1. Under _________ the cost of the asset is written off equally over its life.

[2 Marks]
(a) the moving average method
(b) the straight average method
(c) the straight line method
(d) the moving line method
(e) Not Attempted
Correct Answer : the straight line method
2. The simplest model for valuing equity is the ________.
[1 Marks]
(a) dividend earning model
(b) interest dividend model
(c) dividend discount model
(d) interest discount model
(e) Not Attempted
Correct Answer : dividend discount model
3. For a company to make a profit the sourced funds have to cost _____ than the return the
company earns on their deployment.
[1 Marks]
(a) less
(b) more
(c) Not Attempted
Correct Answer : less
4. The outcome of fundamental analysis is a value (or a range of values) of the stock of the
company called its _____
[1 Marks]
(a) extrinsic offer price
(b) extrinsic value
(c) intrinsic offer price
(d) intrinsic value
(e) Not Attempted
Correct Answer : intrinsic value
5. Stock market returns are a leading indicator, as the stock market usually begins to decline
before the economy declines and they improve before the economy begins to pull out of a
recession.
[2 Marks]
(a) TRUE
(b) FALSE
(c) Not Attempted
Correct Answer : TRUE
6. In the strictest sense, the only cash flow you receive from a firm when you buy publicly
traded stock is the ________.
[1 Marks]
(a) rights
(b) interest
(c) dividend
(d) bonus
(e) Not Attempted
Correct Answer : dividend
7. The _______ explains the performance and the financial results of the company in the
period under review.
[2 Marks]
(a) Tax reports
(b) Internal reports
(c) Commercial reports
(d) Director's Report
(e) Not Attempted
Correct Answer : Director's Report
8. Consider a stock, with an expected dividend per share next period of Rs. 4, a cost of equity
of 15%, and an expected growth rate of 5% forever. The value of this stock is:
[2 Marks]
(a) 40
(b) 50
(c) 55
(d) 45
(e) Not Attempted
Correct Answer : 40
9. Stock A generates a return of 15% while stock B generates a return of 12%. The risk free-
rate is 5%. Stock A has a standard deviation (risk) of 10%, while stock B has a standard
deviation of 5%. Which stock gives a better risk adjusted return?
[2 Marks]
(a) B
(b) A
(c) Not Attempted
Correct Answer : B
10. As of March 31, with amounts expressed in Rs. crores, ABC Ltd. had a provision for
income taxes in its income statement of 4,535 and pre-tax income of 18,820. The effective
tax rate of ABC Ltd. is _______.
[3 Marks]
(a) 34.23
(b) 18.75
(c) 43.55
(d) 24.1
(e) Not Attempted
Correct Answer : 24.1
11. ____ measures non-diversifiable risk.
[1 Marks]
(a) Vega
(b) Beta
(c) Sigma
(d) Co-variance
(e) Not Attempted
Correct Answer : Beta
12. Stock A generates a return of 12% while stock B generates a return of 15%. The risk free-
rate is 5%. Stock A has a standard deviation (risk) of 10%, while stock B has a standard
deviation of 10%. Which stock gives a better risk adjusted return?
[2 Marks]
(a) B
(b) A
(c) Not Attempted
Correct Answer : B
13. Rs. 100 paid now or Rs. 105 paid exactly one year from now both have the same value to
the recipient who assumes 5% as the rate of interest.
[1 Marks]
(a) TRUE
(b) FALSE
(c) Not Attempted
Correct Answer : TRUE
14. The ______ discusses plans for new acquisition and investments.
[2 Marks]
(a) Tax reports
(b) Director's Report
(c) Commercial reports
(d) Internal reports
(e) Not Attempted
Correct Answer : Director's Report
15. The¿¿________ form of the Efficient Market Hypothesis¿¿stipulates that, all information,
whether public or private, is fully reflected in a security's current market price.
[1 Marks]
(a) strong
(b) weak
(c) semi-strong
(d) Not Attempted
Correct Answer : strong
16. ______ is a relative measure of risk: the risk of an individual stock relative to the market
portfolio of all stocks.
[1 Marks]
(a) Beta
(b) Co-variance
(c) Sigma
(d) Vega
(e) Not Attempted
Correct Answer : Beta
17. It is upon the quality, competence and vision of the management that the future of company
rests.
[1 Marks]
(a) TRUE
(b) FALSE
(c) Not Attempted
Correct Answer : TRUE
18. Borrowings or credits for working capital which fluctuate such as bank overdrafts and trade
creditors are not normally classified as loan funds but as ________.
[2 Marks]
(a) current liabilities
(b) current assets
(c) Not Attempted
Correct Answer : current liabilities
19. The _____ indicators predict what is likely to happen to an economy.
[1 Marks]
(a) lagging
(b) leading
(c) Not Attempted
Correct Answer : leading
20. The very-strong form of the Efficient Market Hypothesis stipulates that private information
or insider information too, is quickly incorporated by market prices and therefore cannot be
used to reap abnormal trading profits.
[2 Marks]
(a) TRUE
(b) FALSE
(c) Not Attempted
Correct Answer : FALSE