NCFM 4. SECURITIES MARKET (BASIC) MODULE MOCK TEST PAPERS

SECURITIES MARKET (BASIC) MODULE

Q1
1.What is the outstanding position on which initial margin will be calculated if Mr. Madanlal buys 800 units @Rs.1060 and sells 450 units @Rs.1055? [ 2 Marks ]

(a) 800 units
(b) 1250 units
(c) 450 units
(d) 350 units
(e) I am not attempting this question

Q2
Which of the following does NOT invite penalty points? [ 2 Marks ]

(a) non-payment of funds obligation
(b) short delivery
(c) inadequate stamp duty on transfer deed
(d) bad delivery
(e) I am not attempting this question

Q3
Who issues the registration to a Mutual Fund in India? [ 2 Marks ]

(a) Only RBI
(b) RBI for all types of Mutual Funds and additional permission from SEBI in case of a Mutual Fund being a subsidiary of a bank
(c) Only SEBI
(d) SEBI for all types of Mutual Funds and additional permission from RBI in case of a Mutual Fund being a subsidiary of a bank
(e) I am not attempting this question

Q4
In index/stock futures trading, profits are received or losses are paid ______. [ 1 Mark ]

(a) in the delivery month
(b) on a weekly settlement basis
(c) on daily settlement
(d) on the day of expiry of the contract
(e) I am not attempting this question

Q5
Derivative includes:
A. a security derived from a debt instrument, share, loan whether secured or unsecured, risk instrument or contract for differences or any other form of security.
B. a contract which derives its value from the prices, or index or prices, of underlying securities. [ 2 Marks ]

(a) only A
(b) only B
(c) Both A and B
(d) Neither A nor B
(e) I am not attempting this question

Q6
The _________issued by SEBI aim to secure fuller disclosure of the relevant information about the issuer and the nature of issue so that the investors can take informed decision [ 1 Mark ]

(a) SEBI (Stock Brokers and Sub brokers) Rules
(b) SC(R)A
(c) Disclosure and Investor Protection Guidelines
(d) SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Markets) regulations
(e) I am not attempting this question

Q7
If the company pays dividend of Rs.10 every year and the expected return for the investor is 8%, what is the theoretical value of the share of the company for a period of one year, if the par value of the share is Rs.80? [ 2 Marks ]

(a) 80
(b) 83.334
(c) 84.07
(d) 89.259
(e) I am not attempting this question

Q8
A trading member has the following position in a particular security TELCO:

Client
Buy Quantity
Sell Quantity

A
5200
1000

B
3000
500

C
2000
5600

D
0
4800

E
3400
0



What will be the final settlement obligation in TELCO for the member? [ 3 Marks ]

(a) Pay-in obligation for 13600 shares
(b) Pay-in obligation of 1700 shares
(c) Pay-in obligation for 800 shares
(d) Pay-out obligation of 1700 shares
(e) I am not attempting this question

Q9
The difference between primary markets and secondary markets is __________. [ 2 Marks ]

(a) Corporates raise resources directly from the investors through the primary market, whereas in the secondary markets, investors buy and sell securities to one another
(b) Primary markets deal in shares whereas secondary markets in debentures
(c) Primary markets are legal whereas secondary markets are not
(d) The initial public issues are made in primary market whereas all subsequent issues are made in the secondary markets
(e) I am not attempting this question

Q10
Which of the following is not a speculative transaction? [ 1 Mark ]

(a) a contract in respect of stocks and shares entered into by a dealer or investor therein to guard against loss in his holdings of stocks and shares through price fluctuations
(b) a contract entered into by a member of a forward market or a stock exchange in the course of any transaction in the nature of jobbing or arbitrage to guard against loss arising in ordinary course of business
(c) a contract entered into by a person to guard against loss through future price fluctuations in respect of his contracts for actual delivery of goods manufactured by him or merchandise sold by him
(d) none of the above is speculative transactions
(e) I am not attempting this question

Q11
Assume security A with a beta of 1.1 is being considered at a time when risk free rate of return is 5% and market return is expected to be 14%. What is the required rate of return according to Capital Asset Pricing Model? [ 2 Marks ]

