Institute of Chartered Financial Analysts of India (ICFAI) University 2006 Certification Finance Security Analysis - I - Question Paper

ques. Paper
Security Analysis - I (211) : July 2006


part A : Basic Concepts (30 Marks)



· This part consists of ques. with serial number one - 30.

· ans all ques..

· every ques. carries 1 mark.

· Maximum time for answering part A is 30 Minutes.





1.
Which of the subsequent statements is actual with respect to treasury bills?

(a)
The sale of T-bill is carried out at the public debt office of the RBI

(b)
The 364-days T-bill of Rs.100 sold at Rs.96 earns a return of 4.30%

(c)
The 91-days T-bill of Rs.100 sold at Rs.99 have a discount of 4.20%

(d)
The discount rate are determined by market forces and on a competitive basis

(e)
The 364-days T-bill auction is carried out by the RBI weekly.


< ans >

2.
Which of the subsequent statements is not actual with respect to the Security Market Lines (SML)?

(a)
SML represents the normal trade-off ranging from return and risk

(b)
The vertical distance of the security’s plot on the graph from the SML is called the security’s alpha

(c)
Validity of the CAPM can be tested by constructing ex-post SML

(d)
Ex-post SMLs are used to evaluate the performance of portfolio managers

(e)
The slope of the SML is the beta for the particular security involved.


< ans >

3.
Historically, when the market return changed by 10%, the return on the stock of Arihant Ltd. changed by 16%. The variance of market return is 257.81%2. The systematic risk for Arihant Ltd. is

(a)
160%2

(b)
320%2

(c)
480%2

(d)
660%2

(e)
720%2.


< ans >

4.
Which of the subsequent statement(s) is/are true?

I. Operational efficiency is stated to exist, if the market channelizes resources into projects where the marginal efficiency of capital adjusted for risk differences is the highest.

II. Allocational efficiency is stated to exist if the operating costs are minimum possible to the participants, but still give a fair return to the intermediaries for their services.

III. Full insurance efficiency is stated to exist if participants can adopt hedging strategies as effective tools against possible risks in future.

IV. info arbitrage efficiency is stated to exist if the price of the asset is equal to its intrinsic value.

(a)
Only (II) above

(b)
Only (III) above

(c)
Both (I) and (III) above

(d)
Both (II) and (IV) above

(e)
(II), (III) and (IV) above.

Earning:   Approval pending.