CMA FINAL: PAPER 14

STRATEGIC FINANCIAL MANAGEMENT

(1) A Ltd. has an EPS of ₹3 last year and it paid out 60% of its earnings as dividends that
year. This growth rate in earnings and dividends in the long term is expected to be
6%. If the required rate of return on equity for Ashrin Ltd. is 14%. Calculate the P/E ratio of
A Ltd.
(a) 7.50
(b) 7.65
(c) 7.85
(d) 7.95

(2) The current spot rate for the US$ is ₹50. The expected inflation rate is 6 per cent in
India and 2.5 per cent in the US. What will be the expected spot rate of the US$ a year
hence?
(a) ₹51.71
(b) ₹50.70
(c) ₹57.01
(d) ₹52.71

(3) DEF Ltd. placed ₹52 Crores in overnight call with a foreign bank for a day in overnight
call. The call ruled at 5.65% p.a. What is the amount it would receive from the foreign
bank the next day?
(a) ₹52,00,70,493
(b) ₹52,00,80,493
(c) ₹52,00,80,593
(d) ₹52,00,80,693

(4) The rates available in the Kolkata market are: ₹/$ Spot 46.75/78; £/$ 0.5285/86. If an
Indian Importer requires pounds, calculate the rate quoted to him?
(a) ₹88.51/£
(b) ₹85.51/£
(c) ₹86.51/£
(d) ₹87.51/£

(5) A Ltd., an export customer who relied on the interbank rate of ₹/$ 46.50/10 requested
his banker to purchase a bill for USD 80,000. Calculate the rate to be quoted to A Ltd.,
if the banker wants a margin of 0.08%.
(a) ₹45.45
(b) ₹44.44
(c) ₹46.46
(d) ₹47.47

(6) ________ estimate the difference between the required rate of return and the growth rate
(a) Retention ratio
(b) Leverage ratio
(c) Payout Ratio
(d) Dividend yield ratio

(7) Two Firms P Ltd and M Ltd are similar in all respects expect that M Ltd uses ₹10,00,000
debt in its capital structure. If the corporate tax rate for these firms is 40%, Calculate
 the value of M Ltd exceeds that of P Ltd?
(a) ₹4,00,000
(b) ₹4,40,000
(c) ₹4,04,000
(d) ₹4,00,400

(8) Annual Cost Saving ₹4,00,000; Useful life 4 years; Cost of the Project ₹11,42,000. The
Payback period would be-
(a) 2 years 8 months
(b) 2 years 11 months
(c) 3 years
(d) 1 year 10 months

(9) There are 4 investments

X Y Z U
The standard deviation is 37,947 44,497 42,163 41,997
Expected Net Present Value (₹) 90,000 1,06,000 1,00,000 90,000
Which investment has the highest risk?
(a) X
(b) Y
(c) X
(d) U

(10) The spot rate of the US dollar is ₹65.00/USD and the four-month forward rate is 65.90/USD.
The annualized premium is
(a) 4.2%
(b) 5.1%
(c) 6.0%
(d) 6.4%

(11) A stock is currently sells at ₹350. The put option to sell the stock sells at ₹380 with a
premium of ₹20. The time value of option will be
(a) ₹10
(b) ₹-10
(c) ₹20
(d) ₹0

(12) An investor owns a stock portfolio equally invested in a risk-free asset and two stocks.
If one of the stocks has a beta of 0.75 and the portfolio is as risky as the market, the
beta of the stock in portfolio is
(a) 2.12
(b) 2.25
(c) 2.56
(d) 2.89

(13) You are given the following information: required rate of return on risk free security
7%; required rate of return on market portfolio of investment 12%; beta of the firm 1.7.
The cost of equity capital as per CAPM approach is
(a) 16.3%
(b) 18.0%
(c) 18.60%
 (d) 19%

(14) The following statement is true in the context of rupee-dollar exchange rate with ri
denoting interest rate in India and ru denoting interest rate in the US.
(a) Rupee will be at forward discount if ri > ru
(b) Rupee will be at forward premium if ru > ri
(c) Rupee will be forward premium if ri > ru
(d) Rupee will be at par with dollar if ri = ru.

(15) The following is not a systematic risk.

(a) Market Risk
(b) Interest Rate Risk
(c) Business Risk
(d) Purchasing Power Risk

(16) The following statement is true: (If ‘r’ denotes the correlation coefficient)
(a) r = +1 implies full diversification of securities in a portfolio
(b) r = -1 implies full diversification of securities in a portfolio
(c) r = 0 implies an ideal situation of zero risk
(d) ‘r’ is independent of diversification. Nothing can be inferred based on r

(17) The following is not a feature of Capital Market Line:

(a) There is no unsystematic risk
(b) The individual portfolio exactly replicates market portfolio in terms of risk and
reward
(c) Estimates portfolio return based on market return
(d) Diversification can minimize the individual portfolio risk

(18) A project has a 10% discounted pay back of 2 years with annual after-tax cash
inflows commencing from year end 2 to 4 of ₹400 lacs. How much would have been
the initial cash outlay which was fully made at the beginning of year 1?
wrong question (a) ₹400 lacs
(b) ₹452 lacs
(c) ₹633.80 lacs
(d) ₹497.20 lacs

(20) A firm has an asset β = 1.3, equity β = 1.5. Then, which of the following is true?
(a) The firm is unlevered
(b) Debt β is also 1.3
(c) The above data is not possible
(d) The firm is leveraged and the debt β is lower than the asset β

(21) For a portfolio containing three securities A, B and C,

correlation coefficients ρAB = +0.4; ρAC = +0.75; ρBC = - 0.4; standard deviation σA =
9; σB = 11; σC = 6; weights ωA = 0.2; ωB = 0.5; ωC = 0.3; the covariance of securities A and
B is
(a) 3.96
(b) 24.75
(c) 39.6
(d) 247.5
(22) A ₹1,000 per value bond bearing a coupon rate of 14% matures after 5 years. The
required rate of return on this bond is 10%. The value of the bond (to the nearest rupee)
will be:
(a) 1,125
(b) 1,152
(c) 1,512
(d) 862.20

(23) The following information is available for a mutual fund:

Return Risk (S.D. i.e. σ) Beta (β) Risk Free Rate
13% 16% 0.90 10%
Treynor's Ratio of the mutual fund is:
(a) 3.85
(b) 4.43
(c) 3.33
(d) 3.73

(24) The 90-day interest rate is 1.85% in USA and 1.35% in the UK and the current spot
exchange rate is $ 1.6/£. The 90-day forward rate is
(a) $ 1.607893
(b) $ 1.901221
(c) $ 1.342132
(d) $ 1.652312

(25) The intercept of the Security Market Line (SML) on the y axis is
(a) E(Rm) – Rf
(b) 1/[E(Rm) - Rf]
(c) Rf - E(Rm)
(d) Rf

(26) A mutual fund wants to hedge its portfolio of shares worth ₹10 crore using the NIFTY
Index Futures. The contract size is 100 times the index. The index is currently quoted at
6840. The Beta of the portfolio is 0.8. The beta of the index may be taken as 1. What is
the number of contracts to be traded?
(a) 110
(b) 117
(c) 145
(d) 123

(27) A call option at a strike price of ₹200 is selling at a premium of ₹24. At what share
price on maturity will it break-even for the buyer of the option?
(a) ₹200
(b) ₹176
(c) ₹224
(d) ₹248

(28) A safety mutual fund that had a net asset value of ₹20 at the beginning of a month,
made income and capital gain distribution of ₹0.06 and ₹0.04 respectively per unit
during the month and then ended the month with a net asset value of ₹20.25. The monthly
return is:
(a) 2.25%
 (b) 1.75%
(c) 1.25%
(d) 1.65%

(29) Mr. Ravi is planning to purchase the shares of X Ltd. which had paid a dividend of ₹2
per share last year. Dividends are growing at a rate of 10%. What price would Mr. Ravi
be willing to pay for X Ltd.’s shares if he expects a rate of return of 20%?
(a) ₹22
(b) ₹24
(c) ₹20
(d) ₹21

(30) The spot price of securities of X Ltd. is ₹160. With no dividend and no carrying cost,
compute the theoretical forward price of the securities for 1 month. You may assume a risk-
free interest rate of 9% p.a.
(a) ₹160
(b) ₹162.75
(c) ₹161.20
(d) ₹159.20

(31) It is given that ₹/£ quote is ₹94.30 – 95.20 and that ₹/$ quote is 66.25 – 66.45. What
would be the $/£ quote?
(a) 1.42 :1.44
(b) 1.44 :1.42
(c) 1.44 :1.52
(d) 1.52 :1.44

(32) When are call options and put options said to be 'in the money' in the futures market?
(a) In call options when strike price is above the price of underlying futures, call
option is ‘in the money’. In put options, when the strike price is below the price of
underlying futures put option ‘is in the money’
(b) In call options when strike price is below the price of underlying futures, call
option is ‘in the money’. In put options, when the strike price is above the price of
underlying futures put option ‘is in the money’
(c) None of the above
(d) Both the above

(33) A firm has an equity beta of 1.40 and is currently financed by 25% debt and 75%
equity. What will be the company's equity beta if the company changes its financing
policy to 33% debt and 67% equity? [Assume corporate tax at 35% and zero debt
beta]
(a) 1.62
(b) 1.72
(c) 1.42
(d) 1.52

(34) XYZ Ltd. has a uniform income that accrues in a 4 - year business cycle. It has an
average EPS of ₹20 (per share of ₹100) over its business cycle. Find out the cost of
equity capital, if market price is ₹175.
(a) 11.43%
(b) 12.43%
 (c) 10.43%
(d) 13.43%

(35) Following information is available regarding a mutual fund:

Return 13, Risk (σ) 16, Beta (β) 0.90, Risk free rate 10. Calculate Sharpe ratio
(a) 0.18
(b) 0.16
(c) 0.19
(d) 0.17