(a) 18.9
(b) 21.9
(c) 14.9
(d) 16.9
(e) I am not attempting this question

Q12
Which one of the following is NOT an immediate measure taken by NSCCL in case a member fails to meet any obligation? [ 1 Mark ]

(a) Squares up open positions.
(b) Reduces exposure limits.
(c) Uses trade guarantee fund to discharge his obligations.
(d) Disables trading terminal until member's obligations are fully discharged.
(e) I am not attempting this question

Q13
Stock price of XYZ Ltd. is trading at Rs.60. The firm is expected to declare dividend of Rs.6 per share and is expected to grow at rate of 12per cent per year. What is the cost of equity under dividend growth model? [ 2 Marks ]

(a) 22%
(b) 20%
(c) 18%
(d) 12%
(e) I am not attempting this question

Q14
S&P CNX Nifty includes _______most liquid stocks that trade on NSEIL. [ 1 Mark ]

(a) 50
(b) 30
(c) 500
(d) 100
(e) I am not attempting this question

Q15
Register of transactions (Sauda Book) shall be preserved for a period of ___ years by the stock broker as per the Securities Contracts (Regulation) Rules, 1957. [ 2 Marks ]

(a) 7
(b) 5
(c) 6
(d) 10
(e) I am not attempting this question

Q16
An order which is activated when a price crosses a limit is _________ in F&O segment of NSEIL. [ 1 Mark ]

(a) Market order
(b) Fill or kill order
(c) Stop loss order
(d) None of the above
(e) I am not attempting this question

Q17
Auction is held in Reliance for 10,000 shares.
The closing price of Reliance on that day was Rs.146.00
The last traded price of Reliance on that day was Rs.141.00
The close price of Reliance last Friday was Rs.142.00
The previous day's close price of Reliance was Rs.151.00
What is the maximum allowable price at which the member can put a sell order in the auction for Reliance? (Price band applicable for Auction market is +/-15%) [ 3 Marks ]

(a) Rs. 167.90
(b) Rs. 173.65
(c) Rs. 162.15
(d) Rs. 163.30
(e) I am not attempting this question

Q18
What is the current yield if a 11.50% bond sells in the market for Rs.125? [ 2 Marks ]

(a) 9.2
(b) 9.15
(c) 9.25
(d) 9
(e) I am not attempting this question

Q19
On May 20, 2003, SATYAM COMP closed at Rs. 224, while the June futures contract on SATYAM COMP closed at Rs. 226.4. On May 21, 2003, SATYAM COMP closed at Rs. 227 and the June futures contract on SATYAM COMP closed at Rs. 228.70. Santosh is long 2 contracts of SATYAM COMP (minimum lot size per contract of SATYAM COMP is 1000). What is the profit / loss made by Santosh on his position on May 21, 2003? [ 3 Marks ]

(a) Loss of Rs. 4,600
(b) Profit of Rs. 6,000
(c) Profit of Rs. 4,600
(d) Loss of Rs. 6,000
(e) I am not attempting this question

Q20
Which of the following statements is incorrect regarding B2B portals? [ 2 Marks ]

(a) The 'debtonnetindia' is a B2B web-enabled market place for primary issuance of debt securities and provides investors and brokers similar levels of efficiency and transparency on the primary market segment.
(b) The B2B portal 'debtonnetindia', provides both secondary and primary market platform.
(c) TheB2B portal 'riskexpress' provides both secondary and primary market platform.
(d) Two B2B portals, namely 'debtonnetindia' and 'riskexpress' provide a secure, anonymous, neutral and flexible transactional platform for issue and trading of fixed income instruments.
(e) I am not attempting this question

Q21
What is the average rate of return if the returns during the previous three years are 10%, 25% and 42%? [ 1 Mark ]

(a) 21%
(b) 25.67%
(c) 2.57%
(d) 15.40%
(e) I am not attempting this question

Q22
In which market does Buyer & seller not know each other? [ 1 Mark ]

(a) Continuous Market
(b) Negotiated Market
(c) Continuous as well as negotiated
(d) None of the Above
(e) I am not attempting this question

