RNIS COLLEGE OF FINANCIAL PLANNING - 15

Mock-Test –Module-IV
At the beginning of the year Anurag decided to take Rs 50000 In savings out of bank
deposits and invest it in a portfolio of stocks and bonds; Rs 20000 was placed into
common stocks and Rs 30000 into corporate bonds. A year later, Anurag’s stock and
bond holdings were worth Rs 25000 and Rs 23000 respectively. During the year Rs 1000
cash dividend was received on the stocks and Rs 3000 in coupon payments was received
on the bonds.The stock and bond income was not reinvested in Anurag’s portfolio.

1 Find out the return on Anurag’s stock portfolio?

(a) 30.5%
(b) 28.9%
(c) 30%
(d) 25%

2 What was the return on Anurag’s bond portfolio?

(a) 10%
(b) 8.95%
(c) –13.3%
(d) –12.5%
3 Find out the return on Anurag’s total portfolio during the year?

(a) 3%
(b) 4%
(c )4.5%
(d) 5%

Determine the expected return on the following

SECURITIES NO OF SHARES COST PRICE EXPECTED

YEAR END PRICE
A 200 100 140
B 150 75 78
C 300 125 140
D 100 65 95

4 What is the return on Security B

(a) 4.%
(b) 5%
(c) 2%
(d) 3.5%

RNIS College of Financial Planning

5 The expected return on Security C is
(a) 10.5%
(b) 12%
(c) 6%
(d) 8%
6 Determine the return on security A
(a) 40%
(b) 20%
(c) 28%
(d) 30%
7 What is the return on the portfolio?
(a) 20%
(b) 21%
(c) 18%
(d) 19%

Shown here are the following data on two companies in the same industry.
COMPANY Market Price per Dividend per Share Earnings per share
share
A Ltd 60 10.00 17.50
B Ltd 40 12.00 22.00

8 What is the dividend yield of A Ltd

(a) 16.67%
(b) 15.00%
(c) 16.50%
(d) 17%
9 What is the dividend yield of B Ltd
(a) 32%
(b) 25.50%
(c) 28.00%
(d) 30%

10 P/E Ratio of A Ltd is

(a) 3.43
(b) 3.80
(c) 3.40
(d) 3.00

11 P/E Ratio of B Ltd is

(a) 1.82
(b) 2.00

RNIS College of Financial Planning

(c) 1.50
(d) 1.60
12 Rahul Mehra proposes to purchase a property for giving it on rent. He
expects to receive Rs 55000 in net receipts each year for six years and to sell
the property for Rs 8,50,000 at the end of the six year period. If the expected
return is 15% what would be the value of the property?
(a) Rs 800000
(b) Rs 756700
(c) RS 575625
(d) Rs 448678

13 For an asking price of a property at Rs 9,50,000 with an estimated net

income of Rs 1,25,000 at a market yield of 12%,calculate the value of the
property on capitalization approach.
(a) 10,42,000
(b) 12,56,000 Ans: 125000
(c) 9,88,888 0.12
(d) 8,98,850

With the following data shown in the table below,compute the risk on the
portfolio.
SECURITY Std Deviation Proportion
A 14.5% 60%
B 18.5% 40%
Corr Coeff 0.91

14
(a) 14.50
(b) 15.74
(c) 16.31
(d) 14.78

Calculate for security X and Y based on the data given below

Probability Securuty X Security Y
0.1 40 40
0.2 20 30
0.4 0 15
0.2 -5 0
0.1 -10 -20
15 What us the rate of return on Security X
(a) 6%
(b) 5.5%
(c) 6.5%
(d) 5.0%

RNIS College of Financial Planning

 16 What is the return on security Y
(a) 12%
(b) 14%
(c) 15%
(d) 13%

17 Calculate Standard deviation(risk) on the portfolio assuming 50% weight of each

security.
(a) 18.83
(b) 17.50
(c) 18.20
(d) 17.00

18 Calculate Standard deviation of X

(a) 14.8%
(b) 14.5%
(c) 13.8%
(d) 15.25%

19 Calculate Standard deviation of Security Y

(a) 16.00%
(b) 16.55%
(c) 18.50%
(d) 17.25%

20 Calculate the Covariance

(a) 220
(b) 212
(c) 216
(d) 220

21 For the Financial Year 2005-2006 what is true about the dividend on equity
schemes?
(a) The recipient is required to pay tax at normal rates.
(b) The recipient is not required to pay any tax on dividends.
(c) The distributing company is required to pay distribution tax.
(d) None of these.

