CMA FINAL

STRATEGIC FINANCIAL MANGEMENT

MCQ

1. Investment Decisions, Project Planning and Control

A. Theoretical Questions
1. Which of the following statements is/are true?
A. NPV is not useful for evaluating mutually exclusive projects.
B. The result of the NPV technique is not effected by the discount rate used.
C. Benefit-cost ratio helps in evaluating the projects which differ in initial outlays.
D. The advantage of NPV criteria is that it remains the same for all possible reinvestment rates
of intermediate cash flows.
2. Terminal value of the projects’ cash inflows means
A. The sum of the future cash flows after a particular period of time
B. The present value of the projects’ future cash inflows
C. The sum of the reinvested values of the cash inflows up to the end of the project life
D. The sum of the reinvested values of the cash inflows up to the end of the project life minus
initial
outlay
3. Which of the following statements is/are true?
A. If BCR takes a value of one, it means that the NPV is positive.
B. While BCR is a ratio of present value of benefits to initial investment, the profitability index
is the
ratio of net present value to initial investment.
C. While BCR can take negative values, NBCR cannot take negative values.
D. BCR criteria is used to rank the projects in the order of decreasingly efficient use of capital
when the
capital budget is limited.
4. IRR can be viewed as
A. Desired rate of return for the investment proposed
B. Rate of return earned on the initial investment
C. The discount rate at which the capital is procured
D. Rate of return earned on the intermediate cash flows of the project
5. Which of the following techniques is the most suitable, when NPV and IRR lead to
inconsistent ranking due to life disparity between two or more projects?
A. Modified Net Present Value.
B. Modified Internal Rate of Return.
C. Uniform Annual Equivalent Cost/Benefit.
D. Discounted Payback Period.

B. Practical Questions
1. The following information is available in case of an investment proposal:
NPV at discounting rate of 10% = ₹ 1250 and NPV at discounting rate of 11% = ₹ (-) 200. The
IRR of the proposal is
A. 11.86%
B. 10.86%
C. 9.87%
D. 11.96%
2. The Profitability Index of a project is 1.28 and its cost of investment is ₹ 2,50,000. The
NPV of the project is
A. ₹ 75,000
B. ₹ 80,000
C. ₹ 70,000
D. ₹ 65,000
3. From the following information calculate the MIRR of the project.
Initial Outlay ₹50,000, cost of capital 12% p.a., Life of the project 4 years, Aggregate future value
of cash flows ₹1,04,896.50.
A. 20.35%
B. 21.53%
C. 31.25%
D. 12.25%
4. The IRR of a project is 10%. If the annual cash flow after tax is ₹1,30,000 and
project duration is 4 years,
what is the initial investment in the project?
A. ₹ 4,10,000
B. ₹ 4,12,100
C. ₹ 3,90,000
D. ₹ 4,05,000
5. The NPV of a 4-year project is ₹ 220 lakh and PVIFA at 12% for 4 years is 3.037.
The Equivalent Annual Benefit of the project is (220/3.037 =72.43 lakh) … none of the below
A. ₹ 66.52 lakh
B. ₹ 94.74lakh
C. ₹ 66.96 lakh
D. ₹ 76.65 lakh

2. Evaluation of Risky Proposals for Investment Decisions

A.Theoretical Problems
1. If the cash flows over the life of the project are perfectly correlated, the Standard Deviation is
determined using the formula (D )

2. Which of the following is/are not true regarding the risk adjusted investment appraisal
techniques?
i. In the certainty equivalent method, if there is high degree of correlation between the cash
flows over the entire project life the certainty equivalent coefficient is taken as one for all the
years.
ii. In sensitivity analysis, the impact of the changes in one or more variables on the criterion of
merit is studied.
iii. Simulation does not produce an optimal solution but the user of the technique has to generate
all possible combinations of conditions and constraints to choose the optimal solution.
A. Only (ii) above.
B. Only (iii) above.
C. Both (i) and (ii) above
D. Both (i) and (iii) above
3. Coefficient of variation
A. Is an absolute measure of risk
B. Is a relative measure of risk
C. Is given by mean expected return by standard deviation
D. Is given by the product of mean expected return and standard deviation