(36) A project had an equity beta of 1.3 and was going to be financed by a combination
of 30% debt and 70% equity. Assuming debt-beta to be zero, calculate the project
beta and return from the project taking risk free rate of return to be 10% and return on
market portfolio of 18%.
(a) 14.28%
(b) 17.28%
(c) 15.28%
(d) 16.28%

(37) X Ltd. issued ₹100, 12% Debentures 5 years ago. Interest rates have risen since then,
so that debentures of the company are now selling at 15% yield basis. What is the
current expected market price of the debentures?
(a) ₹75
(b) ₹80
(c) ₹90
(d) ₹85

(38) .
Given Last year Current Year
Sales Unit 2,000 2,800
Selling Price per unit ₹10 ₹10
EPS ₹9.60 ₹38.40
What is the Degree of Combined Leverage?
(a) 6.5
(b) 5.6
(c) 7.5
(d) 5.7

(39) MI Ltd. has annual sales of ₹365 lacs. The company has investment opportunities in
the money market to earn a return of 15% per annum. If the company could reduce
its float by 3 days, what would be the increase in company's total return? (Assume 1 year =
365 days)
(a) ₹45,000
(b) ₹40,000
(c) ₹54,000
(d) ₹46,000

(40) In the inter-bank market, the DM is quoting ₹21.50. If the bank charges 0.125%
commission for TT selling, what is the TT selling rate?
(a) ₹21.47/DM
(b) ₹21.53/DM
 (c) ₹22.78/DM
(d) ₹23.45/DM

(41) The required rate of return on equity is 24% and cost of debt is 12%. The company has
a capital structure mix of 80% of equity and 20% debt. What is the overall rate of
return, the company should earn? Assume no tax.
(a) 21.6%
(b) 14.4%
(c) 18.6%
(d) 17.22%

(42) Initial Investment ₹20 lakh. Expected annual cash flows ₹6 lakh for 10 years. Cost of
capital @ 15%. What is the Profitability Index? The cumulative discounting factor @
15% for 10 years = 5.019.
(a) 1.51
(b) 1.15
(c) 5.15
(d) 0.151

(43) The following details relate to an investment proposal of XYZ Ltd

Investment outlay — ₹100 lakhs
Lease Rentals are payable at ₹180 per ₹1,000
Term of lease—8 years
Cost of capital—12%
What is the present value of lease rentals, if lease rentals are payable at the end of
the year? [Given PV factors at 12% for years (1-8) is 4.9676.
(a) ₹98,14,680
(b) ₹89,41,680
(c) ₹94,18,860
(d) ₹96,84,190

(44) An investor wrote a naked call option. The premium was ₹2.50 per share and the
market price and exercise price of the share are ₹37 and ₹41 respectively. The
contract being for 100 shares, what is the amount of margin under First Method that is
required to be deposited with the clearing house?
(a) ₹590
(b) ₹250
(c) ₹740
(d) ₹400

(45) An investor buys a call option contract for a premium of ₹200. The exercise price is
₹20 and the current market price of the share is ₹17. If the share price after three
months reaches ₹25, what is the profit made by the option holder on exercising the
option? Contract is for 100 shares. Ignore the transaction charges.
(a) ₹200
(b) ₹500
(c) ₹300
(d) ₹400

(46) Unlevered beta and effective tax rate of S Ltd is 0.8 and 35 percent respectively. The
company intends to undertake a project with 60 percent debt financing. Assuming
 risk free rate of 7.5 % and market premium 8 %, calculate cost of equity (rounded up
to two decimal points)
(a) 13.90%
(b) 20.14%
(c) 16.40%
(d) None of (a), (b) or (c)

(47) The spot and 6 months forward rates of US $ in relation to the rupee (₹/$) are
₹40.9542/41.1255 and ₹41.8550/9650 respectively. What will be the annualized
forward margin (premium with respect to Bid Price)?
(a) 4.10%
(b) 4.40%
(c) 4.50%
(d) None of (a), (b) or (c)

(48) A mutual Fund had a Net Asset Value (NAV) of ₹72 at the beginning of the year.
During the year, a sum of ₹6 was distributed as Dividend. Besides, ₹4 as Capital Gain
distributions. At the end of the year, NAV was ₹84. Total return for the year is:
(a) 30.56%
(b) 31.56%
(c) 40.56%
(d) 41.56%

(49) The standard deviation of Greaves Ltd. Stock is 24% and its correlation coefficient with
market portfolio is 0.5. The expected return on market is 16% with the standard
deviation of 20%. If the risk-free return is 6%, what will be the required rate of return on
Greaves Ltd. Script?
(a) 12%
(b) 11%
(c) 13%
(d) 11.5%

(50) Your customer requests you to book a sale forward exchange contract for US $ 2
million delivery 3rd months. The quotes are: Spot US $ 1= ₹48.050/0.060; 1month margin
= 0.0850/0.0900; 2-month margin = 0.2650/0.2700; 3-month margin = 0.5300/0.5350.
You are required to make an exchange profit of 0.125%. Ignore telex charges and brokerage.
(a) ₹120000
(b) ₹230000
(c) ₹75000
(d) ₹100000

(51) The Sterling is trading at ₹1.6100 today. Inflation in UK is 4% and that in USA is 3%. What
could be spot rate ($/£) after 2 years?
(a) 1.5792
(b) 1.5892
(c) 1.5992
(d) 1.5939

(52) The capital structure of a company is as under: 3,00,000, Equity shares of ₹10 each;
32000,12% Preference shares of ₹100 each; General Reserve ₹15,00,000; Securities
Premium Account ₹5,00,000; 25000, 14% Fully Secured Debentures of ₹100 each; Term
 Loan of ₹13,00,000. Based on these, the leverage of the company is:
(a) 60.22%
(b) 58.33%
(c) 55.21%
(d) 62.10%

(53) Historically, when the market return changed 10%, the return on stock of Arihant Ltd
changed by 16%. If variance of market is 257.81, what would be the systematic risk
for Arihant Ltd?
(a) 320%
(b) 480%
(c) 660%
(d) Insufficient information.

(54) The beta co-efficient of equity stock of ARISTO LTD is 1.6. The risk-free rate of return is
12% and the required rate of return is 15% on the market portfolio. If dividend
expected during the coming year ₹2.50 and the growth rate of dividend and earnings
is 8%. At what price the stock of ARISTO LTD. Can be sold (based on CAPM)?
(a) ₹12.50
(b) ₹16.80
(c) ₹28.41
(d) Insufficient Information.

(55) The ratio of current assets (₹3,00,000) to current liabilities (₹2,00,000) is 1.5: 1. The
accountant of this firm is interested in maintaining a current ratio of 2: 1 by paying
some part of current liabilities. Hence, the amount of current liabilities which must be
paid for this purpose is
(a) ₹1,00,000
(b) ₹2,00,000
(c) ₹2,50,000
(d) ₹1,50,000

(56) Dividend-Payers Ltd. has a stable income and stable dividend policy. The average
annual dividend payout is ₹27 per share (Face Value = ₹100). You are required to find
out Dividend payout in year 2, if the company were to have an expected market
price of ₹160 per share at the existing cost of equity. [The market price in year 1 is of ₹160
per share at the existing cost of equity. [The market price in year 1 is ₹150]
(a) ₹28.88
(b) ₹26.86
(c) ₹28.80
(d) ₹26.98

(57) The interest rate in Germany is 11 per cent and the expected inflation rate is 5 per
cent. The British interest rate is 9 per cent. How much is the expected inflation rate in
Britain?
(a) 3.0%
(b) 3.1%
(c) 4.55
(d) 2.9%

(58) A project had an equity beta of 1.2 and was going to be financed by a combination
 of 30% debt and 70% equity (assume debt beta = 0). Hence, the required rate of
return of the project is (assume Rf = 10% and Rm =18%)
(a) 16.27%
(b) 17.26%
(c) 16.72%
(d) 12.76%

(59) Consider the following quotes. Spot (Euro/Pound) = 1.6543/1.6557; Spot (Pound/NZ$) =
0.2786/0.2800. Calculate the % spread on the Euro/Pound Rate.
(a) 0.085%
(b) 0.0085%
(c) 0.85%
(d) 0.00085%

(60) A company has expected Net Operating Income – ₹2,40,000; 10% Debt – ₹7,20,000
and Equity Capitalization rate - 20%. What is the weighted average cost of capital for
the company?
(a) 0.15385
(b) 0.13585
(c) 0.18351
(d) 0.15531

(61) The price of Swedish Krones is $ 0.14 today. If it appreciates by 10% today, how many
Krones a dollar will buy tomorrow?
(a) 6.49351
(b) 4.69351
(c) 3.49513
(d) 5.64913

(62) A firm has sales of ₹75,00,000, variable cost of ₹42,00,000 and fixed cost of ₹6,00,000.
It has a debt of ₹45,00,000 at 9% interest and equity of ₹55,00,000. At what level of
sales, the EBIT of the firm will be equal to zero?
(a) ₹28,48,500
(b) ₹28,84,500
(c) ₹22,84,500
(d) ₹26,48,500

(63) E Limited has earnings before interest and taxes (EBIT) of ₹10 million at a cost of 7%.,
Cost of equity is 12.5%. Ignore taxes. What is the overall cost of capital?
(a) 11.26%
(b) 11.62%
(c) 16.12%
(d) 12.61%

(64) The following various currency quotes are available from the State Bank of India: ₹/£
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
(65) The dollar is currently trading at ₹40. If rupee depreciates by 10%, what will be the
spot rate?
(a) ₹0.0525
(b) ₹0.0552
(c) ₹0.0225
(d) ₹0.0522

(66) A company has ₹7 Crore available for investment. It has evaluated its options and
has found that only four investment projects given below have positive NPV. All these
investments are divisible and get proportional NPVs.
Project Initial Investment (₹ Crore) NPV (₹ Crore) PI
W 6.00 1.80 1.30
X 3.00 0.60 1.20
Y 2.00 0.50 1.25
Z 2.50 1.50 1.60
Which investment projects should be selected?
(a) Project W in full and X in part
(b) Project Z in full and W in part
(c) Project W in full and Z in part
(d) Project Z and Y in full and X in part

