities and Exchange Board of India (SEBI) is the regulatory authority in India
established under Section 3 of SEBI Act, _______
a) 1990
b) 1992
c) 1991
16. An issue where an allotment is made to less than 50 persons
a) Rights Issues
b) Bought out Deal
c) Private Placement

17. Lead Manager stipulates the floor price or a price band and leave it to market forces
to determine the final price.
a) Remutualisation
b) Book Building
c) Fixed Price
18. SBTS stands for ___________
a) Stock Buy Trading System
b) Screen Based Trading System
c) Screen Bolt Trading System
19. An existing listed company either makes a fresh issue of securities to the public or
makes an offer for sale of securities to the public for the first time.
a) Initial Public Offer
b) Follow on offering
c) Green Shoe Option
20. First exchange in the world to use satellite communication technology for trading.
Its trading system, called_________
a) SBTS
b) NEAT

21. ________refers to the legal structure of an exchange whereby ownership, the

management and the trading rights at the exchange are segregated from one another
a) Rematerialisation
b) Demutualisation
c) Dematerialisation

22.
An __________shows how a specified portfolio of share prices are moving in
order to give an indication market trends
a) Forex
b) Index
c) Commodity Ex
23. An outright sale of securities through the intermediary of issue houses or share
brokers where, the shares are not offered to the public directly
a) Offer for sale
b) Follow on offer
c) Secondary offer
24. Bond issued at a discount and repaid at a face Value
a) Eurobonds
b) Yankee Bonds
c) Zero coupon bonds
25. The Securities market essentially has three categories of participants, namely,
a) NSDL, SEBI, Investors
b) RBI, Brokers, Companies,
c) Issuers, Investors in Securities, Intermediaries
26. The external factors that affects the industry as a whole is termed as
a) Controllable risk
b) Systematic risk

c) Unsystematic risk
27. Interest rates ________as inflation increase
a) Decrease
b) Increase
c) Not affected
28. ________ is the measure of systematic risk of a security
a) alpha
b) Beta
c) Arithmetic Mean
29. The risk attributable to factors unique to a security is_________
a) market risk
b) Systematic risk
c) Unsystematic risk
30. Increase in Interest Rates will ____________ the security price
a) Decrease
b) Increase
c) Neutralise
31. If a bond is purchased at Rs.110 and sold at Rs. 117. The interest received for the
year was Rs. 10. The rate of return will be ___________
a) 15 % p.a
b) 7 % p.a

c) 10 % p.a
32. ______ analysis is based on past information of prices and trading volume of stocks
a) Economic
b) Fundamental
c) Technical
33. ___________ is to measure the intrinsic value of a stock with the help of the
companys financial information
a) Fundamental analysis
b) Technical analysis
c) Industry analysis
34. The expected return as per CAPM, when Rm=22%, Rf=9%, = 0.6%
a) 14.6%
b) 16.8%
c) 7.8%
35. Father of Modern Portfolio theory
a) John Litner
b) Harry Markowitz
c) Jensen
36. According to the APT theory, an investor shall increase returns from his portfolio
a) by increasing his funds
b) by replacing other assets

c) by reducing the risk

d) without increasing the portfolio funds
37. The APT Model helps to
a) identify the equilibrium asset price
b) reduce risk
c) eliminate arbitrage
38. The investors by investing in the Mutual Funds get the benefit of
a) Potential of Returns;
b) Diversified portfolio;
c) Flexibility
d) All the above
39. The Mutual Funds that are listed in the stock Exchanges are
a) Growth schemes;
b) Closed-End Scheme;
c) Open-End Scheme
40. An aggressive portfolio consists of bonds; stock in the ratio of
a) 10:90
b) 60:40
c) 50:50
41. The NSE Nifty Index Fund consists of
a) 90% of stocks of the Index;

b) All stocks of the Index;

c) Stocks of High Market Capitalization in NSE)
42. Investment in a mix of equity and debt instruments
a) Hybrid scheme
b) Index scheme;
c) Sectoral Scheme.
43. A hybrid of a closed-ended index fund and an open-ended index fund.
a) Diversified equity scheme
b) Index scheme
c) Exchange Traded Fund.
44. The investor has the choice of investing regular sums of money every month to buy
units of a mutual fund scheme resorting to Rupee Cost Averaging.
a) Systematic Investment Plan;
b) Money Market Scheme;
c) Closed-Ended Scheme.
45. Security selection involves a search for under-priced securities employing
fundamental and/or technical analysis, to identify stocks which seem to promise superior
returns.
a) Passive Portfolio strategy
b) Active Portfolio Strategy;
c) Portfolio Rebalancing Strategy.
46. _____________measures the difference between a Mutual funds actual and expected