B. Numerical Problems
1. If nominal discounting rate is 15%, inflation rate is 5%, then real discounting rate will
be A. 9.52% ( 1.15/1.05-1)X100 = 9.52%
B. 9.25%
C. 10.25%
D. 10.52%
2. If project cost = ₹ 12,000, Annual cash flow = ₹ 4,500 Cost of capital = 14%, life = 4
years, PVIFA (14%, 4) = 2.9137, then the sensitivity with respect to the project cost is
A. 9.27%
B. 10.27%
C. 9.72%
D. 10.72%
3. The following information is available with respect to Project X

NPV Estimate (₹) 30,000 60,000 1,20,000 1,50,000

Probability 0.1 0.4 0.4 0.1
The expected NPV will be
A. ₹ 1,00,000
B. ₹75,000
C. ₹90,000
D. ₹1,20,000

4. If expected NPV = ₹ 1,20,000 and S.D = ₹30,000, then coefficient of variation will
be A. 25%
B. 20%
C. 30%
D. 50%
5. Given, expected value of profit without perfect information = ₹1,600 and expected value
of perfect information
= ₹300, then expected value of profit with perfect information will
be A. ₹1,300
B. ₹1,900
C. ₹950
D. None of the above

3. Leasing Decisions

1. The major advantage of leasing is that it .

A. provides flexible financing
B. provides lower payments
C. avoids risks of obsolescence.
D. All of the above
2. A finance lease is an agreement between an owner of an asset and a user of that asset wherein
the:
A. usual risks and benefits of ownership are transferred to the user;
B. legal title to property is transferred to the lessee when the first lease payment is made;
C. ownership passes to the lessor on inception date of the lease;
D. substantially all of the risks and benefits of ownership remain with the lessor.
3. A way to analyse whether debt or lease financing would be preferable is to:
A. compare the net present values under each alternative, using the cost of capital as the discount
rate.
B. compare the net present values under each alternative, using the after-tax cost of borrowing as
the discount rate.
C. compare the payback periods for each alternative.
D. compare the effective interest costs involved for each alternative.
4. Which of following clearly define the Leasing services?
A. One party agrees to rent property owned by another party
B. It guarantees the lessee, also known as the tenant, use of the asset
C. It guarantees the lessor, regular payments from the lease
D. All of the above.
5. The type of lease that includes a third party, a lender, is called as which of the following?
A. Sale and leaseback
B. Leveraged Lease
C. Direct leasing arrangement
D. Operating lease

4. Securitization

1. In securitization who is the issue of securities?

A. SPV
B. Underwriter
C. Depositer
D. Insurer
2. Under “securitisation process”, the bank or financial institution which gives loan is known as;
A. SPV
B. Obligor
C. Originator
D. Credit enhancer
3. The concept of securitisation is associated with .
A. Capital market
B. Money market.
C. Debt market.
D. Foreign exchange market.
4. Under “securitisation process”, are instruments which issued subsidiary company in respect
of receivables of holding or parent company
A. Pass through certificate
B. Pay through certificate
C. Preferred stock certificate
D. None of these
5. Under “securitisation process”, original borrower is known as;
A. SPV
B. Obligor
C. Originator
D. Credit enhancer
6. certificate under securitisation have multiple maturity structure.
A. Pass through certificate
B. Pay through certificate
C. Preferred stock certificate
D. Interest only certificate

5. Introduction to Security Analysis

1. The price-earnings ratio of a stock reflects the

a. Growth of the company
b. Market mood for the company stock
c. Earnings retained and invested in the company
d. Dividend paid out for the company’s stock

2. The growth in book value per share shows the

a. Rise in the share price
b. Increase in the physical assets of the firm
c. Increase in the net worth
d. Growth in reserves

3. Which of the following is not a component of ROE analysis?

a. Pre-tax margin
b. Asset turnover ratio
c. Effective tax rate
d. Dividend payout ratios

4. Which of the following does not form a part of company analysis?

a. A trend analysis of the company’s market share
b. Life cycle analysis of the industry
c. Leverage and coverage ratio analysis
d. Cost structure and break even analysis

5. An industry in the growth stage of its life cycle is indicated by

a. High P/E ratios
b. High dividend payout ratios
c. High dividend yield
d. High investment in R & D