Q23
Which of the following is not the main objective of SEBI? [ 2 Marks ]

(a) Protecting the interest of investors in securities market
(b) Regulating the securities market
(c) Promoting and developing Forex Market in India.
(d) Promoting the development of securities market
(e) I am not attempting this question

Q24
________ is also known as profitability index which measures the present value of the returns per rupee invested. [ 1 Mark ]

(a) Accounting Rate of Return
(b) Internal Rate of Return
(c) Net Present Value
(d) Benefit-Cost Ratio
(e) I am not attempting this question

Q25
Calculate the value 5 years hence of a deposit of Rs. 1,000 made today if the interest rate is 7% (compounded annually). [ 2 Marks ]

(a) Rs.1,403
(b) Rs.1,350
(c) Rs.1,000
(d) Rs.1,035
(e) I am not attempting this question

Q26
The branch manager can view all the order details for _______ in the 'Outstanding Orders' screen in the NEAT system.
(A) a specific dealer under his own branch
(B) all dealers under his own branch
(C) the whole broking firm [ 1 Mark ]

(a) (A) and (B) only
(b) (A) and (C) only
(c) (A), (B) and (C)
(d) (B) and (C) only
(e) I am not attempting this question

Q27
Total Margin levied on a member in respect of options contracts comprises of _____. [ 1 Mark ]

(a) Initial Margin + Premium Margin - Assignment Margin
(b) Initial Margin + Mark to Market Settlement
(c) Initial Margin + Premium Margin
(d) Initial Margin + Premium Margin + Assignment Margin
(e) I am not attempting this question

Q28
Security A gives a return of 12% with a dispersion of 4%, while security B gives return of 15% with a dispersion of 5%.which security is more risky? [ 2 Marks ]

(a) Security A
(b) Both securities are equally risky
(c) Security B
(d) Neither of the securities is risky
(e) I am not attempting this question

Q29
Which of the following is NOT true about corporate securities market reforms? [ 2 Marks ]

(a) Indian companies were allowed access to international capital market through issue of ADRs and GDRs.
(b) Major part of the liberalisation process was the repeal of the Capital Issues (Control) Act, 1947 in May 1992.
(c) Permission to access the international capital market was withdrawn.
(d) To ensure effective regulation of the corporate securities market, the SEBI Act, 1992 was enacted to empower SEBI with statutory powers.
(e) I am not attempting this question

Q30
A stock currently sells at 120. The put options to sell the stock sells at Rs. 134 costs Rs. 18. What is the time value of the option? [ 2 Marks ]

(a) Rs.12
(b) Rs.18
(c) Rs.4
(d) Rs.14
(e) I am not attempting this question

Q31
The authority regulating the issue of shares by companies in the primary markets is the ________. [ 1 Mark ]

(a) Reserve Bank of India
(b) National Stock Exchange
(c) Controller of Capital Issues
(d) Securities and Exchange Board of India
(e) I am not attempting this question

Q32
A trading member is getting a message that he has violated the gross exposure limit. The gross exposure at that point of time was Rs. 1400 lakh. What is his base capital? (Assume Rs. 1400 lakh is allowable gross exposure). [ 2 Marks ]

(a) Rs. 155.00 lakh
(b) Rs. 181.00 lakh
(c) Rs. 157.00 lakh
(d) Rs. 46.00 lakh
(e) I am not attempting this question

Q33
What are securities issued at Discount & redeemed at par? [ 1 Mark ]

(a) Securities with Fixed Coupon rates
(b) Indexed Bonds
(c) Zero-Coupon Bonds
(d) Floating Rate Bonds
(e) I am not attempting this question

Q34
For what kind of results is Limited review mandatory? [ 2 Marks ]

(a) Audited half-yearly
(b) Audited quarterly
(c) un-audited quarterly
(d) un-audited half-yearly
(e) I am not attempting this question

Q35
An at-the-money option contract would generate ______upon exercise for the buyer. [ 1 Mark ]

(a) negative cash flow
(b) positive cash flow
(c) no cash flow
(d) specified amount of cash flow
(e) I am not attempting this question