returns.
a) Beta factor
b) Alpha factor;
c) Net Asset Value
47. The spot value of Sensex is 12140. An investor buys a one moth Index 12157 call
option for a premium of Rs.8. The option is __________
a) In the money
b) At the money
c) out of the money
48. The option premium is ___
a) Sum of intrinsic value and time value
b) Greater than Sum of intrinsic value and time Value
c) Less than Sum of intrinsic value and time value
49. Mr. X agrees to exchange 100 Kgs of basmati rice three months later at Rs. 80 per
Kg. This is an example of __________
a) Spot contract
b) Forward Contract
c) Futures Contract
50. The Spot is currently selling at Rs. 270. The call option to buy the stock at Rs. 265
costs Rs. 12. What will be the Time Value of the option?
a) Rs. 17
b) Rs. 5

c) Rs. 7
51. The spot value of Nifty is 4430. An investor bought a one month Nifty for 4410 call
option for a premium of Rs. 12. The option is ________
a) in the money
b) at the money
c) Out of the money
52. The RComm is currently selling at Rs. 530. The call option to buy the stock at Rs.
550 Cost Rs. 15. What would be the Time Value of the option?
a) 5
b) 20
c) 0
53. In question above; what will be the intrinsic value._
a) Rs. 0
b) Rs. 8
c) Rs. 20
54. A special contract under which the owner of the contract enjoys the right to buy or
sell something without the obligation to do so_________
a) Forward
b) Option
c) Future
55. The __________can be exercised only on the expiration date
a) American option,

b) European option
c) Index option
56. When the Exercise price is equal to the Spot Price it is
a) ITM
b) OTM
c) ATM
57. The fixed price at which the option holder can buy/sell the underlying asset is called
the _________
a) Strike Price
b) Spot Price
c) Market Price
58. The value of the option contract on individual securities shall not be less than
Rs.__________
a) Rs. 200000
b) Rs. 500000
c) Rs. 100000
59. Sweat equity is (i) a new class of equity shares(ii) issued to the employees and
directors (iii) issued to the investors also (iv) issued out of the class of equity shares
already issued by the company. Which of the following statement is true?
a) (ii) and (iv)
b) (i) and (iii)
c) (ii) and (iii)
d) (iii) and (iv)

60. In the case of non-voting shares

a) the rights of voting stocks and non-voting stocks are similar
b) rights and bonus issues for non-voting shares can be issued in the form of voting
shares
c) the non-voting shares would become voting shares after a particular period of time
d) non-voting shares carry higher dividends instead of voting rights
61. Zero coupon bonds has its origin in
a) U.S. security market
b) Wall Street
c) Japans security market
d) Dalal street
62. Which one of the following is not a money market security?
a) Treasury bills
b) National saving certificate
c) Certificate of deposit
d) Commercial Paper
63. Commercial papers are:
a) Unsecured promissory notes
b) secured promissory notes
c) sold at a premium
d) issued for a period of 1 to 2 years

64. The open ended schemes are

a) open for a particular period
b) have fixed period of maturity
c) listed in the stock exchanges
d) open on a continuous basis.
65. Interval fund is
a) index fund
b) open end fund
c) a closed end fund
d) a combination of close and open end fund
66. Index schemes
a) returns equals to index returns
b) reflect the market
c) are income schemes
d) are tax saving schemes
67. Registrar to the issue
a) helps in the appointment of lead managers
b) drafts the prospectus
c) recommends the basis of allotment
d) directs the various agencies involved in the issue

68. Primary and secondary markets

a) compete with each other
b) complement each other
c) function independently
d) control each other
69. The underwriter has to take up
a) the fixed portion of the issue capital
b) the agreed portion of the unsubscribed part
c) the agreed portion or can refuse it
d) none of the above.
70. In bought out deal
a) shares are offered through letter of offer
b) part of the shares to the public and part to private
c) shares are offered to the private people
d) shares are sold to the merchant banker or sponsor
71. In private placement
a) shares are offered through letter of offer
b) shares are offered through prospectus
c) shares are offered through brokers
d) shares are offered through investment bankers
72. Book building is managed mainly by

a) registrar
b) lead manager
c) registrar and book runner
d) lead manager and book runner
73. The issue can be priced at premium by
a) any public issue of listed company with three years track record of sales
b) any public issue of unlisted company with three years track record of personnel
management.
c) any public issue of listed on unlisted company with three years track record of
profitability
d) any public issue of listed company
74. At present, the par value of the shares is
a) fixed one
b) variable
c) equal to 10
d) equal to 5
75. SEBI has made it mandatory for the companies to disclose
a) the yearly annual report
b) monthly report and annual report
c) quarterly report and annual report
d) monthly review and annual report