6. Degree of financial leverage (DFL) expresses the relationship between

a. EPS and EAIT
b. EPS and P/E
c. EPS and EBIT
d. EPS and Sales

7. Liquidity of a company generally measures

a. The ability of a company to pay its employees in a timely manner
b. The ability to pay interest and principal on all debt
c. The ability to pay dividends
d. The ability to pay current liabilities

8. A common stock ratio

a. Is directly related to the company’s growth rate
b. Can be zero for a growth firm
c. Measures the earnings of a share as a percentage of its market price
d. Indicates the future cash dividends to be expected

9. An industry may have short life due to

a. Legal restrictions
b. Evolution of replacement industry which diminishes the demand for the original industry
c. Coming into force of a newer technology which makes the existing one unviable from
operating costs point of view
d. All of the above.
10. Competition in an industry is generally affected by the
a. Ease with which the new entrants can enter
b. Relationship among the existing players
c. Bargaining power of buyers and suppliers
d. All of the above

11. High growth rates in earnings and market share are characteristics of companies which are in
a. Maturity stage
b. Expansion stage
c. Pioneering stage
d. Declining stage
12. Companies in maturity stage are characterized by
a. High dividend payout ratios
b. Fluctuation in earnings
c. Presence of new investment opportunities
d. All of the above
13. Which of the following can be classified as a lag indicator of economic growth?
a. Ratio of trade inventories to sales
b. Manufacture and trade sales
c. Orders for plant and equipment
d. Business confidence index

B. Practical Problems
1. A company has an ROE of 0.24 and book value of ₹25.38. the EPS for this company is
a. 6.09
b. 7.25
c. 6.94
d. 6.13
2. If ROA is 0.195 and the leverage factor of 1.38, the ROE of the company is
a. 0.279
b. 0.283
c. 0.254
 d. 0.269
3. It was observed that in a certain month, 6 out of 10 leading indicators and moved up as
compared to 4 indicators in the previous month. The diffusion index for the months was
a. 20%
b. 40%
c. 60%
d. 80%

6. Equity and Bond Valuation and Evaluation of Performance

1. All other things being equal, which one of the following bonds will have the maximum volatility?

a. 15 year, 15% coupon bond

b. 5 year, 10% coupon bond

c. 15 year, 10% coupon bond

d. 5 year, 15% coupon bond

2. Suppose the current interest rate on one-year deposit is 10% and it is expected to increase to 13%
next year. What should be the current interest rate on deposit for two years?
a. 11.25%
b. 11.60%
c. 11.49%
d. 12.01%
3. A deep discount bond issued at ₹2500 will be redeemed at ₹1,00,000 after 25 years. If capital
gains is taxed at 20% and indexation benefits of 6% annually is available then the post tax yield
for the investor is
a. 12%
b. 15.125
c. 14.8%
d. 16%
4. A Ltd. has 1 million AAA rated 12% bonds outstanding, maturity in 7 years from now. If the
market interest rate is 14%, the price of the bond is (assume FV ₹100) and coupons are payable
annually
a. 90.00
b. 91.46
c. 93.00
 d. 94.00
5. If the YTM on a one-year GOI bond and a two-year GOI bonds are 7.97% and 8.86%,
respectively then the implicit one-year forward rate at the end of year 1 is

8. A 20-year maturity bond with a par value ₹1,000 makes semi-annual payments at a coupon rate of
8%. The YTM is 9%. How much should you pay for the bond?
a. ₹1080
b. ₹1000
c. ₹908
d. ₹966
9.A bond with a par value of ₹1,000 has a 6% annual coupon rate. Interest is paid semi-annually and
the price of the bond is ₹1,025. what is the current yield?

12. One year ago, you purchased an annual coupon bond for ₹817.84. At that time the bond had a
maturity of 15 years, a face value of ₹1,000, a coupon rate of 5% and a yield to maturity of 7%. One
year later, the yield to maturity increased to 7.5%. what is the total rate of return for the year?

