Question 1

Which speculator expects a rise in price in future?

Accepted Answer

Bulls are speculators who expect the price of securities to rise in the future and may buy securities with the hope of selling them at a higher price later on.

Question 2

When a right to purchase a security is given it is called

Accepted Answer

A call option gives the holder the right, but not the obligation, to buy a security at a specified price within a specific time period.

Question 3

OTCEI deals in

Accepted Answer

OTCEI (Over The Counter Exchange of India) was established to deal in industrial securities, providing a trading platform for both buyers and sellers.

Question 4

The first stock exchange which was fully computerized was

Accepted Answer

The Over the Counter Exchange of India (OTCEI) was the first fully computerized stock exchange in India, established in 1990 to facilitate small and medium-sized companies in raising capital.

Question 5

Interest rate risk is associated with

Accepted Answer

Interest rate risk is directly associated with changes in the bank rate, which can affect the cost of borrowing and the return on investments.

Question 6

Volatile stock has beta value

Accepted Answer

A volatile stock typically has a beta value greater than one, indicating it is more volatile than the market.

Question 7

Total risk in a security usually measured by

Accepted Answer

Standard deviation is commonly used to measure the total risk in a security, as it quantifies the dispersion of returns around the mean return, capturing both systematic and unsystematic risk.

Question 8

Systematic risk is measured with

Accepted Answer

Beta is the correct measure for systematic risk as it represents the sensitivity of a security's returns to the overall market returns, indicating how much risk is associated with market movements.

Question 9

The term beta is synonymous with

Accepted Answer

Beta is a measure of a stock's volatility in relation to the overall market, representing systematic risk, which is the risk inherent to the entire market or market segment.

Question 10

SEBI has made it mandatory for the companies to disclose

Accepted Answer

SEBI (Securities and Exchange Board of India) requires companies to disclose their quarterly financial results as well as their annual report to ensure transparency and provide timely information to investors.

Question 11

The minimum number of shares applied for is

Accepted Answer

The answer of The minimum number of shares applied for...

Question 12

For every RS 1 lakh of fresh issue of capital there should be at least

Accepted Answer

For every RS 1 lakh of fresh issue of capital there should be at least 5 share holders

Question 13

Marketability risk of bond is

Accepted Answer

Marketability risk of a bond refers to the risk associated with the difficulty in selling the bond at its fair market value. This can be due to a lack of liquidity in the market for that particular bond.

Question 14

Default risk is lower in

Accepted Answer

Treasury bills are considered the safest investment among the given options as they are backed by the full faith and credit of the U.S. government.

Question 15

The value of the bond depends on

Accepted Answer

The value of a bond is influenced by its coupon rate, the time until it matures (years to maturity), and the expected yield to maturity. These factors collectively determine the present value of the bond's future cash flows, including interest payments and the repayment of the principal at maturity.

Question 16

The bond yield remains constant over its life and the discount or premium amount will decrease

Accepted Answer

The discount or premium on a bond amortizes to zero by maturity, meaning as the bond approaches its maturity date, the amount of amortization increases, leading to an increasing rate of decrease in the discount or premium.

Question 17

Yield to maturity is the single factor that makes

Accepted Answer

Yield to maturity (YTM) is the rate at which the present value of all future cash flows from the bond (interest payments and the repayment of the principal) equals the current market price of the bond.

Question 18

The term structure of the bond is the relationship between the

Accepted Answer

The answer of The term structure of the bond is...

Question 19

The problem with Markowitz's model is that a number of covariance have to be estimated. for example for a portfolio of 30 stocks, the covariance that to be estimated are

Accepted Answer

For a portfolio of 30 stocks, the number of unique covariances that need to be estimated is given by the formula n(n-1)/2, where n is the number of stocks. Plugging in 30 for n gives 30(29)/2 = 435.

Question 20

For portfolio of 40 stocks to adopt Sharpe index model, the bit of information needed are

Accepted Answer

The Sharpe index model requires the following information for a portfolio of 40 stocks: the expected return and beta for each stock (which totals 80 bits of information), the risk-free rate (1 bit), and the expected return on the market portfolio (1 bit). Additionally, the covariance of each stock with the market is needed, but since beta is used instead (which incorporates this information), no separate covariance data is needed. However, the variance of each stock is also required, adding 40 more bits of information (one for each stock). Therefore, the total information needed is 80 (for expected return and beta) + 1 (risk-free rate) + 1 (market return) + 40 (variances) = 122 bits of information.

Quiz 7: Investment and Risk Analysis