(67) An investor is bullish about X Ltd. which trades in the spot market at ₹1,150. He buys
two call option contracts with three months (one contract is 100 shares) with a strike
price of ₹1,195 at a premium of ₹35 per share. Three months later, the share is selling at
₹1,240. Net profit/loss of the investor on the position will be
(a) ₹1,000
(b) ₹16,000
(c) ₹11,000
(d) ₹2,000

(68) Duhita Ltd. intends to buy an equipment. Quotes are obtained for two different makes
A and B as given below:
Cost (₹ Million) Estimate life (Years)
A 4.5 10
B 6.00 15
Ignoring the operations and maintenance costs, which will be almost the same for A
and B, which one would be chapter? The company's cost of capital is 10%.
[Given: PVIFA (10%, 10 yrs.) = 6.1446 and PVIFA (10%, 15 years) = 7.6061]
(a) A will be cheaper
(b) B will be cheaper
(c) Cost will be the same
(d) They are not comparable and therefore nothing can be said about which is
cheaper

(69) BLC Ltd., a valued customer engaged in import business is in need to remit EURO 1
million to his European exporter. The spot rate of ₹/US$ is ₹65.47/65.57 and that of
US$/EURO is $ 0.8053/0.8057. What rate will a banker quote to BLC Ltd. if the bank's
margin is 0.50%?
(a) ₹53.09
(b) ₹53.067
 (c) ₹53.01
(d) ₹52.99

(70) Given for a project:

Annual Cash inflow = ₹80,000, Useful life = 4 years
Undiscounted Pay-Back period = 2.855 years
What is the cost of the project?
(a) ₹1,12,084
(b) ₹2,28,400
(c) ₹9,13,600
(d) None of the above

(71) A project had an equity beta of 1.4 and is to be financed by a combination of 25%
Debt and 75% Equity. Assume Debt Beta as zero, Rf = 12% and Rm = 18%.
Hence, the required rate of return of the project is
(a) 16.72%
(b) 18.30%
(c) 17.45%
(d) 12.00%

(72) An Indian Company is planning to invest in the US. The annual rates of inflation are 8%
in India and 3% in USA. If the spot rate is currently ₹60.50/$, what spot rate can you expect
after 5 years, assuming the inflation rates will remain the same over 5 years?
(a) ₹88.89
(b) ₹54.95
(c) ₹76.68
(d) ₹76.10

(73) Which of the following securities is most liquid?

(a) Money Market instruments
(b) Capital Market instruments
(c) Gilt-edged securities
(d) Index futures

(74) While plotting a graph with risk on X-axis and expected return on Y-axis, a line drawn
with co-ordinates (0, rf) and (β, rm) is called
(a) Security Market Line
(b) Characteristic Line
(c) Capital Market Line
(d) CAPM Line

(75) If the RBI intends to reduce the supply of money as part of anti-inflation policy, it might
(a) Lower the bank rate
(b) Increase the Cash Reserve Ratio
(c) Decrease the SLR
(d) Buy Government securities in the open market

(76) Which of the following is not an investment constraint?

(a) Liquidity
(b) The absence of the need for regular income.
(c) The preferred time horizon
 (d) Risk tolerance

(77) It is given that ₹/£ quote is ₹100.68 – 102.95 and ₹/$ quote is ₹61.86 – 62.87. What
would be the $/£ quote? It is given that ₹/£ quote is ₹100.68 – 102.95 and ₹/$ quote is
₹61.86 – 62.87. What would be the $/£ quote?
(a) $1.6014-$1.6642(quote)
(b) $1.6014-$1.6542(quote)
(c) $1.6014-$6352(quote)
(d) $1.6014-$6252(quote)

(78) The theoretical forward price of the following security for 6 months is:
Spot Price (Sx) ₹160
Risk free interest rate 9% [Given: e0.045 = 1.046028]
.
(a) ₹166.3645
(b) ₹167.4645
(c) ₹167.3645
(d) ₹166.4656

(79) A project had an equity beta of 1.3 and was going to be financed by a combination
of 30% debt and 70% equity. Assuming debt-beta to be zero, the project beta is:
(a) 0.81
(b) 0.71
(c) 0.51
(d) 0.91

(80) An investor buys a call option contract for a premium of ₹150. The exercise price is
₹15 and the current market price of the share is ₹12. If the share price after three months
reaches ₹20, what is the profit made by the option holder on exercising the
option? Contract is for 100 shares. Ignore the transaction charges.
(a) ₹450
(b) ₹350
(c) ₹375
(d) ₹475

(81) Mr. X can earn a return of 18% by investing in equity shares on his own. Now he is
considering recently announced equity based mutual fund scheme in which initial
expenses are 6.70% and annual recurring expenses are 1.7%. How much should the
mutual fund earn to provide Mr. X a return of 18 per cent?
(a) 22
(b) 19
(c) 24
(d) 21

(82) CNX Nifty is currently quoting at 9100. Each lot is 75. An investor purchases a May
Futures contract at 9200. He has been asked to pay 5% margin. What amount of initial
margin is he required to deposit? To what level NIFTY futures should in increase to get
a gain of 4%?
(a) 9318.4
(b) 9218.4
(c) 9218.5
 (d) 9118.4

(83) P Ltd. has an EPS of ₹75 per share. Its Dividend Payout Ratio is 30%. Earnings and
dividends of the company are expected to grow at 6% per annum. Find out the cost
of equity capital if its market price is ₹300 per share.
(a) 11.5%
(b) 12.5%
(c) 13.5%
(d) 14.5%

(84) An investor has three alternatives of varying investment values. The data available for
each of these alternatives are given below:
Alternative Expected Return (%) Standard Deviation of Return
I 23 8.00
II 20 9.50
III 18 5.00
Which alternative would be the best if coefficient of variation is used?
(a) Alternative III is the best as its co-efficient of variation is the lowest
(b) Alternative II is the best as its co-efficient of variation is the lowest
(c) Alternative I is the best as its co-efficient of variation is the lowest
(d) None

(85) A student ordered a book from USA on 01-05-2018 for $ 90, when the spot rate was
₹68.50/$. Payment was made ten days later, on 11-05-2018 when the book was
delivered. By this time, the rupee had appreciated by 10%. How much did it cost the
student in Rupees? (Ignore transaction and delivery cost).
(a) ₹5304.55
(b) ₹5404.55
(c) ₹5504.55
(d) ₹5604.55

(86) You are a forex dealer in India. Rates of rupee and pound in the international market
are US $0.01386952 and US $1.3181401 respectively. What will be your direct quote of
£ (pound) to your customer.
(a) ₹54.6987
(b) ₹71.1408
(c) ₹95.0386
(d) ₹0.0105

(87) ‘Bank rate’ published by the Reserve Bank refers to

(a) the repo rate transacted by RBI
(b) the rate at which housing or other long-term loans shall be sanctioned by
scheduled banks to their customers
(c) The rate at which RBI is willing to buy or rediscount bills of exchange or other
commercial paper
(d) the rate which RBI uses as cut-off for auction of Government securities

(88) An investor has invested in a mutual fund when the NAV was ₹15.50 per unit. After 90
days the NAV was ₹14.45 per unit. During the period the investor got a cash dividend
of ₹1.35 per unit and capital gain distribution of Re. 0.20. The annualized return based
on 360 days year count will be
 (a) 3.23%
(b) 12.92%
(c) 0.8075%
(d) 16.45%

(89) Initial investment of a project is ₹25 lakh. Expected annual cash flows are ₹6.5 lakh for
10 years Cost of capital is 15%. The annuity factor for 15% for 10 years is 5.019. The
Profitability Index of the project will be
(a) 1.305
(b) 3.846
(c) 0.26
(d) 0.7663

(90) Rate of inflation = 5.1%, β = 0.85, Risk premium = 2.295%, Market return = 12%. The real
rate of return will be
(a) 4.2%
(b) 11.70%
(c) 6%
(d) 5.95%

(91) In a constant dividend model, the following estimates the difference between the
required rate of return and the growth rate:
(a) Earnings Retention ratio
(b) Leverage ratio
(c) Dividend Pay-out ratio
(d) Dividend yield ratio

(92) Presently, a company’s share price is ₹120. After 6 months, the price will be either ₹
150 with a probability of 0.8 or ₹110 with a probability of 0.2. A call option exists with
an exercise price of ₹130. What will be the expected value of call option at maturity date?
(a) ₹20
(b) ₹16
(c) ₹12
(d) ₹10

(93) A stock is currently selling at ₹270. The call option to buy the stock at ₹265 costs ₹12.
What is the Time Value of the option?
(a) ₹5
(b) ₹17
(c) ₹7
(d) None of (a), (b) or (c)

(94) A Ltd., an export customer requested his banker B to purchase a bill for USD 80,000.
Calculate the rate to be quoted to A Ltd. if B wants a margin of 0.08%, given that the
interbank rate is ₹ $ 71.50/10.
(a) ₹71.1569
(b) ₹71.0431
(c) ₹71.5572
(d) ₹71.4428

(95) A company is considering four projects A, B, C and D with the following information:
 Project A Project B Project C Project D
Expected NPV (Rs) 60,000 80,000 70,000 90,000
Standard deviation (Rs) 4,000 10,000 12,000 14,000
Which project will fit the requirement of low-risk appetite?
(a) Project A
(b) Project B
(c) Project C
(d) Project D

(96) From the following quotes of a bank, determine the rate at which Yen can be
purchased with Rupees.
₹/£ Sterling 75.31 – 33
£ Sterling/Dollar ($) 1.563 – 65
Dollar ($)/Yen (¥) 1.048/52 [per 100 Yen]
.
(a) ₹124.02
(b) ₹142.02
(c) ₹412.02
(d) ₹214.02

(97) The spot Value of Nifty is 4430. An investor bought a one-month Nifty 4410 call option
for a premium of ₹12. The option is:
(a) In the money
(b) at the money
(c) Out of the money
(d) Insufficient data