76. Stock exchange

a) helps in the fixation stock prices
b) ensure safe and fair dealing
c) induces good performance by the company
d) all the above
77. Sell Reliance Petro shares at Rs. 60. This order is a
a) best rate order
b) limit order
c) discretionary order
d) stop loss order
78. The rolling settlement period introduced in the stock exchanges is
a) T + 5
b) T + 7
c) T + 2
d) T +15
79. Allotment of securities should be done within
a) 60 days
b) 30 days
c) 75 days
d) 90 days
80. The Market maker has to

a)

buy the shares

b)

sell the shares

c)

buy and sell shares

d)

none of the above

81. The minimum size of issued capital to be listed on BSE is

a)20 cr
b)5 cr
c)10 cr
d)15 cr
82. Compulsory delisting is due to
a) violation of listing agreement
b) capital size is small
c) merger
d) thin trading
83. Customers Protection fund is set up
a) to protect the investors against price fluctuations
b) To protect the broker in case of non payment of money by investors
c) To provide insurance to investors in case of default by the members
d) To protect the member and the investor
84. The VSAT which connects the main central computer means

a) Videsh Sanchar automated trading

b) Videsh Sanchar aperture terminal
c) Very special aperture terminal
d) Very small aperture terminal
85. Clearing and settlement operations of the NSE is carried out by
a)

National Security Depository Ltd.,

b) National Security Clearing Corporation

c)

State Bank of India

d) By the exchange itself

86. Over the Counter Exchange of India was started after the role model of
a) NASQ
b) JASQ
c) NASDAQ and JASDAQ
d) NSE
87. According to SEBI guidelines
a) All the new issues should be in the depository mode
b) All the A group shares should be traded through NSDL
c) All the B group shares should be traded through NSDL
d) All the above are true.
88. SEBI would not vet offer documents seeking listing on
a.

OTCEI

b. NSE
c.

BSE

d. ISE
89. The promoters contribution should not be less than
a)25% of the issue size
b)20% of the issue size
c)30% of the issue size
d)33% of the issue size
90. At present the merchant bankers
a)Are divided into four categories
b)Are divided into three categories
c)Have to segregate fund and fee based activity
d)Should have net worth of Rs. 3 Cr.
91. Mutual fund can make investment
a) In any company listed or unlisted
b) In privately placed securities of associated company
c) Up to 40 per cent of the listed or unlisted securities of group companies.
d) Should not exceed 10 per cent of the funds in
92. FIIs are permitted
a) To invest in the listed companies only

securities of a single company.

b) To invest in the listed and unlisted companies

c) Not to invest in the debentures
d) To invest in shares of listed, unlisted companies and debentures.
93. Mr. A purchase a stock in the stock market. His holding Period return depends on
the
a) Purchase price of the stock
b) Selling price of the stock
c) Dividend paid to the stock
d) All the above
94.A stock of Rs. 10 face value has declared 35% dividend for the current year. The stock
is currently selling for Rs. 40. What is its dividend yield?
a) 35%
b) 70%
c) 8.75%
d) 8.5%
95. According to constant growth model, the next years dividend is 20%, required rate of
return is 10% and the growth rate is 15 per cent. The market price would be
a)Rs. 50
b)Rs. 55
c)Rs. 45
d)Rs. 40
96. Gross domestic product is a logical factor to analyse the economy in picking up a
stock because it indicates

a) Inflation or deflation
b) The market value of assets
c) The status of the economy
d) The condition of the stock market
97. The fall in the interest rate is conducive to the stock market because
a) Money may flow from the bond market to stock market
b) Corporate can borrow at easy terms
c) Brokers can do business at borrowed funds
d) B and c
98. One of the following factors leads the activity of stock market
a) Money supply
b) Per capital income
c) Unemployment rate
d) Manufacturing and trade
99.Mr. A is a daring portfolio manager. He wants to increase the return of his portfolio.
He should choose stocks from
a) Defensive industry
b) Industry at a growth stage
c) Industry in the maturity period
d) Industry with more export potential
100. The price earnings ratio of a stock reflects