13. Mr. X expects 20% return from his investment. The dividend from the stock is ₹2.0 and the
present price is ₹50. What should be the future price of the stock?
(a) ₹ 56.39
(b) ₹ 58.00
(c) ₹ 60.00
(d) ₹ 62.30
7. Mutual Funds
1. How much money would you need to purchase 400 shares of a mutual fund with a NAV of ₹
55 per share and a 3% load?
(a) ₹22,000
(b)
₹21,450 (c)
₹23,200 (d)
₹22,660
2. If a mutual fund NAV is 50 and its expense ratio is 2% what are the total expenses per share?
(a) 2
(b) 10
(c) 1
(d) 5
3. You invested 1,000 in a mutual fund with a 4% load when NAV was 20 per share. If you sell
your shares at a NAV of 20 per share, what is the return of your investment?
(a) 14.8%
(b) 15.2%
(c) 12.5%
(d) 10.8%
4. A mutual fund has a beginning balance of 100 million earns interest of 10 million, receives
dividends of 15 million, and has expenses of 5 million. If 10 million shares are outstanding, what is
the NAV?
(a) 10.50
(b) 11.00
(c) 12.00
(d) 12.50
5. A scheme has average weekly net assets of ₹ 324 Cr and has annual expenses of ₹ 3.24Cr, it’s
expenses ratio is
(a) 1%
(b) 10%
(c) Can’t say
(d) Insufficient information
6. If a scheme has 45 Cr units issued and has an FV of ₹10 and NAV is at 11.33, unit capital
(₹ in Cr) would be equal to
(a) 500.85
(b) 50.85
(c) 950.85
(d) 450
7. For a scheme to be defined as an equal fund, it must have a minimum
(a) 65% in Indian equities
(b) 65% in equities
(c) 51% Indian equities
(d) 35% in Indian equities
8. On average, actively managed mutual funds have an expenses ratio of about
(a) 1.5%
(b) 2.5%.
(c) 3%
(d) 5%.

9. If opening units 10,000 Units subscribe 3000, Units redeem 1000 then Closing units?
a) 10,000 units
b) 13,000 units
c) 12,000 units
d) 14,000 units

10. If opening units 1,25,000 Units subscribe 2,00,000, Units redeem 50,000 then Closing units?
a) 3,25,000 units
b) 2,75,000 units
c) 3,75,000 units
d) 2,50,000 units

11. A mutual fund had average daily assets of ₹500 million in the past year. During the year, the
fund sold ₹60 million of stock X and purchased ₹90 million of stock Y. What was the fund’s turnover
ratio?
(a) 12%
(b) 15%
(c) 18%
(d) 30%.

12. A closed-end fund has a portfolio currently worth ₹350 million. The fund has liabilities of ₹5
million and 17 million units outstanding. What is the net asset value of the fund?
(a) ₹20.28
(b) ₹20.29
(c) ₹20.59
(d) ₹29.17
8. Portfolio Theory and Practice
Theoretical Problems:
1. Risk of two securities with different expected return can be compared with
a. Coefficient of variation
b. Standard deviation of securities
c. Variance of securities
d. None of the above
2. A portfolio having two risky securities can be turned risk less if
a. The securities are completely positively correlated
b. If the correlation ranges between zero and one
c. The securities are completely negatively correlated
d. None of the above
3. Efficient portfolios can be defined as those portfolios which for a given level of risk provides
a. Maximum return
b. Average return
c. Minimum return
d. None of the above
4. Capital market line is:
a. Capital allocation line of a market portfolio
b. Capital allocation line of a risk free asset
c. Both a and b
d. None of the above
5. The object of portfolio is to reduce by diversification
a. Return
b. Risk
c. Uncertainty
d. Percentage
6. This type of risk is avoidable through proper diversification
a. Portfolio risk
b. Systematic risk
c. Unsystematic risk
d. Total risk
7. Beta is the slope of
a. The security market line
b. The capital market line
c. A characteristic line
d. The CAPM
8. A measure of risk per unit of expected return
a. Standard deviation
b. Coefficient of variation
c. Correlation coefficient
d. Beta
9. The greater the beta, the security involved
a. Greater the unavoidable risk
b. Greater the avoidable risk
c. Less the unavoidable risk
d. Less the avoidable risk
10. A statistical measure of the Degree to which two variables move together
a. Coefficient of variation
b. Variance
c. Covariance
d. Certainty equivalent
11. Which theory believes that the investors prefer larger to smaller returns from securities?
a. Modern
b. Traditional
c. Markowitz
d. Sharpe
12. Modern portfolio theory the relationship between risk and return
a. Maximizes
b. Minimizes
c. Quantifies
d. Does not assume
Practical Problems:
1. A portfolio comprises two securities and the expected return on them is 12% and 16%
respectively. Determinereturn of portfolio if first security constitutes 40% of total portfolio.
a.12.4%
b. 13.4%
c.14.4%
d. 15.4%
2. Mr. A invested ₹10,000 in a shares of XYZ Company 10 years ago, and that is shares (including
reinvested dividends) are currently worth ₹23,8000. Using this information, calculate total
investment return of Mr. A
a. 0%
b. 38%
c.138%
d. 238%
3. What is the annualized return of Mr. A based on the data of the above question?