(98) A certain mutual fund has a return of 17% with standard deviation of 3.5% and the
Sharpe ratio is 4. The risk-free rate is
(a) 12.5%
(b) 4%
(c) 3%
(d) 7.5%

(99) The following information of a project are given below:

Expected cash flow (₹) Probability
6,000 0.20
16,000 0.80
If certainty equivalent coefficient is 0.7, what will be certain (Risk less) cash flows of
the project?
(a) ₹12,000
(b) ₹9,800
(c) ₹9,000
(d) ₹15,400

(100) The spot and 6 months forward rates of US dollar in relation to the rupee (₹/$) are ₹
74.532/75.4143 and ₹75.1278/76.2538 respectively. What will be the annualized
forward margin (with respect to Ask price)?
(a) 2.42%
(b) 1.60%
(c) 2.23%
 (d) 2.31%

(101) B can earn a return of 18% by investing in equity shares on his own. Now he is
considering a recently announced equity based Mutual Fund Scheme in which initial
expenses are 1% and annual recurring expenses are 2%. How much should be
Mutual Fund earn to provide B, a return of 18%?
(a) 18.18%
(b) 20.18%
(c) 22.18%
(d) 21%

(102) You are given the following information of a stock:

Strike Price ₹400
Current stock price ₹370
Risk free rate of interest 5%
Theoretical minimum price of a European 6 months put option after six months is
(a) ₹9.37
(b) ₹20.12
(c) ₹30.76
(d) ₹20.63

(103) MS Ltd. is planning to invest in USA. The annual rates of inflation are 8% in India and
3% in USA. If spot rate is currently ₹75.50/$, what spot rate can the company expect
after 3 years?
(a) ₹65.49
(b) ₹79.16
(c) ₹87.04
(d) ₹72.00

(104) If the covariance between the returns on a portfolio BC and returns on the market index is
25 and the variance of returns on the market index is 20, what will be the systematic risk of
BC under the variance approach?
(a) 1.25
(b) 1.56
(c) 5.45
(d) 31.25

(105) Which of the following investment avenues has the least risk associated with it?
(a) Corporate Fixed Deposits
(b) Deposits in commercial banks
(c) Public Provident Fund
(d) Non-convertible zero coupon

(106) M uses 12% as nominal required rate of return to evaluate its new investment projects. It
has recently been decided to protect shareholders interest against loss of purchasing power
due to inflation. If the expected inflation rate is 5%, the real discount rate will be
(a) 6.67%
(b) 6%
(c) 17.6%
(d) 7%
(107) A want to hedge its portfolio of shares worth ₹150 million using the Index futures. The
contract size is 100 times the index. The index is currently quoted at 7500. The beta of the
portfolio is 0.9. Consider the beta of the index as 1. The number of contracts to be traded
is
(a) 18000
(b) 180
(c) 22
(d) 200

(108) The following information is extracted from MF, a mutual fund scheme. NAV on 01-11- 2019
is ₹65.78, annualized return is 15%. Distributions of income and capital gains were ₹0.50
and ₹0.30 per unit in the month. What is the NAV on 30-11-2019?
(a) ₹67.50
(b) ₹66.14
(c) ₹65.80
(d) ₹66.96

(109) A portfolio holding 90% of its assets in CNX Nifty stocks in proportion to their market
capitalization and 10% in Treasury Bills is more sensitive to
(a) Systematic Risk
(b) Unsystematic Risk
(c) Interest Rate Risk
(d) Index Risk

(110) Project X is to be financed by 40% debt (with zero beta) and balance with equity (with 1.3
beta). If the risk-free rate is 13% and return on market portfolio is 22%, the return from the
project will be
(a) 13.07
(b) 13.70
(c) 24.70
(d) 20.02

(111) Z Ltd. invests ₹20 lacs in a project with life 5 years and no salvage value. Tax rate is
50% and straight-line depreciation is used. The uniform expected cash flows after tax
and before depreciation shield are:
Year end 1 2 3 4 5
Cash flows after tax (₹ lacs) 4 5 6 6 7
The payback period is
(a) 3 years
(b) 3 years and 11 months
(c) 2 years and 11 months
(d) 2 years and 6 months

(112) The probability distribution of security N is given below:

Probability Return
(%)
0.30 30
0.40 20
0.30 10
The risk of the return of the security will be around
(a) 60%
 (b) 8%
(c) 20%
(d) 24%

(113) A company’s share is currently trading at ₹240. After 6 months, the price will be either ₹250
with probability of 0.80 or ₹220 with probability 0.20. A European call option exists with an
exercise price of ₹230. The expected value of call option at maturity date will be
(a) ₹10
(b) ₹16
(c) ₹4
(d) ₹14

(114) The value of beta of a security does not depend on

(a) standard deviation of the security
(b) standard deviation of the market
(c) correlation between the security and the market
(d) risk free rate

(115) A project of ROBN Ltd. has a Net Present Value (base case NPV) of ₹ 1,50,000. This project
has one financial side effect; it expands the firm's borrowing power by₹ 5,00,000. The
project lasts indefinitely so it is treated as supporting perpetual debt. If the borrowing rate
is 10 per cent and the net tax-shield is 35 per cent, the Adjusted Net Present Value (ANPV)
of the project will be
(a) ₹ 3,25,000
(b) ₹3,10,000
(c) ₹2,88,000
(d) None of the above

(116) ABON Ltd.'s earning per share is ₹ 15 and growth rate of earning is 5%. The earnings growth
rate is expected to stay at this level in the near future. If its payout ratio is 50% and costs of
capital is 15%, what will be the market price of the share after three years? (Calculation
upto two decimal places)
(a) ₹95.50
(b) ₹91.16
(c) ₹90.20
(d) None of the above

(117) The expected return from a portfolio is 16% and its variance of return (Risk Squard) is 285%.
If the investor's tolerance is 60; the Risk penalty will be
(a) 5.80%
(b) 4.95%
(c) 4.90%
(d) 4.75%

(118 The Following particulars relate to a mutual fund scheme:

)
Sector Investment in shares at Index on purchase Index on Valuation
cost ₹ lakh date date
IT and ITES 28 1,750 2,950
Infrastructure 15 1,375 2,475
The outstanding number of units is 1.25 lakhs. What will be the Net Asset Value (NAV)
 per unit?
(a) ₹59.36
(b) ₹55.30
(c) ₹54.31
(d) ₹53.29

(119) If the director of COMTECH Ltd. who has access to inside information is unable to use this
information to make Supernormal Profits, 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.

(120) EYAN Ltd. (EL) has a Beta of 0.80 with BSE 300. Each BSE 300 Futures contract is worth 100
units. BINUA Anticipates a bearish market for the next three months and has gone short on
Shares of 25000 Shares of EL in the Spot Market. EL shares are traded at ₹ 100. 3 months'
Future BSE 300 is quoted at 15500. What are the numbers of BSE 300 Futures contract to
be taken by BINUA if she wants to hedge price risk to the extent of 125%?
(a) 300
(b) 250
(c) 240
(d) 200

(121) Buying and selling a call and a put option with same strike prices and same expiry date is
called
(a) Straddle
(b) Box spread
(c) Strip
(d) Butterfly spread

(122) When the trade open on 01.03.2023 the stock price of Rolex Ltd., is ₹ 250. It rises to ₹ 260.
The March 2023, call option on Rolex Ltd. started at ₹ 25. It moved to ₹ 29. The Delta of call
option of Rolex Ltd. would be
(a) 0.50
(b) 0.40
(c) 0.35
(d) Insufficient information

(123) The Slope of the Security Marke Line (SML) denotes

(a) The Risk Premium required
(b) Beta of the Security
(c) Market Volatility
(d) The influence of the unsystematic

(124) Which of the following is/are the benefit(s) of Unified Payment Interface (UPI) to the
merchants?
(a) Round the clock availability
(b) Single click authentication
(c) Safer, secured and innovative
(d) In-App Payments (IAP)
(125) In Porter's structural analysis, which of the following is not considered as an entry barrier?
(a) Product differentiation
(b) Switching costs
(c) Capital requirements
(d) Low value addition

(126) (xii) Which one of the following is not a Digital Asset?

(a) Digital Printing
(b) Website
(c) Stable Coin
(d) Fintech

(127) The 90-day interest rate is 1.85% in USA and 1.35% in the UK and the current spot exchange
rate is $ 1.6/1£. The 90-day forward rate is
(a) $ 0.62808
(b) $ 1.592145
(c) $ 1.607893
(d) $ 1.342132

(128) ZONS Ltd. Shares are traded in the Stock Market. The Standard Deviations of ZONS'S Shares
and the Market are 6% and 4% respectively. If the Correlation Co-efficient for the shares
with the market is 0.8, what will be Beta Co-efficient of the Company's Shares based on the
CAPM?
(a) 0.90
(b) 1.00
(c) 1.20
(d) 1.50

(129) RTZ Ltd. wishes to earn real rate of 10% from its project. When the inflation recorded is 7%,
what is the normal rate the company would earn?
(a) 16.60%
(b) 17.70%
(c) 18.20%
(d) None of the above

(130) MS. RATRI, a prospective investor has collected the following information pertaining to two
securities A and B.