a) The growth of the company

b) The market mood for the companys stock
c) The earnings retained and invested in the company
d) The dividend paid out for the companys stock
101. Which of the following statement defines the efficient market.
a) Information is fully reflected on the stock prices
b) The stock exchange is fully automated
c) The market is monitored by the regulation authorities
d) Free entry and exit of the investors.
102. Put option
a)Gives the owner the right to buy an asset or any security to someone else
b)Gives the owner the right to buy an asset
c)Gives the owner the right to buy but not an obligation
d) Gives the owner the right to sell but not an obligation
103. The call option price is higher
a) The striking price is higher than the stock price
b) The striking price is lower than the stock price
c) The option period is shorter
d) The option period is longer and the striking price is lower
104. The option is at the money when

a) Stock price > striking price

b) Striking price > stock price
c) Stock price = striking price
d) There is a high premium
105. Which one of the following statement is true?
a) The premium of the call option and stock price is inversely related
b) Option prices are not affected by the dividends
c) Stock market volatility does not affect the option price
d) The premium of the call option is directly related to stock price.
106. The put option buyer gains
a) In the bullish Market
b) In the bearish market
c) In the stable market
d) When the strike price is lower than stock price
107. The Black Schools Option pricing theory is based on the following assumption
a) The stock price movement is taken to be random,
b) The stock pays regular dividends
c) There is cyclical change in interest rate.
d) The call option can be exercised any time during its life period.
108. An investor who anticipates fall in price of Telco shares after an year could hedge
his risk by

a) Buying future contracts now itself

b) Selling the future contract now itself.
c) Both of the above
d) Neither of the above.
109. Margin money of the future contracts depends on
a) The nature of the buyer and seller
b) The stock market indices movement
c) Speculative activity
d) a and b
110. Which one of the following statement is true
a) Arbitrageurs simultaneously buy and sell two different securities
b) Arbitrageurs force the price of stock in dex future Contract to remain close to the
underlying index
c) Arbitrageurs make the price stock index futures to deviate from the underlying
index value
d) Arbitrageurs buy two different securities at the same price in different markets.
111. The need for constant income depends on the
a) Market risk
b) Inflation risk
c) Interest risk
d) Unique risk
112. The highly liquid security is

a) Mutual fund units

b) Treasury bills
c) Shares
d) Commercial papers
113. Investors invest more in stocks during their
a) Early career period
b) Mid career level
c) Retirement stage with huge money
d) All the above mentioned period
114. An investor is having a portfolio with the combination of stock and bonds in the
ratio of 75:25. He is
a) Risk averse
b) Risk neutral
c) A risk taker
d) Active in portfolio management
115. In the active approach the investor continuously studies
a) Group related risk
b) Market related risk
c) Security specific risk
d) All above
116. Diversification reduces

a) Interest rate risk

b) Market risk
c) Unique risk
d) Inflation risk
117. Marketwise approach has roots in
a) Good portfolio management
b) Proper entry and exit in the market
c) Estimation of stock return
d) Analyzing the risk and return related to stocks
118. The risks involved in the purchase of InfoTech and Satyam Computers shares are
measured with help of
a) Average return of stocks of companies individually
b) Co-variance between two companies scrip return
c) Variance of each companys stock
d) All the above.
119. Corner portfolios are calculated where a
a) Security enters
b) Security leaves
c) Security enters or leaves
d) Security with high extreme value enters
120. The buying and selling activities of the arbitrageur

a) Increase the profit

b) Brings equilibrium level
c) Creates disequilibrium
d) Reduces the profit margin
121. According to the APT theory, an investor would try to
increase returns from his portfolio
a) By increasing the risk
b) By increasing the portfolio funds
c) By reducing the risk
d) Without increasing the portfolio funds
122. The mutual funds that are listed in the stock exchanges
a) Closed-end funds
b) Stock indexed funds
c) Open-end funds
d) Growth schemes
123. The investors by investing in the mutual funds get
a) Professional management
b) Diversification
c) Return potential
d) All the above

are

124. The market returns standard deviation is 15. The X stock return is 25%. The risk
less rate of interest is 5%. The risk premium of the X stock is
a) 1.33
b) 5
c) 15
d) 20
125. The market return is 20% and the riskless rate of return is 7%. The funds beta
coefficient is 1.2.
What is its expected return?
a) 2.5
b) 22.6
c) 31.0
d) 24.8
126. The NSE Nifty index fund consists of
a) The stocks of high market capitalization ion NSE
b) Blue chip companies stocks of the index
c) All the stocks of the Nifty index
d) Consists 90% of the stocks of the index leaving
importance.
127. The market timer is a
a) Professional portfolio manager
b) Active portfolio manager
c) Passive portfolio manager

stocks of lesser

d) None of the above.