a. 8%
b. 9.06%
c. 10%
d. 11%
4. Mr. X invested ₹10,000 in shares of XYZ Company 20 years ago, and that his shares (including
reinvested dividends) are currently worth ₹18,800. Using this information, calculate total
investment return of Mr. A.
a. 0%
b. 38%
c. 58%
d. 88%.

9. Asset Pricing Theories

1. The security market line’s first point is riskless asset with a beta of zero and the second point
on the line is beta of
(a) 1
(b) 1.5
(c) 2.0
(d) 0.5
2. The beta of equity is 1.2. The debt equity ratio of the company is 0.8. Calculate the beta of the
assets of the firm. (Assume no taxes)
(a) 0.95
(b) 0.75
(c) 0.67
(d) 1.60
3. Mr. Pandey has formed a portfolio and the characteristics of his portfolio are given below:

Security Cipla Ranbaxy Treasury bill Index fund

Weight (Wi) 0.07 0.25 0.25 0.43
Beta (βi) 1.72 0.89 ? ?
Beta of his Portfolio is
(a) 0.8512
(b) 0.9539
(c) 0.7729
(d) 1.5067
4. The risk of the whole market as measured by beta is
(a) 1

(b) 0

(c) -1
(d) Greater than
5. Consider the information given below:
Rate of inflation = 5.1% Beta = 0.85
Real rate of return = 4.2% And market return = 12.6%
The risk premium for the above security will be-
(a) 2.5%
(b) 2.65%
(c) 2.805%
(d) 2.95%
6. Covariance between a stock and a market index and the variance of the market index were
found to be 33.56 and 19.15 respectively. The beta of the stock is:
(a) 1.55
(b) 1.75
(c) 1.85
(d) 2.05
7.

Portfolio E(ri) Rish (βi)

X 10.0 0.95
Y 13.5 1.15
M 17.0 1.00
From the above data it is obvious that
(a) Portfolio Y offers disproportionate return to the underlying risk.
(b) Portfolio M offers disproportionate return to the underlying risk.
(c) Portfolio X is fully diversified,
(d) Portfolio X is a market portfolio.
8. Assume that both A and B are well diversified portfolios and the risk free rate is 8%

Portfolio Expected return (%) Beta

A 16 1.00
B 12 0.25
In this situation you would conclude that portfolios A and B.
(a) Are in equilibrium?
(b) Offer an arbitrage opportunity?
(c) Are both underpriced?
(d) Are both fairly priced?

10. Portfolio Performance Evaluation and Portfolio Revision

1. The portfolio’s risk premium is 12% and the standard deviation of market and the portfolio
are 4 and 3, respectively. The fund’s beta value is 1.5. The Treynor index is
(a) 3.0
(b) 8.0
(c) 4.0
(d) 12
2. A portfolio manager realized an average annual return of 12%. The beta of the portfolio is 1.1
and the standard deviation of returns is 30%. The average annual return for the market index is 10%
and the standard deviation of the market returns is 25%. The rf is 5%. Calculate Jensen’s alpha for the
portfolio.
(a) 0.5%
(b) – 0.5%
(c) 1.5%
(d) – 1.5%
3. A portfolio manager realized an average annual return of 15%. The beta of the portfolio is 1.2
and the standard deviation of return is 25%. The average annual return for the market index was 11%
and the standard deviation of the market returns is 20%. The risk-free rate is 4%. Calculate the Sharpe
ratio for the portfolio.

