MODULE2

INVESTMENT MANAGEMENT
1. What is Investment ?
Ans. To Invest means to buy an asset with the intentions to make profits. The purpose of
investment is to generate a return from the invested assets.
2. Write any two Investment Avenues.
Ans. Real estate, Gold, stocks, bonds, mutual funds, retirement scheme
3. Expand SSY ?
Ans. Sukanya Samriddhi Yojana

4 Write any two objectives of Investment.

Ans a. Capital Appreciation:- You may earn income in the way of profit when you sell the asset
at a higher price(eg. Sale of shares,real estateproperty,gold to earn profit)
b. Regular returns:- Investment can be made to generate regular returns(eg. Shares
purchased to earn dividend, Rental income from real estate property, interest on FD)
5. Expand PMJDY.
Ans. Pradhan Mantri Jan Dhan Yojna
6. What is Capital Market ?
Ans In Capital Markets, instruments like equity, bonds, debentures, G-secs etc are traded. All
these instuments are of long term nature. Capital markets deals with financial instruments
having a maturity of more than 1 year
7. Write any two types of financial securities.
A. Shares
B. Bonds/Debentures
C. Derivatives
D. Units of Mutual Fund
E. Government Securities
F. Securities receipts
G. Other marketable securities of any incorporated company or other body corporate
8. Expand NEAT.
Ans. National Exchange for Automated Trading
9 What is Screen Based Trading ?
Ans. In order to provide efficiency, liquidity and transparency, NSE introduced a nationwide,
online, fully automated screen based trading system(SBTS) where a member can punch into
the computer the quantities of a security and the price at which he would like to transact, and
the transaction is executed as soon as matching sell or buy order from a counter party is
found.

10. What is 0TC ?

Ans. Over The Counter (0TC) market is characterised by non existence of a central
counterparty (CCP), and hence the parties deal directly with each other. Since, no CCP is
involved, the counterparty settlement risk is higher. Some of the popular instruments that are
dealt in these 0TCmarkets are Foreign exchange(Fx), Forward derivatives, Swap derivative
Contracts etc.

11. Write any two differences between Capital Market and Money Market.
Ans.
|Capital Market Money Market
Instruments like equity, bonds,debentures, G Instruments like T-Bills, Repos, Certificate of
-Sec, etc are traded Deposits, Commercial Papers, etc are
traded
Deals with financial instruments having Deals with financial instruments having
maturity of more than 1 year maturity of less than or upto 1 year
12. What is ELSS ?
Ans. Equity Linked Savings Scheme, isa type of diversified equity scheme which comes with
a lockin period of 3 yrs, offered by mutual funds in India. They offer tax benefits under Section
80C of Income Tax Act 1961.

13. What is Investment ? Explain the reasons for Investment.

Ans.To Invest means to buy an asset with the intentions to make profits. The purpose of
investment is to generate a return from the invested assets. Eg. Real estate, Gold, stocks,
bonds, mutual funds, retirement scheme
Reasons to Investment
a. Capital Appreciation:- You may earn income in the way of profit when you sell the asset at
a higher price(eg. Sale of shares,real estateproperty.gold to earn profit)
b. Reqular returns:- Investment can be made to generate reqular returns(eg. Shares
purchased to earn dividend, Rental income from real estate property, interest on FD)
14. Explain the factors influencing the Investors risk profile.
Ans. On the Basis of family information
Number of Earning members in a family:- If number of earning members are more then
individual can take higher risk and vice versa
Number of dependent members:- An individual can not take risk if the number of dependent
members are more and vice versa.
On the Basis of personal information
Life expectancy - Risk appetite is higher when life expentancy is longer
Age - Lower the age, higher the risk that can be taken
Employability: Well qualified and multi skilled professionals can afford to take more risk
Nature of Job: Those with steady jobs are better positioned to take risk
Psyche: Daring and adventurous people are better positioned mentally, to accept the
downsides that come with risk
Basis financialinformation
Capital Base: Higher the capital base, better the ability to take financial risk.
Reqularity of Income- People earning reqular income can take more risk than those with
unpredictable income streams.
15. Explain the types of risk involved in Investment.
Ans:1. Market Risk: The risk of Investments declining in value because of economic
developments or other events that affect the entire market. The main types of market risk are
equity risk, interest rate risk and currency risk.
2. Liquidity Risk: The risk of being unable to sell your investment at fair price and get your
money out when you want to. To sell the investment, you may need to accept a lower price. In
some cases, it may not be possible to sell the investment at all.
3. Concentration Risk: The risk of loss because your money is concentrated in 1 investment
or type of investment. When you diversify your investments, you spread the risk over different
types of investments, industries and geographic locations.
4. Credit Risk: The risk that the government entity or company that issued the bond will run
into financial difficulties and wont be able to pay the interest or repay the principal at maturity.
Credit risk applies to debt investments such as bonds. You can evaluate credit risk by looking
at the credit rating of the bond
5. Reinvestment Risk: The risk of loss from reinvesting principal or income at a lower interest
rate. Suppose you buy a bond paying 5%. Reinvestment risk will affect you if interest rates
drop and you have to reinvest the principal at less than 5%. Reinvestment risk will not apply if
you intend to spend the regular interest payments or the principal at maturity.
6. Inflation Risk: The risk of a loss in your purchasing power because the value of your
investments does not keep up with inflation
7. Horizon Risk: The risk that your investment horizon may be shortened because of an
unforeseen event, for eg., the loss of your job. This may force you to sell investments that you
were expecting to hold for the long term.
8. Longevity Risk: The risk of outliving your savings. This risk is particularly relevant for
people who are retired or are nearing retirement.
9. Foreign investment Risk: The risk of loss when investing in foreign countries. When you
buy foreign investments, for example, the shares of companies in emerging markets, you face
risks that do not exist in India, for example, the risk of nationalization.
16. Explain the Fundamental Analysis ?
Ans: The analysis of a business's financial statements, health, competitors and market is
called Fundamental Analysis. It also considers the overall state of the economy and factors
including interest rates, production, earnings, employment, GDP, housing, manufacturing and
management.