Particulars Security A Security B

Expected Return 15 18
Standard deviation of return 18 22
Beta 0.90 1.40
Variance of returns on the Market Index is 225(%)2. The correlation co-efficient
between the returns on securities A and B is 0.75. The systematic Risk of a portfolio
consisting of these two securities in equal proportions is

(a) 24.63 (%)^2

(b) 125.78 (%)^2
(c) 297.56 (%)^2
(d) None of (A), (B) and (C)
(131) The current market price of an equity share of THOMAS LTD., is ₹ 500. Within a period of 3
months, the maximum and minimum price of it is expected to be ₹ 600 and ₹ 300
respectively. What should be the value of a 3 months call option under "Risk Ncutral"
method at the strike rate of ₹ 550 if the risk-free rate of interest to 8% p.a.? [ Given e0.02 =
1.0202]
(a) ₹23.34
(b) ₹34.31
(c) ₹43.21
(d) None of the above

(132) MS. MOU invested ₹ 50,000 in a mutual fund scheme - SX on 01.04.2022. The capital gain
and dividend for the year ₹ 3 per unit which were reinvested at the year-end (31.03.2023)
NAV of ₹ 25. Mou had total units of 2,800 as on 31.03.2023. What was the NAV as on
01.04.2022?
(a) ₹10
(b) ₹15
(c) ₹20
(d) None of the above

(133) MR. BUA is a forex dealer in India. Rates of Rupee and Euro in the International
Market rate are US $ 0.0124688 and US $ 1.092694 respectively. What will be his
direct quote of (€) euro to his customer?
(a) ₹ 88.91
(b) ₹ 88.32
(c) ₹ 87.63
(d) ₹ 80.90

(134) NOBON Ltd., has been evaluating investment in a project which will require ₹ 40 lakh capital
expenditure on a new machinery. The Company expects the capital investment to provide
annual Cash flows of ₹ 9 lakh per year after taxes indefinitely. The business risk of the
investment decision requires a 15 percent discount rate. The base case NPV for NOBON
Ltd.’s project will be
(a) ₹ 25 lakh
(b) ₹ 20 lakh
(c) ₹ 18.50 lakh
(d) Nonc of the above

(135) The Stock of ANOS Ltd. (FV ₹ 10) quotes ₹ 500 on NSE and the 3 months future price quotes
at ₹ 510. The borrowing rate is given as 15% p.a. What would be the theoretical price of 3
months ANOS Ltd. future if the expected annual dividend yield is 25% p.a. payable before
expiry?
(a) ₹ 540.50
(b) ₹ 516.25
(c) ₹ 510.50
(d) Insufficient data

(136) The portfolio composition of Mr. SANU is given below:

Amount in lakh
Equity 120
 Cash/ Cash equivalents 40
total 160
The beta of the equity portion of the Portfolio is 0.85 and the current NIFTY future is at
4261.5. The multiple attached to NIFTY future is 100. If Mr. SANU purchases 23 future
contracts, his Portfolio Beta will be
(a) 1.05
(b) 1.12
(c) 1.20
(d) 1.25

(137) Buying a call and put with the same expiry date, on the same stock with a different strike
price is a
(a) Strangle
(b) Straddle
(c) Strap
(d) Strip

(138) P and Q are two mutually exclusive projects. P has a higher initial fixed cost and will make
a profit of ₹ 10,000 for a high sales volume and a loss of ₹ 4,000 for a low sales volume. For
Q, the corresponding amounts would be a profit of ₹ 7,000 or a profit of ₹ 2,000. The
probability of high sales volume is 60%. The expected value of perfect information is
(a) ₹ 9,000
(b) ₹6,800
(c) ₹ 12,600
(d) ₹ 10,200

(139) Which one of the following is true?

(a) Systematic risk can be minimized by investing in many sectors like banking,
real estate and food products
(b) Government securities are free from interest rate risk
(c) The market rewards an investor in proportion to the unsystematic risk that he
is willing to take
(d) Systematic risk is independent of the industry to which a security belongs.

(140) A project of Axon Ltd. requires ₹ 30 lakh capital investment and expects perpetual annual
cash inflow after taxes of ₹ 8 lakh. The business risk of the venture requires a 20 per cent
discount rate. However, as the project is considered socially desirable it qualifies for an
immediate tax-free Government grant of ₹ 10 lakh. What will be the Adjusted Net Present
Value (ANPV) of the project?
(a) ₹ 25 lakh
(b) ₹ 20 lakh
(c) ₹ 15 lakh
(d) Insufficient information

(141) An instrument of debt having investment grade rating by a credit rating agency
(a) implies that the investment is safe and recommends that the investor can
go ahead and invest in the security.
(b) implies that all statutory compliances of the issuing entity are fulfilled
(c) implies that the investment is sound at the time of issue and the issue price
is reasonable
(d) implies an opinion of the rating agency that the instrument will pay back
 the capital and the stated interest on time.

(142) Mr. Shan a trader, is having in its portfolio shares worth ₹ 85 lakh at current price and cash
₹ 15 lakh. The beta of share portfolio is 1.6. After 3 months the price of shares dropped by
3.20%. If the trader on current date goes for long position on ₹ 100 lakh Nifty Future, what
is the value of Market Index after 3 months?
(a) ₹ 95 lakh
(b) ₹ 96 lakh
(c) ₹ 98 lakh
(d) None of the above

(143) SMO Mutual Fund has a NAV of ₹ 8.60 at the beginning of the year. Meanwhile Fund
distributes ₹ 0.80 as dividend and ₹ 0.70 as capital gains. If the Fund's return during the
year is 26.16%, at the end of year NAV will increase to
(a) ₹ 9.10
(b) ₹ 9.35
(c) ₹ 9.40
(d) None of the above

(144) The Sharpe's ratio and the Treynor's ratio of Reliance Growth Fund are 0.56 and 9.80,
respectively. The correlation co-efficient between returns of the Fund and the Market-Index
is 0.70. What is the standard deviation of the market index's return?
(a) 12.25%
(b) 11.14%
(c) 10.62%
(d) Insufficient parameter

(145) The current market price of an equity share of BANCH Ltd. is ₹ 400 and it is expected that
the stock price after 3 months will be either ₹ 432 or ₹ 360. If the Risk-free rate of interest
be 12% p.a., what should the value of a '3 month's' Call Option under the 'Risk-neutral'
method at the strike rate of ₹ 388? [Given, e0.02 = 1.0202, e0.03 = 1.03045]
(a) ₹ 30.94
(b) ₹ 32.15
(c) ₹ 32.98
(d) None of the above

(146) While plotting a graph with risk on X-axis and expected return on Y-axis, a line drawn with
co-ordinates (o, rf) and (ß, r m) is called
(a) Security Market Line
(b) Characteristic Line
(c) Capital Market Line
(d) CAPM Line

(147 The project-Z of ZINT Ltd. has a mean NPV of ₹ 600. The Project Manager
) of the Company wants to determine the probability of the NPV of the project
under different ranges. If the Standard Deviation of NPV is ₹ 300, what is the
probability of the NPV between the range of ₹ 375 and ₹ 675?
[Given: Arca under Normal Curve from O to Z]:
Z=0 TO Z 0.15 0.25 0.50 0.60 0.75 1.25 1.30
Value 0.05962 0.9871 0.19146 0.22575 0.27337 0.39435 0.40320
.
 (a) 27.34%
(b) 37.21%
(c) 40.13%
(d) 44.04%

(148) The following various currency quotes are available:

₹/£ 104.0215 / 104.5505
£/$ 0.7155/0.7195
$/100¥0.8695/0.8710
The rate at which 100 ¥ can be purchased with Rupees will be
(a) ₹ 67.37
(b) ₹ 66.50
(c) ₹ 65.52
(d) None of the above

(149) If the Reserve Bank of India (RBI) intends to reduce the supply of money to bring down
inflation, it might
(a) increase the Cash Reserve Ratio (CRR).
(b) decrease the Statutory Liquidity Ratio (SLR)
(c) buy Government securities in the open market
(d) lower the Bank rate.

(150) ZOTSON Plc. has been evaluating investment in a project which will require ₹ 39 lakh capital
expenditure on a new machinery. The company expects the capital investment to provide
annual cash flows of ₹ 6 lakh per year after taxes indefinitely. The discount rate, which it
applies to invest decisions of this nature, is 14 per cent net. What will be the Base Case NPV
for ZOTSON Plc.'s project? (Calculation upto two decimal points.)
(a) ₹4.00 Lakh
(b) ₹3.86 Lakh
(c) ₹3.56 Lakh
(d) ₹3.25 Lakh

(151) SBT company is considering four projects P, Q, R and T with the following information:
Project P Project Q Project R Project T
Expected NPV 1,20,000 1,60,000 1,40,000 1,80,000
Standard 8,000 20,000 24,000 28,000
deviation
Identify the least Risky Project if coefficient of variation is used:
(a) Project P
(b) Project Q
(c) Project R
(d) Project T

(152) Which of the following is/are not the component of digital infrastructure and why?
(a) APIs and Integrations
(b) Cloud Services
(c) Stablecoins
(d) Internet
(153) MR. PATOB, a Portfolio Manager managing a Portfolio (Beta 1.50) whose current market
value of ₹ 12 crore. It is expected that the markets are likely to correct downwards and
hedging needs to be adopted using NIFTY Index futures. Currently Index futures are quoted
at 8000 with each contract underlies 100 units. Mr. PATOB hedges 100% of his Portfolios.
What is the number of NIFTY Index contracts to be sold?
(a) 180 contracts
(b) 200 contracts
(c) 225 contracts
(d) None of the above

(154) MR. GORG is a forex dealer in India. Rates of Rupee and Euro in the International Market
are US $ 0-012572 and US $ 1-117294 respectively. What will be his direct quote of E (Euro)
to his customers? (Calculation upto 3 decimal points.)
(a) ₹ 85.925
(b) ₹ 88.872
(c) ₹ 89-125
(d) ₹ 90.312

(155) Plain Vanilla interest rate swaps involved

(a) Fixed to Fixed rate Swap
(b) Fixed to Floating rate Swap
(c) Floating to Floating rate Swap
(d) Currency Swap

(156) An option's theoretical value increases by 1.75 if the interest rate is decreased by 1%. Then
1.75 is
(a) the Rho of a call option.
(b) the Rho of a put option.
(c) the Theta of a call option.
(d) the Theta of put option

(157) The intercept of the security market line (SML) on the Y-axis is
(a) the risk-free return
(b) the positive risk premium
(c) the Beta of the security
(d) the expected return when ß = 1.

