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CAPITAL MARKET ANALYSIS OBJECTIVE QUESTIONS

1. The Price at which a company’s 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 company’s 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 investor’s 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
company’s financial information

a) Fundamental analysis

b) Technical analysis

c) Industry analysis

34. The expected return as per CAPM, when Rm=22%, Rf=9%, β = 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 fund’s 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) Japan’s 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. Customer’s 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 securities of a single

company.

92. FIIs are permitted

a) To invest in the listed companies only

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 year’s 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 company’s stock

c) The earnings retained and invested in the company

d) The dividend paid out for the company’s 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 company’s 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 are

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

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
fund’s 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 stocks of

lesser importance.

127. The market timer is a

a) Professional portfolio manager

b) Active portfolio manager

 c) Passive portfolio manager

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 SEBI’s 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-Nifty’s base period is

a) 1992

b) 1993

c) 1994

d) 1995

143. The statistical tool used to measure a company’s 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