4. A portfolio manager realized an average annual return of 10%. The beta of the portfolio is 0.8
and the standard deviation of returns is 20%. The average annual return for the market index is 12%
and the standard deviation of the market returns is 25%. The rf rate is 3%. Calculate the Treynor ratio.
11. Efficient Market Hypothesis

1. Which of the following statement defines an efficient market?

(a) Information is fully reflected in the stock prices
(b) The stock exchange is fully automated
(c) The market is monitored by the regulatory authorities
(d) Free entry and exit of investors
2. In a weakly efficient market, the stock price reflects
(a) The company’s financial performance
(b) The past price of the scrip
(c) The demand for the scrip
(d) The past price and traded volume
3. In the strong form of efficient market
(a) All available information is reflected in prices
(b) All published information is reflected in prices
(c) Stock price reflects past price
(d) All information including insider information is reflected in prices
4. If markets are efficient, the security price provides
(a) Inadequate return for taking up risk
(b) Normal return for the level of risk taken
(c) High return for the level of risk taken
(d) Both (b) and (c)
5. A run in the stock price is
(a) A sequence of either a fall or rise in stock prices
(b) An uninterrupted sequence of either a rise or fall in stock prices
(c) An alternate sequence of stock price and volume movements
(d) A sequence of fall in price
6. The efficient market hypothesis suggests that investors should
(a) Adopt an active portfolio management strategy
(b) Adopt a passive portfolio management strategy
(c) Use technical analysis as the basis for investment decisions
(d) Use fundamental analysis as the basis for investment decisions
7. The small-firm-in-January effect refers to the phenomenon that portfolios of small-firm stocks
(compared to portfolios of large firm stocks) have
(a) A tendency to underperform the stock market
(b) High returns in December and January
(c) Abnormal positive returns, primarily in January
(d) Returns in January that are positively co related with return in December
8. In an efficient market, portfolio management:
(a) Plays an important role in terms of diversification and risk management
(b) Is relevant only for high tax bracket investors
(c) Is relevant only in the management of bond portfolios
(d) Does not require emphasis on diversification
9. Which of the following most appears to contradict the proposition that the stock market is
weakly efficient?
Explain.
(a) Over 25% of mutual funds outer perform the market on average
(b) Insiders earn abnormal trading profits
(c) Every January, the stock market earns abnormal return
(d) Over 50% mutual funds outperformed the market on average
10. Which of the following sources of market inefficiency would be most easily exploited?
(a) A stock price drops suddenly due to a large sale by an institution
(b) A stock is overpriced because traders are restricted form short sales
(c) Stocks are overvalued because investors are exuberant over increased productivity in the
economy
(d) None of the above
11. Which of the following statements are true if the efficient market hypothesis holds?
(a) It implies that future events can be forecast with perfect accuracy
(b) It implies that prices reflect all available information
(c) It implies that security prices change for no discernible reason
(d) It implies that prices do not fluctuate
12. Which of the following would be a viable way to earn abnormally high trading profits if
markets are semi strong form efficient?
(a) Buy shares in companies with low P/E ratios
(b) Buy shares in companies with recent above average price changes
(c) Buy shares in companies with recent below average price changes
(d) Buy shares in companies for which you have advance knowledge of an improvement in the
management team