(158) MS BRISTI is considering an investment in a Mutual Fund with a 2% load. As another

alternative, she can also invest in a Bank Deposit paying 8% interest. Her investment
planning period is 4 years. Examine, what should be the annual rate of return on Mutual
Fund so that she prefers the investment in the Fund to the investment in Bank Deposit.
(a) 8.15%
(b) 8.55%
(c) 8.82%
(d) None of the above

(159) Which one of the following is not a part of Market Risk and why?
(a) Equity Risk
(b) Inflation Risk
(c) Downgrade Risk
 (d) None of the above

(160) The initial outlay for an equipment of RAGIN Ltd. is ₹ 10,00,000. It is estimated that this will
generate cash inflows of ₹ 3,40,000 per annum for 4 years. The Cost of Capital of the
Company is 5 per cent. (Ignore Taxes). By how much can the Annual Cash in flows change
before the Company becomes indifferent to the Project?
[Given: PVI FA (5%, 4 years) = 3-546] [Present Calculation to nearest rupees]
(a) ₹ 57,992
(b) ₹ 60,125
(c) ₹ 61,310
(d) None of the above

(161) MS PARNA is planning to construct a minimum risk portfolio by investing in the Shares of
NAB Ltd., and SAN Ltd. The risk associated with the return of NAB Ltd. and SAN Ltd. are 23%
and 25% respectively. If the co-variance between the returns of Shares of both companies
is 0 (zero), the proportion of funds to be invested in the Shares of NAB Ltd. will be:
(a) 45.84%
(b) 54-16%
(c) 66.67%
(d) None of the above

(162) The Closing prices of the Stock of TORRENT LTD. on consecutive trading day
are as under:
Days Closing price
1 125.45
2 135.25
3 132.75
4 142.75
5 145.25
The Relative strength of the stock of Torrent Ltd. is
(a) 0.9875
(b) 1.0255
(c) 1.0628
(d) None of the above

(163) A Project has a Net Present Value (base Case NPV) of ₹ 1,20,000. However, this project has
one financial side effects; it expands the firm's borrowing power by ₹ 4,80,000. The project
lasts indefinitely so it is treated as supporting perpetual debt. If the borrowing rate is 15
per cent and the net tax shield is 35 per cent, what will be the Adjusted Net Present Value
(ANPV) of the project?
(a) ₹ 2,90,000
(b) ₹ 2,88,000
(c) ₹ 2,40,000
(d) None of the above

(164) The Current Price of ACC's stock is ₹ 1,010 and it is expected that price of stock may either
go up to ₹ 1,212 or go down to ₹ 808. If the stock price of call option of ACC's stock is ₹
1,010 and Risk - free rate is 6.5%, the probability of decrease in stock price will be
(a) 0.6625
(b) 0.5230
(c) 0.4680
 (d) 0.3375

(165) An option's theoretical value increase by 1.50 if the interest rate is decrease by 1%. Then,
1.50 is
(a) The Gamma of a call option
(b) The Theta of a put option
(c) The Rho of a put option
(d) The Rho of a call option

(166) LONZA Ltd., an export customer who relied on the inter - bank rate of ₹/US$ 80-50/15
requested his banker to purchase a bill for US$ 1,00,000. What is the rate to be quoted to
LONZA Ltd., if the banker wants a margin of 0.10%? (Calculation rounded off to two decimal
point)
(a) ₹ 80.58
(b) ₹ 80.42
(c) ₹ 80.12
(d) ₹ 78.90

(167) Consider a bullish spread option strategy using call option on the stock of GANT Ltd., with
₹ 60 exercise price, priced at ₹ 6 and a call option with ₹ 75 exercise price, priced at ₹ 3-50.
The current market price of stock of Gant Ltd., is ₹ 67. If the price of the stock is ₹ 95 on
maturity, the net profit at expiration will be
(a) ₹ 8.50
(b) ₹ 10.50
(c) ₹ 12.50
(d) ₹ 15.00

(168) The Sharpe ratio and Treynor ratio of CHOLA EQUITY FUND are 0-37 and 4.16 respectively.
The risk premium on the Fund is 6%. Standard deviation of the Fund's return is 11.80%. If
the standard deviation of the Market Index's return is 9.56%, the Correlation Co-efficient
between return of the Fund and the Market will be
(a) 0.90
(b) 0.85
(c) 0.72
(d) None of the above

(169) A call option is written for a strike price of ₹ 400, with a premium of ₹ 50.
(a) The holder's maximum loss is ₹ 50
(b) The holder's maximum gain is ₹ 50
(c) The writer's maximum loss is ₹ 50
(d) The writer's maximum gain is ₹ 50

(170) The intercept of the security market line on the y axis is

(a) the risk-free return
(b) the positive risk premium
(c) the beta of the security
(d) the expected return when ß = 1

(171) Security A has a total risk of 'a' and Security B has a total risk of 'b'. a is greater than
b. The following is true:
(a) If A has a higher systematic risk, B will have a higher unsystematic risk.
 (b) A has to have a higher systematic risk than B
(c) A has to have at least the same amount of systematic risk as B
(d) A can have a lower systematic risk than B

(172) The following is true of standard deviation of returns of a portfolio under CAPM:
(a) Market rewards the investor in proportion to the risk taken in the form of (the
standard deviation of the portfolio x(1-p), where p is the correlation coefficient
between the portfolio and market returns
(b) Standard deviation of the portfolio is the sum of the standard deviations of the
securities in the portfolio
(c) Standard deviation is a good measure to compare as it is the deviation per unit of the
mean return
(d) Standard deviation is greater than the systematic risk of the portfolio

(173) The following various currency quotes are available: Rs. / 1€ 103.0213/ 103.5404
£/1 $ 0.7354/ 0.7385
$/100¥0.8720/0.8810
The rate at which 100 Yen (¥) can be purchased with rupees will be
(a) Rs. 66.40
(b) Rs. 67.03
(c) Rs. 66.06
(d) Rs 67.37

(174) An option's theoretical value increases by 1.75 if the interest rate is decreased by 1%. Then,
1.75 is
(a) The rho of a put option
(b) The rho of a call option
(c) The theta of call option
(d) The theta of a put option

(175) Which of the following is not an assumption of Black-Scholes Model?

(a) The risk-free rate of interest is known
(b) Options can be exercised only at expiration
(c) Dividend is paid on the shares
(d) No imperfection exists in writing an option

(176) An investor invested 40% of her money in Stock A and 60% in Stock B. Stock A has a beta of
1.2 and Stock B has a beta of 1.6. If the risk-free rate is 5% and the expected return on the
market is 12%, the expected return of the investor would be the following under Capital
Asset Pricing Model:
(a) 10.08%
(b) 15.08%
(c) 14.80%
(d) 21.80%

(177) The market price (ex-dividend) of a unit of an open-ended mutual fund scheme was ₹30 at
the beginning of the year. A dividend of ₹3 has been paid during the year. The price of the
unit is ₹35 at the year end. The rate of return of the past year of the unit is
(a) 24.32%
(b) 26.67%
(c) 25.52%
 (d) 28.56%

(178) An investor has limited funds to invest. The following information of four securities is given
below:
Particulars Security A Security B Security C Security D
Standard 10% 15% 11% 12%
Deviation
Average Return 12% 20% 17% 15%
The best security to invest in if he wants more safety in relation to the return will be:
(a) Security D
(b) Security C
(c) Security A
(d) Security B

(179) A project has a 10% discounted pay back of 2 years with annual after-tax cash inflows
commencing from year end 2 to 4 of ₹400 lakhs. How much would have been the total
project cash outlay which was made in two installments equally at the beginning and end
of year 1?
(a) ₹381.81 lakhs
(b) ₹347.11 lakhs
(c) ₹346.15 lakhs
(d) ₹330.58 lakhs

(180) When the spot price decreases, the value of a call option
(a) is equal to its premium
(b) Decreases
(c) Increases
(d) does not change

(181) The following is true in a capital budgeting exercise with discounted cash flow technique:
(a) When there is capital rationing, Net Present Value is better than the Internal Rate
of Return.
(b) The Net Present Value highlights the significant minus cash flows occurring
between the inflows when the incomes are being generated more than the Internal
Rate of Return.
(c) When there are mutually exclusive proposals of different scales, the Internal Rate of
Return is better than the NPV.
(d) The internal rate of return assumes that the cash flows are reinvested at the
required rate of return

(182) The spot rate is USD 1 = Rs. 75.4035/75.9848. 3 months’ swap points are 0.80-0.70. The
forward rates are
(a) 74.7035/75.1848
(b) 75.80/75.70
(c) 74.6035/75.2848
(d) 76.2035/76.6848

(183) Buying a call and put with the same expiry date, on the same stock with a different strike
price is a
(a) Strangle
(b) Strap
 (c) Straddle
(d) Strip

(184) The spot and 3 months’ forward rates of US $ in relation to Rupee (Rs. /1 US $) are Rs. 75.00
/ 75.35 and Rs. 74.60/75.05 respectively. What will be the annualized forward discount
(with respect to ask price)?
(a) 1.59%
(b) 0.53%
(c) 0.40%
(d) 2.13%

(185) An Indian invested USD 1,00,000 in USA when the US$ was Rs. 72. The investment has
appreciated by 10%, while the US$ has become stronger by 4%. The investment return in
Rupees is
(a) 6%
(b) 5.58%
(c) 14.40%
(d) 9.60%

(186) The following is not a disadvantage of pay-back period as an evaluation measure for
selecting a project:
(a) Before the pay- back period, the mix of cash flows can be rearranged to get the
same result
(b) It does not consider the magnitude of cash flows after the payback period.
(c) It can give a conflicting decision compared to the net present value method
(d) A company that is cash-poor gauges the early recovery of funds invested

(187) An Indian Company is planning to invest in USA. The annual rates of inflation are 8% in India
and 3% in USA. If the spot rate is currently Rs. 73.50/1$, what spot rate can you expect after
2 years, assuming the inflation rates will remain the same over 2 years?
(a) Rs. 66.85
(b) Rs. 80.81
(c) Rs.70.09
(d) Rs.77.07