Q36
The cost of debt capital is cheaper in the capital structure under________. [ 1 Mark ]

(a) Net Operating Income Approach
(b) Traditional Approach
(c) Net Income Approach
(d) Modigliani and Miller Approach
(e) I am not attempting this question

Q37
Where securities are listed on the application of any person on any recognised stock exchange, such person shall comply with the conditions of the listing agreement with __________. [ 2 Marks ]

(a) that stock exchange
(b) Registrar of Companies
(c) Central Government
(d) Securities and Exchange Board of India
(e) I am not attempting this question

Q38
Average Collection Period is given by __________. [ 1 Mark ]

(a) Average Accounts Payables/Average Daily Credit Sales
(b) Average Accounts Payables/Average Daily Credit Purchases
(c) Average Accounts Receivables/Average Daily Credit Sales
(d) Average Accounts Receivables/Average Daily Credit Purchases
(e) I am not attempting this question

Q39
The pre-issue and post-issue obligations are discharged by _______. [ 1 Mark ]

(a) bankers
(b) stock exchanges
(c) transfer agents
(d) merchant bankers
(e) I am not attempting this question

Q40
Find the spot rate uptill next coupon, using Nelson-Seigel Model when settlement date is 15th March 2003 & next coupon is 23rd September 2003, Beta 0=8, Beta 1 = -1.85, Beta 2 = -4 and Tau=15. [ 3 Marks ]

(a) 5.9089
(b) 6.0576
(c) 6.1135
(d) 6.0045
(e) I am not attempting this question

Q41
What is the present value of Rs. 4000 receivable after two years at a discount rate of 5% under continuous discounting? [ 2 Marks ]

(a) Rs. 3619.34
(b) Rs. 3800
(c) Rs. 3628.11
(d) Rs. 4200
(e) I am not attempting this question

Q42
Find the forward leg consideration for Security 11.50% 2012 for Settlement date of 25th August 2003 & Maturity date of 14th December 2012 with Market Price of Rs. 133 (Ex-Interest Price), Repo rate 8% p.a. & Repo term of 5 days. [ 3 Marks ]

(a) 135.6565
(b) 135.6246
(c) 135.4163
(d) 135.5812
(e) I am not attempting this question

Q43
Pay-in and pay-out of funds and securities are effected on the same day in the ____________. [ 1 Mark ]

(a) ALBM Segment
(b) Rolling Market Segment
(c) Normal Market segment
(d) Limited Physical Segment
(e) I am not attempting this question

Q44
Trading member Mr. Shantilal took proprietary purchase in a March 2000 contract. He bought 1500 units @Rs.1200 and sold 1200 @ Rs. 1220. The end of day settlement price was Rs. 1221. What is the outstanding position on which initial margin will be calculated? [ 2 Marks ]

(a) 1200 units
(b) 2700 units
(c) 1500 units
(d) 300 units
(e) I am not attempting this question

Q45
Which of the following is FALSE about the NEAT system? [ 2 Marks ]

(a) A member punches into the computer quantities of securities and the price at which he wants to transact.
(b) The transaction is executed through the mainframe computer of the exchange as soon as the order punched by the user finds a matching sale or buy order from a counter party.
(c) The identity of the trading member is revealed to make the system transparent.
(d) This system enables members from across the country to trade simultaneously with enormous ease and efficiency.
(e) I am not attempting this question

Q46
A call option that is out-of-the-money or at-the-money has ________. [ 1 Mark ]

(a) no value
(b) only intrinsic value
(c) face value
(d) only time value
(e) I am not attempting this question

Q47
Which of the following is a criterion for admission of a stock into S&P CNX Nifty? [ 1 Mark ]

(a) Stocks where prices have gone up recently
(b) Stocks where ICICI has appraised projects
(c) Stocks with low impact cost
(d) Stock with low P/E
(e) I am not attempting this question

Q48
NSE has set up Investor Protection Fund as a ________. [ 1 Mark ]

(a) Company
(b) Cooperative Society
(c) Association
(d) Trust
(e) I am not attempting this question

Q49
The power to withdraw recognition to a Stock Exchange vests in ______. [ 1 Mark ]