12. Risks in Financial Market

1. Risk management is the process which includes –

A. Risk identification

B. Risk assessment

C. Risk measurement

D. All of the above

2. Which of the following is not a part of Financial Risk?

A. Operational Risk

B. Market Risk

C. Credit Risk

D. Liquidity Risk

3. Which of the following is not a part of Market Risk?

A. Equity risk

B. Inflation Risk

C. Downgrade Risk

D. Interest Rate Risk

4. Which of the following is not a part of Credit Risk?

A. Default risk

B. Downgrade risk

C. Concentration risk

D. Liquidity risk

5. Responses to risk includes –

A. Risk avoidance

B. Risk reduction

C. Risk transfer

D. All of the above

13.. . Financial Derivatives – Instruments for Risk Management

1. An investor writes a three-month put on the stock of an oil company at an exercise price of ₹275
per share at a premium of ₹34. If the expiration date price is ₹280, calculate the gain/loss of put
writer.
A. ₹5
B. (-) ₹5
C. ₹34
D. None of the above
2. An investor buys 100 shares of a sugar mill at ₹210 per share and at the same time writes a
September 250 call at a premium of ₹20 per share. If the expiration date price is ₹280, calculate the
net gain/loss.
A. ₹20
B. ₹40
C. ₹60
D. None of the above
3. If the share of BA Ltd. (F. V. ₹10) quotes ₹920 on NSE, and the 3 months futures
price quotes at ₹950, and the borrowing rate is given as 8% and the expected annual dividend yield
is 15%
p.a. payable
before expiry, then the price of 3-month BA Ltd. futures would be A.
₹948.40 B. ₹939.90
C. ₹938.50
D. ₹936.90
4. The stock of ABC Ltd. sells for ₹240. The present value of exercise price and the value of
call option are ₹217.40 and ₹9.60 respectively. What is the value of put option?
A. ₹16.50
B. ₹22.00
C. ₹17.00
D. ₹18.00
5. In June 2005, a six month Call on Ritz Ltd.’s stock with an exercise price of ₹25 sold for ₹5.
The stock price was ₹20. The risk- free interest rate was 5% per annum. How much would you be
willing to pay for a Put Option on Ritz Ltd.’s stock with same maturity and exercise price? [Given:
PVIF (5%, 1/2
year) = 0.9756]
A. ₹6.39
B. ₹9.39
C. ₹12.39
D. None of (A), (B), (C).

14. The International Financial Environment

1. Which of the following bonds are denominated in Yen?

A. Yankee.

B. Samurai.

C. Shibosai.

D. Both (b) and (d) above.

2. are underwritten and have a maturity of up to one year.

A. Note issuance facilities

B. Medium-term notes

C. Commercial paper

D. ADRs

3. is a private arrangement between lending banks and a borrower.

A. Club loan

B. Multiple component facility

C. Syndicated Euro credit

D. All of the above

4. A Yankee bond is

A. A dollar dominated bond issued for global market by a non-US entity

B. A dollar denominated bond issued in the US by a non-US entity

C. A dollar denominated bond issued by a US resident to a non-US investor

D. A dollar denominated bond issued in US by a US resident

5. Shibosai bond is a bond

A. Denominated in ¥ and issued outside Japan

B. Denominated in a currency other than ¥ and issued in Japan

C. Denominated in Japanese ¥ and issued under private placement in Japan

D. Denominated in ¥ and issued by a overseas corporate to the public in Japan

15. Foreign Exchange Market

1. The 6-month forward rate for US dollar against Rupee is quoted as ₹49.50 as opposed to
a spot price of
₹48.85. The forward premium on US dollar
is A. 1.50 %
B. 3.08 %
C. 3.05 %
D. None of the above.
2. An Indian company is planning to invest in US. The US inflation rate is expected to be 3%
and that of India is expected to be 8% annually. If the spot rate currently is ₹45/US $, what spot rate
can you expect after 5 years?
A. ₹56.09/US $
B. ₹57.00/US $
C. ₹57.04/US $
D. ₹57.13/US$
3. The spot and 6 months forward rates of £ in relation to the rupee ( ₹/£): are ₹77.9542/
78.1255 and
₹78.8550/9650 respectively. What will be the annualised forward margin (Premium with respect to
Ask
Price)?
A. 2.31%
B. 2.15%
C. 1.80%
D. 1.59%
4. The United States Dollar is selling in India at ₹45.20. If the interest rate for a 6-months
borrowing in India
is 10% and the corresponding rate in USA is 4%, what would be the rate of forward
premium/(discount)?
A. 5.93 %
B. 5.88 %
C. (5.17%)
D. (5.52%)
5. The following various currency quotes are available from a leading Indian Bank:
₹/£: ₹75.31/75.33
£/$: £0.6391/0.6398
$/¥: $0.01048/0.01052
The rate at which yen (¥) can be purchased with rupees will be
A. ₹0.5070
B. ₹1.5030
C. ₹1.7230
D. None of the above
6. The sterling is trading at $1.6400 today. Inflation U.K. is 3.8% and that in U.S.A. is 2.9%.
What would be the spot rate ($/£) after 2 years?
A. $1.6117
B. $1.615
C. $1.625
D. None of the above 7. Given, ₹/£ 81.31/81.33
£/$: £0.6491/0.6498
$/¥: $0.01098/0.01102
The rate at which yen (¥) can be purchased with rupees will be:
A. ₹1.5270
B. ₹1.5890
C. ₹0.5824
D. ₹0.7824
8. The dollar is currently trading at ₹40. If Rupee depreciates by 10%, what will be the spot
rate?
A. ₹0525
B. ₹0552
C. ₹0.0225
D. ₹0.0522
9. If the following rates are prevailing: Euro/$: 1.1916/1.1925 and $/£: 1.42/1.47 what will be
the cross rate between Euro/Pound?
A. £1.6921/1.730
B. £1.7530/1.6921
C. £1.6921/1.1925
D. £1.7530/1.1916
10. Spot (Euro/Pound) = 1.6543/1.6557 Spot (Pound/NZ $) = 0.2786/0.2800 What is the %
Spread on the Euro/Pound rate?
A. 0.085%
B. 0.805%
C. 0.508%
D. 0.058%