(188) A buy signal provided by moving average analysis of stock prices is when the stock price line
(a) rises above a falling moving average line
(b) falls below a flattening moving average line.
(c) falls below a falling moving average line
(d) falls below a rising moving average line

(189) X imports goods from USA. X will not do the following as a hedging measure:
(a) Buy call options
(b) Buy currency forward
(c) Buy put options
(d) Buy currency futures

(190) Which of the following investment avenues has the least risk associated with it?
(a) Corporate Fixed Deposits
(b) Deposits in commercial banks
(c) Public Provident Fund
 (d) Non-convertible zero coupon bonds

(191) M uses 12% as nominal required rate of return to evaluate its new investment projects. It
has recently been decided to protect shareholders’ interest against loss of purchasing
power due to inflation. If the expected inflation rate is 5%, the real discount rate will be
(a) 6.67%
(b) 6%
(c) 17.6%
(d) 7%

(192) A want to hedge its portfolio of shares worth ` 150 million using the Index futures. The
contract size is 100 times the index. The index is currently quoted at 7500. The beta of the
portfolio is 0.9. Consider the beta of the index as 1. The number of contracts to be traded
is
(a) 18000
(b) 180
(c) 22
(d) 200

(193) The following information is extracted from MF, a mutual fund scheme. NAV on 01-11-2019
is ₹ 65.78, annualized return is 15%. Distributions of income and capital gains were ₹ 0.50
and ₹ 0.30 per unit in the month. What is the NAV on 30-11-2019?
(a) ₹ 67.50
(b) ₹ 66.14
(c) ₹ 65.80
(d) ₹ 66.96

(194) A portfolio holding 90% of its assets in CNX Nifty stocks in proportion to their market
capitalization and 10% in Treasury Bills is more sensitive to
(a) Systematic Risk
(b) Unsystematic Risk
(c) Interest Rate Risk
(d) Index Risk

(195) Project X is to be financed by 40% debt (with zero beta) and balance with equity (with 1.3
beta). If the risk-free rate is 13% and return on market portfolio is 22%, the return from the
project will be
(a) 13.07%
(b) 13.70%
(c) 24.70%
(d) 20.02%

(196) Z Ltd. invests ₹ 20 lacs in a project with life 5 years and no salvage value. Tax rate is 50% and
straight-line depreciation is used. The uniform expected cash flows after tax and before
depreciation shield are:
Year End 1 2 3 4 5
Cash flows after tax (₹ lacs) 4 5 6 6 7

The payback period is

(a) 3 years
(b) 3 years and 11 months
 (c) 2 years and 11 months
(d) 2 years and 6 months

(197) The probability distribution of security N is given below:

Probability Return (%)
0.30 30
0.40 20
0.30 10
The risk of the return of the security will be around
(a) 60%
(b) 8%
(c) 20%
(d) 24%

(198) A company’s share is currently trading at ₹ 240. After 6 months, the price will be either ₹
250 with probability of 0.80 or ₹ 220 with probability 0.20. A European call option exists
with an exercise price of ₹ 230. The expected value of call option at maturity date will be
(a) ₹10
(b) ₹16
(c) ₹ 4
(d) ₹14

(199) The value of beta of a security does not depend on

(a) standard deviation of the security
(b) standard deviation of the market
(c) correlation between the security and the market
(d) risk free rate

(200) A company is considering four projects A, B, C and D with the following information

Project A Project B Project C Project D

Expected NPV (₹) 60,000 80,000 70,000 90,000
Standard deviation (₹) 4,000 10,000 12,000 14,000
Which project will fit the requirement of low-risk appetite?
(a) Project A
(b) Project B
(c) Project C
(d) Project D

(201) From the following quotes of a bank, determine the rate at which Yen can be
purchased with Rupees.

₹/£ Sterling 75.31 – 33

£ Sterling/Dollar ($) 1.563 – 65
Dollar ($)/Yen (¥) 1.048/52 [per 100 Yen]
.
(a) ₹ 124.02
(b) ₹ 142.02
(c) ₹ 412.02
(d) ₹ 214.02
(202) The spot Value of Nifty is 4430. An investor bought a one-month Nifty 4410 call option
for a premium of ` 12. The option is:
(a) In the money
(b) At the money
(c) Out of the money
(d) Insufficient data

(203) A certain mutual fund has a return of 17% with standard deviation of 3.5% and the
Sharpe ratio is 4. The risk-free rate is
(a) 12.5%
(b) 4%
(c) 3%
(d) 7.5%

(204) The following information of a project are given below:

Expected cash flow (₹) Probability

6,000 0.20
16,000 0.80
If certainty equivalent coefficient is 0.7, what will be certain (Risk less) cash flows of
the project?
(a) ₹ 12,000
(b) ₹ 9,800
(c) ₹ 9,000
(d) ₹ 15,400

(205) The spot and 6 months forward rates of US dollar in relation to the rupee (`/$) are `
74.532/75.4143 and ` 75.1278/76.2538 respectively. What will be the annualized
forward margin (with respect to Ask price)?
(a) 2.42%
(b) 1.60%
(c) 2.23%
(d) 2.31%

(206) B can earn a return of 18% by investing in equity shares on his own. Now he is
considering a recently announced equity based Mutual Fund Scheme in which
initial expenses are 1% and annual recurring expenses are 2%. How much should be
Mutual Fund earn to provide B, a return of 18%?
(a) 18.18%
(b) 20.18%
(c) 22.18%
(d) 21%

(207) You are given the following information of a stock:

Strike Price ₹ 400
Current stock price ₹ 370
Risk free rate of interest 5%
Theoretical minimum price of a European 6 months’ put option after six months is
(a) ₹ 9.37
(b) ₹ 20.12
(c) ₹30.76
 (d) ₹20.63

(208) MS Ltd. is planning to invest in USA. The annual rates of inflation are 8% in India and
3% in USA. If spot rate is currently ` 75-50/$, what spot rate can the company expect
after 3 years?
(a) ₹ 65.49
(b) ₹79.16
(c) ₹87.04
(d) ₹72.00

(209) If the covariance between the returns on a portfolio BC and returns on the market
index is 25 and the variance of returns on the market index is 20, what will be the
systematic risk of BC under the variance approach?
(a) 1.25
(b) 1.56
(c) 5.45
(d) 31.25

(210) M buys a call option contract for a premium of Rs. 200. The exercise price is RS. 25 and the
current market price of the share is Rs. 22. If the share price after three months reaches Rs.
30, what is the profit made by M on exercising the option? A contract is for 100 shares.
Ignore transaction charges.
(a) ₹ 200
(b) ₹ 300
(c) ₹ 100
(d) ₹ 600

(211) You are a forex dealer in India. Rates of rupee and pound in the international market are US
$0.01386952 and US $1.3181401 respectively. What will be your direct quote of £ (pound)
to your customer.
(a) ₹ 54.6987
(b) ₹ 71.1408
(c) ₹ 95.0386
(d) ₹ 0.0105

(212) ‘Bank rate’ published by the Reserve Bank refers to

(a) the repo rate transacted by RBI.
(b) the rate at which housing or other long-term loans shall be sanctioned by
scheduled banks to their customers
(c) The rate at which RBI is willing to buy or rediscount bills of exchange or other
commercial paper
(d) the rate which RBI uses as cut-off for auction of Government securities

(213) An investor has invested in a mutual fund when the NAG was Rs. 15.50 per unit. After 90
days the NAV was Rs. 14.45 per unit. During the period the investor got a cash dividend of
Rs. 1.35 per unit and capital gain distribution of Re. 0.20. The annualized return based on
360 days year count will be
(a) 3.23%
(b) 12.92%
(c) 0.8075%
(d) 16.45%
(214) Initial investment of a project is Rs. 25 lakhs. Expected annual cash flows are Rs. 6.5 lakh for
10 years Cost of capital is 15%. The annuity factor for 15% for 10 years is 5.019. The
Profitability Index of the project will be
(a) 1.305
(b) 3.846
(c) 0.26
(d) 0.7663

(215) Rate of inflation = 5.1%, β = 0.85, Risk premium = 2.295%, Market return = 12%. The real
rate of return will be
(a) 4.2%
(b) 11.70%
(c) 6%
(d) 5.95%

(216) In a constant dividend model, the following estimates the difference between the required
rate of return and the growth rate:
(a) Earnings Retention ratio
(b) Leverage ratio
(c) Dividend Pay-out ratio
(d) Dividend yield ratio

(217) Presently, a company’s share price is Rs. 120. After 6 months, the price will be either Rs.
150 with a probability of 0.8 or Rs. 110 with a probability of 0.2. A call option exists with an
exercise price of Rs. 130. What will be the expected value of call option at maturity date?
(a) ₹ 20
(b) ₹ 16
(c) ₹ 12
(d) ₹ 10

(218) A stock is currently selling at Rs. 270. The call option to buy the stock at Rs. 265 costs Rs.
12. What is the Time Value of the option?
(a) ₹ 5
(b) ₹ 17
(c) ₹ 7
(d) None of (A), (B) or (C)

(219) A Ltd., an export customer requested his banker B to purchase a bill for USD 80,000.
Calculate the rate to be quoted to A Ltd. if B wants a margin of 0.08%, given that the
interbank rate is Rs. /$ 71.50/10.
(a) ₹ 71.1569
(b) ₹ 71.0431
(c) ₹ 71.5572
(d) ₹ 71.4428

(220) A company has ₹ 7 crore available for investment. It has evaluated its options and has found
that only four investment projects given below have positive NPV. All these investments are
divisible and get proportional NPVs.
 Project Initial Investment (₹ NPV (₹ crore) PI
crore)
W 6.00 1.80 1.30
X 3.00 0.60 1.20
Y 2.00 0.50 1.25
Z 2.50 1.50 1.60
Which investment projects should be selected?
(a) Project W in full and X in part
(b) Project Z in full and W in part
(c) Project W in full and Z in part
(d) Project Z and Y in full and X in part