(a) Parliament
(b) Reserve Bank of India
(c) Securities and Exchange Board of India
(d) Department of Company Affairs
(e) I am not attempting this question

Q50
How much is the correlation coefficient between the companies A and B, if their covariance is 30 and their standard deviations respectively are 6 and 8? [ 2 Marks ]

(a) 0.46
(b) 0.625
(c) 1.6
(d) 1
(e) I am not attempting this question

Q51
Mr. Harsh purchased 16000 shares of MTNL Options having strike price of 120. The market lot of the shares before adjustment was 1600. After the corporate action of 1:1 bonus in MTNL, the revised details in respect of strike price, Market lot and positions would be _________. [ 2 Marks ]

(a) 120, 1600, 16000
(b) 240, 800, 8000
(c) 30, 1600, 8000
(d) 60, 3200, 32000
(e) I am not attempting this question

Q52
Spot value of Nifty is 1240. An investor buys a one-month nifty 1255 put option for a premium of Rs.17. The option is __________. [ 2 Marks ]

(a) at-the-money
(b) out-of-the-money
(c) in-the-money
(d) above-the-money
(e) I am not attempting this question

Q53
For a security B, if price at the beginning of the year is Rs.20; dividend receivable at the end of the year is Rs.0.5; and the price at the end of the year is Rs.22 then what is the rate of return on the security? [ 2 Marks ]

(a) 0.095
(b) 0.125
(c) 0.045
(d) 0.135
(e) I am not attempting this question

Q54
Which of the following is NOT true about corporate securities market reforms? [ 2 Marks ]

(a) The trading cycle in the stock exchanges follow rolling settlement.
(b) The practice of allocation of resources among different competing entities as well as its terms by a central authority was discontinued.
(c) The secondary market overcame the geographical barriers by moving to screen based trading.
(d) Counter-party risk is borne by investors.
(e) I am not attempting this question

Q55
The depositories assist NSCCL to pay-in and pay-out of _________. [ 1 Mark ]

(a) securities held in demat form only
(b) securities held in physical form only
(c) securities held in demat as well as in physical form
(d) None of the above
(e) I am not attempting this question

Q56
Mr. A purchased equity shares of XYZ Ltd. at a cost of Rs. 95000/- on 1st June 2001. He sold the same on 1st January 2003 for Rs. 98000/-. (Given: Cost inflation index FY 2001-02 = 426, FY 2002-03 = 447 and 447/426 = 1.05). Long term capital profit / loss on this transaction would be ____. [ 2 Marks ]

(a) Long term capital gain Rs. 3,000/-
(b) Long term capital loss Rs. 1,750/-
(c) Long term capital gain Rs. 1,750/-
(d) Long term capital loss Rs. 3,000/-
(e) I am not attempting this question

Q57
Which of the following is TRUE about primary markets? [ 2 Marks ]

(a) Primary markets are places where only short term instruments are traded.
(b) Primary markets refer to the direct solicitation of funds from the public by companies.
(c) Primary markets are markets where commodities are sold.
(d) Primary markets is the place where public can buy and sell securities with one another.
(e) I am not attempting this question

Q58
Premium Margin is levied at ___ level. [ 1 Mark ]

(a) broker
(b) trading member
(c) client
(d) clearing member
(e) I am not attempting this question

Q59
In the case of a GTC order, each day counted is a calendar day inclusive of ____________. [ 1 Mark ]

(a) Saturdays and Sundays
(b) Saturdays, Sundays and other Exchange specified holidays
(c) Sundays only
(d) Saturdays only
(e) I am not attempting this question

Q60
Which of the following is NOT true about a credit rating agency (CRA)? [ 2 Marks ]

(a) CRA can not rate the securities issued by its promoter
(b) CRA can be promoted by any company or body corporate having the networth of Rs. 100 crore in previous 3 years.
(c) CRA can not rate securities issued by any borrower, subsidiary, an associate promoter of CRA if there are common Chairman, Directors or employee between CRA or its rating committee and these entities.
(d) CRA has to have a minimum networth of 5 crore
(e) I am not attempting this question