16. Foreign Exchange Risk Management

1. An Indian company’s cost of production is ₹20/unit while its export price is $ 1/ unit. If the $
appreciates by 10% and the spot rate today is ₹40 per $, what is the impact of transaction exposure?
A. Increase in profit by ₹4 per unit.
B. Decrease in profit by ₹4 per unit.
C. No change in profit.
D. Insufficient data.

2. The foreign exchange market prices for US dollar ($) against Indian rupees (₹) are quoted
as under:
Buying Selling
Spot ₹65.30 ₹65.50
Three months’ forward ₹66.35 ₹67.20
Calculate the cost of the forward cover.
A. 8.15%
B. 8.17%
C. 8.20%
D. 8.22%
17. Digital Finance
1. Which of the following is not a component of Digital Finance Ecosystem?

A. Digital Infrastructure

B. Digital Money

C. Digital Liabilities

D. Digital Financial Services

2. NFT stands for .

A. Non-Fungible Token

B. Non-Fuel Token

C. Non-Fractional Token

D. Non-Fundamental Token

3. Digital Finance Cube has dimensions.

A. Six

B. Four

C. Three

D. Two

4. In India, all payments are regulated by .

A. RBI Act, 1934

B. Banking Regulation Act, 1949

C. Payment and Settlement Systems Act, 2007

D. SBI Act, 1955

5. UPI stands for .

A. United Payment Interface

B. Unified Payment Interface

C. Unique Payment Interface

D. Utility Payment Interface

ANSWER KEY

1. Investment Decisions, Project Planning and Control

A. Theoretical Questions
1 2 3 4 5
C C D B C
B. Practical Questions

1 2 3 4 5
B C A B A

2.Evaluation of Risky Proposals for Investment Decisions

A.Theoretical Problems
1 2 3
D C D
B. Numerical Problems
1 2 3 4 5
A A C A B

3. Leasing Decisions
1 2 3 4 5
D A B D B
4. Securitization

1 2 3 4 5 6
C C C C B B

5. Introduction to Security Analysis

A. Theoretical
1 2 3 4 5 6 7 8 9 10 11 12 13
b d d b a c d b d d c a a

B. Practical
1 2 3
a d c
6. Equity and Bond Valuation and Evaluation of Performance

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

d c b b d c a c d b b b b b c d a c

19 20 21

b b d

7. Mutual Funds
1 2 3 4 5 6 7 8 9 10 11 12
d c b b a b b a c b a b

8. Portfolio Theory and Practice

Theoretical
1 2 3 4 5 6 7 8 9 10 11 12
a c a c b c c b a c a c

Practical
1 2 3 4
c c b d

9. Asset Pricing Theories

1 2 3 4 5 6 7 8
a c c a c b b b

10. Portfolio Performance Evaluation and Portfolio Revision

1 2 3 4 5
b b b b b

11. Efficient Market Hypothesis

1 2 3 4 5 6 7 8 9 10 11 12
a d d b b b c a c a b d
12. Risks in Financial Market
1 2 3 4 5
D A C D D

13. Financial Derivatives – Instruments for Risk Management

1 2 3 4 5
C C D C B

14. The International Financial Environment

1 2 3 4 5
D A A B C

15. Foreign Exchange Market

1 2 3 4 5 6 7 8 9 10
B C B B A A C C A A

16. Foreign Exchange Risk Management

1 2 3
A D C

17. Digital Finance

1 2 3 4 5
C A C C B