(221) An investor is bullish about X Ltd. which trades in the spot market at ₹ 1,150. He buys two
call option contracts with three months (one contract is 100 shares) with a strike price of ₹
1,195 at a premium of ₹ 35 per share. Three months later, the share is selling at ₹ 1,240.
Net profit/loss of the investor on the position will be
(a) ₹ 1,000
(b) ₹ 16,000
(c) ₹ 11,000
(d) ₹ 2,000

(222) BLC Ltd. a valued customer engaged in import business, is in need to remit EURO 1 million
to his European exporter. The spot rate of `/US$ is ` 65.47/65.57 and that of US$/EURO is $
0.8053/0.8057. What rate will a banker quote to BLC Ltd. if the bank's margin is 0.50%?
(a) ₹ 53.09
(b) ₹ 53.067
(c) ₹ 53.01
(d) ₹ 52.99

(223) Given for a project: Annual Cash inflow = ₹ 80,000, Useful life = 4 years Undiscounted Pay-
Back period = 2.855 years What is the cost of the project?
(a) ₹ 1,12,084
(b) ₹2,28,400
(c) ₹9,13,600
(d) None of the above

(224) A project had an equity beta of 1.4 and is to be financed by a combination of 25% Debt and
75% Equity. Assume Debt Beta as zero, Rf = 12% and Rm = 18%. Hence, the required rate of
return of the project is
(a) 16.72%
(b) 18.30%
(c) 17.45%
(d) 12.00%

(225) An Indian Company is planning to invest in the US. The annual rates of inflation are 8% in
India and 3% in USA. If the spot rate is currently ` 60.50/$, what spot rate can you expect
after 5 years, assuming the inflation rates will remain the same over 5 years?
(a) ₹88.89
(b) ₹54.95
(c) ₹76.68
(d) ₹76.10
(226) Which of the following securities is most liquid?
(a) Money Market instruments
(b) Capital Market instruments
(c) Gilt-edged securities
(d) Index futures

(227) While plotting a graph with risk on X-axis and expected return on Y-axis, a line drawn with
co-ordinates (0, rf) and (β, rm) is called
(a) Security Market Line
(b) Characteristic Line
(c) Capital Market Line
(d) CAPM Line

(228) If the RBI intends to reduce the supply of money as part of anti-inflation policy, it might
(a) Lower the bank rate
(b) Increase the Cash Reserve Ration
(c) Decrease the SLR
(d) Buy Government securities in the open market.

(229) A project has a 10% discounted pay back of 2 years with annual after-tax cash
inflows commencing from year end 2 to 4 of ₹ 400 lacs. How much would have been
the initial cash outlay which was fully made at the beginning of year 1?
(a) ₹400 lacs
(b) ₹452 lacs
(c) ₹633.80 lacs
(d) ₹497.20 lacs

(231) A firm has an asset β = 1.3, equity β = 1.5. Then, which of the following is true?
(a) The firm is unlevered.
(b) Debt β is also 1.3.
(c) The above data is not possible.
(d) The firm is leveraged and the debt β is lower than the asset β.

(232) For a portfolio containing three securities A, B and C,

correlation coefficients ρAB = +0.4; ρAC = +0.75; ρBC = - 0.4;
standard deviation σA = 9; σB = 11; σC = 6;
weights ωA = 0.2; ωB = 0.5; ωC = 0.3;
the covariance of securities A and B is
(a) 3.96
(b) 24.75
(c) 39.6
(d) 247.5

(233) A ₹1,000 per value bond bearing a coupon rate of 14% matures after 5 years. The required
rate of return on this bond is 10%. The value of the bond (to the nearest rupee) will be:
(a) 1,125
(b) 1,152
(c) 1,512
(d) 862.20
(234) The following information is available for a mutual fund:
Return 13%
Risk (S.D. i.e. σ) 16%
Beta (β) 0.90
Risk Free Rate 10%
Treynor's Ratio of the mutual fund is:
(a) 3.85
(b) 4.43
(c) 3.33
(d) 3.73

(235) The 90-day interest rate is 1.85% in USA and 1.35% in the UK and the current spot exchange
rate is $ 1.6/£. The 90-day forward rate is
(a) $ 1.607893
(b) $ 1.901221
(c) $ 1.342132
(d) $ 1.652312

(236) The intercept of the Security Market Line (SML) on the y axis is
(a) E(Rm) – Rf
(b) 1/[E(Rm) - Rf]
(c) Rf - E(Rm)
(d) Rf

(237) A mutual fund wants to hedge its portfolio of shares worth ` 10 crore using the NIFTY Index
Futures. The contract size is 100 times the index. The index is currently quoted at 6840. The
Beta of the portfolio is 0.8. The beta of the index may be taken as 1. What is the number of
contracts to be traded?
(a) 110
(b) 116
(c) 145
(d) 123

(238) A call option at a strike price of ₹ 200 is selling at a premium of ₹ 24. At what share
price on maturity will it break-even for the buyer of the option?
(a) ₹ 200
(b) ₹176
(c) ₹224
(d) ₹248

(239) Annual Cost Saving ₹ 4,00,000

Useful life 4 Years
Cost of the Project ₹ 11,42,000
The Payback period would be
(a) 2 years 8 months
(b) 2 years 11 months
(c) 3 years
(d) 1 year 10 months

(240) There are 4 investments

X Y Z U
 The standard deviation is 37,947 44,497 42,163 41,997
Expected net present value (`) 90,000 1,06,000 1,00,000 90,000
Which investment has the highest risk?
(a) X
(b) Y
(c) Z
(d) U

(241) The spot rate of the US dollar is ` 65.00/USD and the four-month forward rate is 65.90/USD.
The annualized premium is
(a) 4.2%
(b) 5.1%
(c) 6.0%
(d) 6.4%

(242) A stock is currently sells at ₹ 350. The put option to sell the stock sells at ₹ 380 with a
premium of ₹ 20. The time value of option will be
(a) ₹10
(b) ₹-10
(c) ₹20
(d) ₹0

(243) An investor owns a stock portfolio equally invested in a risk-free asset and two stocks. If one
of the stocks has a beta of 0.75 and the portfolio is as risky as the market, the beta of the
stock in portfolio is
(a) 2.12
(b) 2.25
(c) 2.56
(d) 2.89

(244) You are given the following information: required rate of return on risk free security 7%;
required rate of return on market portfolio of investment 12%; beta of the firm 1.7. The
cost of equity capital as per CAPM approach is
(a) 16.3%
(b) 18.0%
(c) 18.60%
(d) 19%

(245) The following statement is true in the context of rupee-dollar exchange rate with ri denoting
interest rate in India and ru denoting interest rate in the US.
(a) Rupee will be at forward discount if ri > ru
(b) Rupee will be at forward premium if ru > ri
(c) Rupee will be forward premium if ri > ru
(d) Rupee will be at par with dollar if ri = ru.

(246) The following is not a systematic risk.

(a) Market Risk
(b) Interest Rate Risk
(c) Business Risk
(d) Purchasing Power Risk
(247) The following statement is true:
(If ‘r’ denotes the correlation coefficient)
(a) r = +1 implies full diversification of securities in a portfolio
(b) r = -1 implies full diversification of securities in a portfolio
(c) r = 0 implies an ideal situation of zero risk
(d) ‘r’ is independent of diversification. Nothing can be inferred based on r.

(248) The following is not a feature of Capital Market Line:

(a) There is no unsystematic risk.
(b) The individual portfolio exactly replicates market portfolio in terms of risk and
reward.
(c) Estimates portfolio return based on market return
(d) Diversification can minimize the individual portfolio risk.

(249) What is the opportunity cost of not taking a discount, when the credit terms are 2/20 net
45? Assume 1 year = 360 days
(a) 24.9%
(b) 29.4%
(c) 22.9%
(d) 29.2%

(250) E Limited has earnings before interest and taxes (EBIT) of ` 10 million at a cost of 7%., Cost
of equity is 12.5%. Ignore taxes. What is the overall cost of capital?
(a) 11.26%
(b) 11.62%
(c) 16.12%
(d) 12.61%

(251) S Limited earns ₹ 6 per share, has capitalization rate of 10% and has a return on investment
at the rate of 20%. According to Walter’s model, what should be the price per share at 30%
dividend payout ratio?
(a) ₹120
(b) ₹102
(c) ₹112
(d) ₹106

(252) On January 1, 2012, X Limited’s beginning inventory was `4,00,000. During 2012, Ltd.
purchased `19,00,000 of additional inventory. On December 31, 2012, X Ltd.’s ending
inventory was `5,00,000. What is X Ltd.’s operating cycle in 2012, if it is assumed that the
average collection period is 42 days? (1 year =36 days).
(a) 123.3 days
(b) 132.3 days
(c) 126.3 days
(d) 133.3 days

(253) From the following, what is the amount of sales of A Ltd.? Financial Leverage — 3:1;
Interest—`200; Operating Leverage — 4: 1; Variable Cost as a % of sales — 66.67%.
(a) ₹3,600
(b) ₹6,300
(c) ₹6,030
(d) ₹3,060
(254) The dollar is currently trading at `40. If rupee depreciates by 10%, what will be the spot
rate?
(a) ₹ 0.0525
(b) ₹0.0552
(c) ₹0.0225
(d) ₹0.0522

(255) If the following rates are prevailing: Euro/$: 1.1916/1.1925 and $/£: 1.42/1.47 what will be
the corss rate between Euro/Pound?
(a) 1.6921/1.750
(b) 1.7530/1.6921
(c) 1.6921/1.1925
(d) 1.7530/1.1916

(256) Duhita Ltd. intends to buy an equipment. Quotes are obtained for two different makes A
and B as given below:
Cost (₹Million) Estimate life (years)
A 4.5 10
B 6.00 15
Ignoring the operations and maintenance costs which will be almost the same for A and B,
which one would be chapter? The company's cost of capital is 10% [Given: PVIFA (10%, 10
yrs.) = 6.1446 and PVIFA (10%, 15 years) = 7.6061]
(a) A will be cheaper
(b) B will be cheaper
(c) Cost will be the same
(d) They are not comparable and therefore nothing can be said about which is cheaper