128. Aggressive portfolio consists of bonds: stocks in the

ratio of

a) 60:40
b) 70:30
c) 40:60
d) 50:50
129. The rupee cost averaging approach seems to work better with
a) Cyclical stock price
b) Declining stock price
c) Rising stock price
d) Rising stock price with cyclical patterns
130. In the rupee cost averaging plan when the stock prices are low
a) A prefixed amount is spent on shares
b) Higher amount of money is allocated to shares
c) Lower amount of money is allocated to shares
d) More money is spent on bonds.
131. Sweat equity shares may be issued
a) to public
b) at a discount t employees and directors
c) for consideration other than cash
d) both B and C

132. Non-Voting shares carry

a) No voting right
b) Additional dividends
c) Listing benefits
d) All the above
133. The Beta co-efficient of equity stock of ECOBOARD LTD. Is 1.6. The risk-free rate of
return is 12% and the required rate of return is 18% on the market portfolio. If the
dividend expected during the coming year is Rs. 2.50 and the growth rate of dividend and
earnings is 8%, at what price the stock of Ecoboard Ltd. Can be sold (based on the
CAPM)?
a) Rs. 18.38
b) Rs. 15.60
c) Rs. 12.50
d) None of A,B,C
134. An option of allocating shares in excess of the shares included in the public issue is
called
a) Call option
b) Compound option
c) Green shoe option
d) Follow on offer
135. The legislations governing the securities market are
a) The SEBI Act, 1992 and the Companies Act, 1956
b) The Securities Contracts (Regulation ) Act, 1956

c) Depositories Act, 1996

d) All of the above
136. The members of IRDA, other than Chairman of IRDA are appointed by
a) The Chairman of IRDA
b) Government of India
c) The ROC
d) RBI
137. SEBI (Disclosure and Investor Protection) Guidelines, 2000 are not applicable to
a) All public issues by unlisted companies
b) Public sector banks
c) Infrastructure companies
d) Both (b) and (c) above
138. As per SEBIs guidelines, a mutual fund should be established as a
a) Public Limited Company
b) Trust
c) Private Limited Company
d) None of the above
139. If the director of a company who has access to inside information is unable to use
this information to make supernormal profit, it is a sign of
a) Weak form of efficient market hypothesis
b) Semi-strong form of efficient market hypothesis

c) Strong form of efficient market hypothesis

d) Incompetence of the director
140. The following are the common assumptions to both APT and CAPM:
a) Investors have homogenous beliefs
b) The markets are perfect
c) Investors are risk-averse utility maximizers
d) All of (a) ,(b), and (c) above
141. The Sensex has
a) 25 stocks
b) 30 stocks
c) 33 stocks
d) 35 stocks
142. The NSE-Niftys base period is
a) 1992
b) 1993
c) 1994
d) 1995
143. The statistical tool used to measure a companys risk is
a) Mean
b) Mode

c) Variance
d) Co-variance
144. Default risk is lower in
a) Treasury Bills
b) Government Bonds
c) ICICI Bonds
d) IDBI Bonds
145. The Value of the bond depends on
a) Coupon Rate
b) Years to maturity
c) Expected yield to maturity
d) All the above
146. The market value of the scrip is determined by
a) The dividend declared
b) The present status of stock market
c) The number of floating shares
d) The interaction of demand and supply
147. In the stock market psychology
a) Investors forget the past.
b) History repeats itself
c) More faith in future prediction

d) a & b
148. Dow theory was developed to explain
a) New York Stock market movement
b) The Dow Jones Industrial averages
c) Security market price movement
d) The buy and sell strategy
149. A support level exists
a) At a price fixed by the stock exchange brokers
b) At a price fixed by the regulatory authority of the stock exchanges
c) At a price where considerable demand is created
d) At a low price where stock would be available
150. Technical indicators help
a) To find out the present state of the stock market
b) To estimate the growth of stock market
c) To indicate the economic activity
d) To show the direction of the overall market
151. Overbought region indicates
a) More shares are sold
b) The supply is more
c) Potential fall in the price level

d) Potential rise in the share price

152.The economy is passing through a phase of uncertainty, the market may either
experience a bull phase or a bear phase, if an investor invests Rs. 1 Lakh in the stock at
present he may either gain one more lakh rupees or end up in the dead loss. If Mr. Arun
invests
a) He wants to maximize the return
b) He is neutral towards the risk
c) He is a risk lover
d) He loves gambling
153. Mr. Karthik purchased treasury bills since
a) The returns are certain
b) Minimum variation in the return
c) The return is certain and the variation is nil
d) There is assurance of full payment of principal