22 For the Financial Year 2005-06 , what is true about dividends on debt schemes?
(a) The distributing company is required to pay dividend distribution tax .
(b) The recipient has to pay tax on dividend received by him.
(c) The recipient is required to pay tax at marginal rates.
(d) None of these.

RNIS College of Financial Planning

23 Which of the following statements is true.
(a) Price of an option is called as premium.
(b) A short call is buying a call possibly with the hope of selling it back later at lower
price.
(c) A short call is selling a call possibly with the hope of buying it back at higher price.
(d) A short call is selling a call possibly with the hope of buying it back later at lower
price.
(e) Both (a) and (d)

24 Which of the following statement is not true?

(a) Buying a call option allows the taker to profit from an increase in the price of
underlying securities
(b) Buying a call option allows the taker to profit from a decrease in the price of
underlying securities.
© Call options whose strike price exceeds the spot price are called IN THE MONEY
options.
(d) Call options whose spoy price exceeds the exercise price are called IN THE MONEY
options.
(e) Both (b) and (d)

25 Which of the following statements are true about future contracts?

(a) Forward price s are normally higher than spot prices.
(b) Usually the position are marked to market.
(c) Daily settlement takes place.
(d) Both (a) and (b)
(e) (a),(b) and (c)

26 Intrinsic value is
(a) Difference between original and current share price.
(b) Difference between original and strike price.
(c) Difference between strike and current share price.
(d) None of these

27 A stock currently sells at 120. The put option to sell the stock sells at Rs134 costs
Rs 18 .The time value of the option is---------
(a) Rs 18
(b) Rs 4
(c) Rs 14
(d) Rs 12.
28 An in-the-money option would generate
(a) positive cash flow
(b) pre determined amount of cash flow
(c) no cash flow
(d) negative cash flow

RNIS College of Financial Planning

29 A put option gives the ------------ the right to but not the obligation to --------------the
underlying asset at a specified price.
(a) seller,buy
(b) seller, sell
(c) owner,buy
(d) owner,sell
30 By buying index futures one can make------------------------
(a) unlimited profits or loss since market may go up or down.
(b) Limited profit but unlimited losses.
(c) Limited profits or losses.
(d) Unlimited profit but limited loss.
31 A call option at a strike price of Rs 176 is selling at a premium of Rs 18. At what
price will it break even for the buyer of the option?
(a) Rs 196
(b) Rs 204
(c) Rs 187
(d) Rs 194

32 Typically option premium is

(a) Less than the sum of intrinsic value and time value.
(b) Greater than the sum of intrinsic value and time value.
(c) Equal to the sum of intrinsic value and time value
(d) Independent of intrinsic value and time value
33 Spot value of S&P CNX Nifty is 1200. An investor bought a one –month S&P Nifty
1220 call option for a premium of Rs 10. The option is

(a) In-the money

(b) At –the- money
(c) Out-of-money
(d) None of these

34 For knowledge companies, the core activity must provide-------of the total income in
the preceding------- years
(a) Not less than 51%;3
(b) Not less than 75%;3
(c) Not less than 75%;2
(d) Not less than 51%;2
35 For listing, the company must submit to------audited balance sheets for the past----
years.
(a) SEBI;3
(b) CLB;2
(c) NSE;3
(d) ROC;2

RNIS College of Financial Planning

36 For IPO’s by companies, the paid up equity must be more than------Cr and
market cap more than ------Cr
(a) 25;50
(b) 10;25
(c) 10;50
(d) 25;50

The Managing Director of ABC Ltd wants to float an IPO. He has come to know about
Book Building and is favourably inclined. However he is also concerned about the retail
investors. He does an analysis of the merits and demerits of Plain Vanilla IPO and Book
Building methods.

37 Which of the following statement is true?

(a) In book building demand for the IPO is known at the end of the issue.
(b) In book building demand for the IPO is known at the beginning of the issue.
(c) In book building demand for the IPO is known throughout the issue
(d) In book building demand for the IPO Is not known.

38 Which statement is true?

(a) In a Vanilla IPO , p[rice discovery is better than in a book building issue.
(b) In a Vanilla IPO, price discovery is less efficient than in a book building issue.
(c) In a Vanilla IPO ,price discovery is throughout the issue.
(d) In Book building, price discovery is non-existent .

39 Which statement is true?

(a) Book building is more common in developed than emerging markets.
(b) Book building is less common in developed than emerging markets.
(c) Book building is very common in India.
(d) None of these

40 A bond has a face value of Rs 1000 and coupon rate of 8%. Five years are remaining
to maturity and required rate of return is 6%. What is the value of the bond?
(a) Rs 1084
(b) Rs 1000
(c) Rs 925
(d) Rs 950

41 In the above question if the required rate of return is 10%,the value of bond will be
(a) Increase by Rs 160
(b) Decrease by Rs 160
(c) There will be no change
(d) Value will be Rs 950

RNIS College of Financial Planning

 42 In case of fixed income securities, which of the following statements is not true?
(a) Current yield includes only the coupon if the security is sold immediately.
(b) Current yield includes both coupon & capital gain/loss if the security is sold
immediately.
(c) YTM is the return an investor would receive if the security were held to maturity.
(d) All are true
(e) All are false

43 NAV of one unit of a mutual fund is Rs 11 . The entry load is 4%. The cost to the
investor would be
(a) Rs 11
(b) Rs 11.44
(c) Rs 10.56
(d) Rs 11.50

44 Which of the following features are present in Exchange Traded Funds

(a) Real Time NAV
(b) Daily/Real Time Portfolio Disclosure
(c) Low cost intra day trading possible
(d) All of these
(e) None of these

45 Real Estate market in India is

(a) Highly organized
(b) Disorganised
(c) Is Free from Government controls
(d) Offers homogeneous product

46 What ails the Indian Housing Society?

(a) Lack of clear titles in most cases
(b) High stamp duty rates
(c) Obsolete tenancy & rental control laws
(d) All of the above

Assume that you own two securities with the following expected returns and and
standard deviations. The proportion of holding is also indicated.
Security Expected return % Standard deviation Proportion %
A 12 15 40
B 15 20 60

47 What is the risk of the portfolio when the correlation between securities is +1.0?
(a) 12%
(b) 18%
(c) 15%
(d) 6%

RNIS College of Financial Planning

48 What is the risk of the portfolio when the correlation between securities is –1.0?
(a) 12%
(b) 18%
(c) 15%
(d) 6%

49 Which policy works better in Flat but Fluctuating markets?

(a) Buy & Hold policy
(b) Constant Mix Policy
(c) CPPI
(d) None of these

50 Which policy works better when the market is moving in only one direction either
up or down?
(a) Drifting Asset Allocation
(b) Balanced Asset Allocation
(c) Dynamic Asset Allocation
(d) All of these

(Confidential)

RNIS College of Financial Planning

ANSWERS TO MOCK TEST-MODULE IV

1 c 26 c
2 c 27 b
3 b 28 a
4 a 29 d
5 b 30 a
6 a 31 d
7 b 32 c
8 a 33 c
9 a 34 c
10 a 35 c
11 a 36 b
12 c 37 c
13 a 38 b
14 b 39 a
15 a 40 a
16 b 41 b
17 a 42 a
18 a 43 b
19 b 44 d
20 c 45 d
21 b 46 d
22 a 47 b
23 e 48 d
24 d 49 b
25 e 50 c

RNIS College of Financial Planning